28 February 1997 GST/HST Interpretation HQR0000510 - Letter From , Dated , 19XX

                                                                        February 28, 1997

This is in response to a note from XXXXX of your office in which he had requested our comments on the what parts of the above noted letter the Department should give direction.

The letter from XXXXX, a law firm in XXXXX requested comments on the following areas (points raised by the letter have been italicized):

1. The appropriateness of a clause in a standard form Purchase and Sale Agreement for used residential property, a GST Certificate - Vacant Land and a GST Certificate - Used Residential Property.

We advise that you comment on the sections of the legislation quoted and not on the appropriateness of the clause or certificate. You may want to bring up the point that not all exempt supplies of residential property are covered by section 2 of Part I of Schedule V to the Excise Tax Act (the Act).

2. Assignment of HST Rebate - Can the builder accept an assignment of the HST Rebate when the builder has not owned the land that the house is being constructed on?

A GST/HST new housing rebate pursuant to section 254 or 254.1 of the Act can be paid or credited by a builder to a qualified individual purchaser. All of the conditions outlined in these respective sections must be fulfilled for the individual to be entitled to the rebate. A builder of a residential complex is defined in subsection 123(1) of the Act as a person who has an interest in the real property on which the complex is situated at a time when the person constructs or engages another to construct the complex. A person who acquires an interest in a residential complex before it has been occupied as a place of residence for the primary purpose of selling the complex is also considered a builder. However, with the exceptions of a mobile home or a floating home, the definition of residential complex requires that there be underlying and surrounding land for the complex. Thus, a person who constructs a residential complex but has no interest in the land (either leasehold interest, equitable interest or legal title) associated with the residential complex is not a builder for the purposes of the Act.

An individual who purchases the land from one person and the construction services for a residential complex from a different person would not qualify for a new housing rebate pursuant to section 254 of the Act. Rather, the individual may qualify for a new housing rebate pursuant to section 256 of the Act, provided the individual met all of the other conditions described therein. There is no provision in section 256 to allow the rebate to be paid or credited to the qualifying individual by a person other than the Minister of National Revenue.

3. When will forms, completion guides and memoranda be available?

We have forwarded XXXXX a copy of an E-mail sent to XXXXX by Mr. Michael McGlynn of our Technical Publications Unit. The E-mail outlined a provisional list of TIBs to be issued by April 1, 1997 and a list of GST Memoranda that will be revised over the longer term. Any questions you have can be directed to Mr. McGlynn at (613) 954-0181.

Client Services Division is in the process of completing changes to form GST 190 and the publication Completion Guide and Form For: New Housing Rebate. The form and guide should be available in the field before April 1, 1997.

4. The remaining questions deal with the calculation of the HST and new housing rebates and how HST should be disclosed on a statement of adjustments.

Again we advise that your comments should reflect interpretations of the legislative provisions that pertain to these issues. For example, an appropriate response to the question of how the HST should be disclosed on a statement of adjustments would be an explanation of the proposed amendment to section 223 of the Act found in Part II of Bill C-70.

Whether the consideration for the supply of a residential complex from a builder includes allowances for amounts paid directly to sub-trades by an individual purchaser and sweat equity amounts for work performed on the complex by the individual purchaser and credited by the builder to the individual purchaser is best determined on a case by case basis with attention to the terms of the agreement(s) between the builder, the purchaser and the sub-trades. An explanation of the definitions of supply and recipient pursuant to subsection 123(1) of the Act and the value of consideration for a supply pursuant to subsection 153(1) of the Act may provide a useful general framework for these issues.

We have already provided XXXXX of your office with comments on a spreadsheet that he had developed for determining value of consideration, tax payable, and rebate amounts where the terms of a contract are such that the price payable for a new house includes the HST with both the GST new housing rebate and the XXXXX new housing rebate credited by the builder. This is a very useful chart and we have forwarded it to our Technical Publications Unit for their consideration.

If you have any questions about this memorandum please contact the undersigned at (613) 954-8852.

Heather MacLeod
A/Policy Officer
Financial Institutions and Real Property
GST Rulings and Interpretations

Legal References:                   123(1) "builder", "residential complex", 234(1), 254, 254.1, 256.

Authority:                               Excise Tax Act

Reference:

b.c.c.:   H.Q. Quality Assurance
XXXXX