25 McArthur Road,
Place Vanier, 10th Floor, Tower C
XXXXX Vanier, ON
XXXXX K1A 0L5
XXXXX Case: HQR0000606
XXXXX NCS: 11950-1, 11645-1
June 12, 1997
Dear XXXXX
This letter is in response to correspondence of January 31, 1997 from XXXXX Tax Services Office concerning the application of the Goods and Services Tax (GST) to the sale of mobile homes.
Interpretation Requested
In XXXXX letter it is stated that XXXXX denied all input tax credits (ITCs) for XXXXX for the periods XXXXX XXXXX[.] This is a company that imports used mobile homes from XXXXX[.] The ITCs were denied on the basis that the company had no commercial activity since the resupply by way of sale of a 'used mobile home' imported from XXXXX would be exempt within Part I of Schedule V to the Excise Tax Act (the Act). The XXXXX has since received a conflicting opinion stating that a 'used mobile home' is only considered used if it has been used within Canada.
XXXXX would like clarification on the meaning of a 'used mobile home' for GST purposes.
As per my conversation with XXXXX of April 29, 1997, it is my understanding that XXXXX is a dealer/manufacturer of mobile homes that is importing them into Canada. The ITCs that are being claimed by XXXXX are in respect of the tax being paid at Customs and on other small items. As per XXXXX message of May 6, 1997, the mobile homes are taken to XXXXX lot after coming through Customs and are improved upon there and then sold to the customers
Interpretation Given
Used residential housing is generally exempted under section 2 of Part I of Schedule V to the Act. Specifically, this section exempts:
"A supply by way of sale of a residential complex or an interest therein made by a person who is not a builder of the complex or, where the complex is a multiple unit residential complex, an addition thereto, unless the person claimed an input tax credit in respect of the last acquisition by the person of the complex or in respect of an improvement to the complex acquired, imported or brought into a participating province by the person after the complex was last acquired by the person."
Please note that this section does not specifically refer to used housing as being exempted from the GST. This term is a general description often used in explaining the GST status of housing. However, referring only to a 'used home' is not legislatively correct as a supply of a 'used home' can in certain cases, still be taxable for GST purposes. Section 2 of Part I of Schedule V to the Act is the principal exempting provision for a residential complex that is being sold by a person who is not the builder, provided the vendor has not claimed an ITC in respect of the last acquisition of, or an improvement acquired or imported for, the complex. The definition of a "residential complex" in subsection 123(1) of the Act includes a mobile home.
Further to this, used residential complexes sold by a builder may be exempted under sections 3, 4 or 5 of Part I of Schedule V to the Act. However, the term 'used housing' is again not referred to in the legislation. Section 3 of Part I of Schedule V to the Act exempts the sale of a residential complex intended for use as the primary residence for the builder, an individual related to the builder, or a former spouse of the builder. Provided no ITCs have been claimed in respect of the last acquisition or importation of an improvement to the property, the sale is exempt. Section 4 and 5 of Part I of Schedule V to the Act exempt the sale of residential complexes by builders where the complex has been taxed pursuant to the self-supply rules of section 191 of the Act or has been acquired by way of exempt sale, and no ITCs have been claimed by the builder in respect of the last acquisition of the property or any improvements thereto.
In regards to these exempting provisions, it is necessary to know that paragraph (c) of the definition of "builder" in subsection 123(1) of the Act defines a builder, in the case of mobile homes, to be a person who makes a supply of the home before the home has been used or occupied by any individual as a place of residence. The definition does not include an individual who makes a supply of a mobile home otherwise than in the course of a business or adventure or concern in the nature of trade.
As XXXXX is supplying the homes after they have been occupied by individuals as a place of residence, XXXXX is not the "builder" of the mobile homes as defined for GST purposes. Moreover, as the ITCs claimed by XXXXX were done so improperly and were not in respect of their last acquisition of the mobile homes, or in respect of the acquisition or importation of any improvements to the mobile homes, the supply of these mobile homes is exempted pursuant to section 2 of Part I of Schedule V to the Act.
Section 212 of the Act states that every person who is liable under the Customs Act to pay duty on imported goods (or would be liable to do so if the goods were subject to duty), is also liable to pay the GST on the goods. Mobile homes are goods for purposes of the Customs Act and are subject to Division III tax at the time of importation. There is no provision in Schedule VII to the Act that exempts mobile homes on importation.
Subsection 142(3) of the Act deems a mobile home to be tangible personal property and not real property for the purposes of section 142 of the Act. This means that when the mobile homes are imported by XXXXX the GST will be payable to Customs at the rate of 7% of the duty paid value of the mobile homes.
In summary, XXXXX is providing an exempt supply by way of sale of the mobile homes regardless of the homes having been used or previously occupied in either Canada or the U.S.A., as they meet the criteria referred to above in section 2 of Part I of Schedule V to the Act. As the importer of record, XXXXX will be required to pay the GST on importation of the mobile homes since at that point they are goods and there is no supply or deemed supply that occurs on importation that invokes the real property exemptions in Part I of Schedule V to the Act. Further, since XXXXX is providing an exempt supply, as per above, they would not be eligible to claim any ITCs under subsection 169(1) of the Act as this is excluded from the definition of a commercial activity.
If you require any further information concerning this matter, please contact me at (613)952-9214.
Yours truly,
Doris Rist
A/Rulings Officer
Financial Institutions and Real Property
GST/HST Rulings and Interpretations
XXXXX
| b.c.c.: |
Originator's Desk Copy |
b.c.c.: NCS Subject Code(s) - I 11950-1, 11645-1
| b.c.c.: |
Registration Number: n/a
XXXXX |
b.c.c.: H.Q.Quality Assurance
| b.c.c.: |
hard copy - R/F GST |
Analysis: mobile homes imported into Canada are considered tangible personal property upon importation
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Casework Number HQR0000606
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