Doug Grant
GST Business Returns Processing
Roy McKain
Border Issues
Tower C, Vanier Towers
I refer to your memorandum of April 18, 1997, concerning timeshare arrangements.
In your memorandum you state that:
1. XXXXX Duty Free Shop (DFS) has requested a definition of a time share arrangement.
2. The DFS has been receiving many claims relating to "timeshare/reservations" from non-residents and has been re-imbursing these claims as long as the GST is charged and paid on the accommodation invoice for that stay.
3. Based on the documentation provided by the DFS, there are many hotels in the Whistler area that operate with 50% of its accommodation space as timeshare arrangements and the remaining 50% is used as a hotel.
You have asked us:
(a) to define when an arrangement is timeshare and when it is a reservation for short-term accommodation?
(b) whether a timeshare arrangement can be for a one time stay or must it be for multiple stays in a year or over a number of years?
(c) whether a timeshare arrangement covering a period greater than one year can be entered into in writing yet the billing and charging of GST done separately for each stay? This type of billing makes the arrangement look like a normal hotel stay and not a timeshare arrangement.
(d) what is the exact intent of the legislation?
General Comments
The supply of a timeshare is a supply of real property by way of sale, lease, licence or similar arrangement. In essence, timesharing is a general term that applies to various methods of purchasing or using vacation homes, condominiums, or motel/hotel accommodation for a certain time period each year. The two common types of timesharing plans that exist are fee simple ownership and right-to-use plans.
1. Fee simple ownership has two variations; estate for years and time-span ownership.
(a) In an estate for years ownership, the purchaser will own and have exclusive use of the unit for the specified week every year for the specified number of years in the agreement-generally 20 to 40 years.
(b) On the other hand, in a time span ownership, the buyer receives undivided interest in the whole living unit based pro rata on the number of weeks selected, but is not given direct priority interest in any time period.
2. Right-to-use means a non-equity ownership position in the timeshare. It provides for an occupancy membership in the resort for the specified number of years in the agreement. This type of timeshare allows for occupancy of the vacation accommodation and resort facility for a number of years on a weekly basis. There are three main types of right-to-use timeshares vacation licence, vacation lease, and club membership.
The purpose of entering into timeshare arrangements is usually to allow enjoyment of an interest in property for a limited period of time every year. This period of time may be fixed in advance for all time, or may be settled by reservations, or through some other method such as open use flexible time where you buy a fixed amount of annual timeshare, usually in one-week segments, which you would be entitled to use at any time during the year subject to availability.
The Department has developed an administrative policy P-064 entitled Treatment of Timeshares. This policy describes the circumstances that constitute a timeshare arrangement. A copy of P-064 is attached for your information.
It is a question of fact as to whether a timeshare arrangement exists or not. Invoicing for the ownership of a unit or long term lease (timeshare) can be structured in many different ways. Therefore, these arrangements must be examined on a case by case basis to determine whether a particular arrangement is a timeshare arrangement or a short term rental of hotel accommodation.
With respect to the legislative changes relating to the definition of short term accommodation in subsection 123(1) of the Excise Tax Act, the consolidated explanatory notes indicate that the intention of the legislative change is to exclude from the non-resident rebates, residential complexes or units supplied under a timeshare arrangement. Therefore, whether a timeshare is acquired by way of ownership or long-term lease, the recipient is not entitled to a rebate.
With respect to the attachment dealing with the XXXXX it would appear that this is only a letter of enticement. If the invited individual meets all the qualifications to take advantage of the promotion, then that individual would qualify for the mini vacation, if not, the full rental rates would be charged. You will further note that during the visit the individual will be subject to a low-key, 90 minute presentation dealing with the features and benefits of the XXXXX , which is intended to sell membership in the XXXXX to the participant.
Conclusions
If there is no charge for the mini-vacation, it may mean that:
(a) the customer met the requirements and agreed to buy a timeshare unit, or
(b) the customer met the requirements, but did not buy a timeshare unit.
The above scenarios would have the following implications:
(a) if the agreement to purchase the timeshare was entered into prior to April 23, 1996, a rebate would be available subject to conditions of the rebate provisions.
(b) since no consideration and GST was paid, for hotel accommodation no rebate would be available.
If on the other hand the customer did not meet the qualifications and consequently had to pay the hotel charges, then a rebate would be available to the extent the GST was paid.
The other attachments in the package appear to be straight hotel reservations for accommodation and not timeshare situations. If this is the case and the GST was paid then a rebate would be available.
Every case must be examined on its own merits to determine if it is a timeshare arrangement. I would suggest that the XXXXX DFS raise individual cases with which it has concerns with the XXXXX . I would further suggest that it may be necessary for you to write to some of these hotels to alert them to the fact that by showing timeshare arrangements as short term accommodation they may be inadvertently misrepresenting the facts.
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 952-4294.
Roy McKain
| c.c.: |
Randy Nanner
Roy McKain |
Legislative References: Ss. 123(1), s. 6 and 13 of Part I, of Sch. V.
Policy Paper P-064
Condo Buying Made Easy, 2nd Edition - Principles of Property Law, Bruce Ziff
NCS Subject Code(s): 11870-1, 11685-1
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