GST/HST Rulings and Interpretations Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Road
Vanier, Ontario
XXXXX K1A 0L5
XXXXX
XXXXX Case: HQR0000742
XXXXX File: 11849-7
July 17, 1997
Dear XXXXX
Thank you for your fax of June 18, 1997 concerning the application of the Goods and Services Tax (GST)Harmonized Sales Tax (HST) to the transfer of assets by XXXXX XXXXX to hospital authorities and school boards.
Interpretation Requested
Where the XXXXX constructs schools or hospitals and transfers all or substantially all of these assets for no consideration, to school boards or hospital authorities, the exclusion in section 155(2) of the Excise Tax Act (ETA) would allow these transactions to be exempt under Section 10 of Part VI of Schedule V to the ETA.
Interpretation Given
As it is not clear whether the province deals with regional health boards and school authorities at arm's length, we have provided an interpretation for both an arm's length and a non-arm's length transaction.
In an arm's length transaction Section 10 of Part VI of Schedule V to the ETA exempts supplies made by a public sector body of property or services where all or substantially all of the body's supplies of the property or service are made free of charge. The definition of "public sector body" in subsection 123(1) of the ETA includes government. "Government" is defined in the same subsection to mean Her Majesty in right of Canada or a province. These definitions would include the XXXXX as a public sector body. Therefore, Section 10 of Part VI of Schedule V exempts the supply of schools or hospitals where all or substantially all of these schools or hospitals are provided by the province for no consideration in an arm's length transaction.
Subsection 155(1) of the ETA provides an anti-avoidance rule whereby certain non-arm's length supplies made for less than fair market value or for no consideration are deemed to have been made for fair market value. Subparagraph 155(2)(b)(iii) clarifies that this rule does not apply to supplies which are exempt under Part V.1 or VI of Schedule V to the ETA, e.g. Section 10 of Part VI of Schedule V to the ETA. Therefore, Subparagraph 155(2)(b)(iii) and Section 10 of Part VI of Schedule V to the ETA act together to exempt the supply of schools or hospitals where all or substantially all of these schools or hospitals are provided by the province for no consideration in a non-arm's length transaction.
The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST Memoranda Series, do not bind the Department with respect to a particular situation.
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-7947.
Yours truly,
Darlene Wladyka
Governments Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate
| c.c.: |
J.A. Venne
D. Harding |
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