2 October 1998 GST/HST Ruling HQR0000106 - Territorial Lands Act and Federal Real Property Act

Mr. John Dione Department of Indian Affairs and Northern Development 10 Wellington Street, Room 1135 Hull, Quebec K1A 0H4Attention: Mr. Dione, Internal Control and Audit Officer

GST/HST Rulings and Interpretations  Directorate Place Vanier, Tower C, 10th Floor 25 McArthur Road Vanier, Ontario K1A 0L5Case: HQR0000106October 2, 1998

Subject:

GST/HST APPLICATION RULING Territorial Lands Act and Federal Real Property Act

Dear Mr. Dione:

Thank you for your facsimile transmission of March 29, 1996 to XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to fees charged pursuant to the subject legislation. We apologize for the delay in this response.

Our understanding of the facts is as follows:

Statement of Facts

1. The Department of Indian Affairs and Northern Development (DIAND) is a branch of the federal government. The federal government is registered for GST/HST purposes.

2. The Minister of DIAND controls, manages and administers certain Crown lands in the Yukon Territory and the Northwest Territories for the purposes of protection, control, use, purchase, or lease in accordance with the Territorial Land Use Regulations, the Territorial Lands Regulations and the Territorial Quarrying Regulations made pursuant to the Territorial Lands Act.

3. In accordance with the Federal Real Property Regulations, made pursuant to the Federal Real Property Act, no sale, lease or other disposition of federal real property and no licence in respect of federal real property can be made or given by any Minister of a federal department unless it is in accordance with that Act and accompanying regulations.

Territorial Lands Act

4. The Territorial Lands Act (TLA) gives the Governor in Council authority to set apart and appropriate, as a land management zone, any territorial lands in the Yukon Territory or the Northwest Territories for the protection of the ecological balance or physical characteristics in that area. Under the TLA, the Governor in Council may make regulations respecting the issuance of permits for the use of surface land in a land management zone and the terms, conditions and fees payable for those permits.

5. The TLA also provides the Governor in Council with the authority to sell, lease or otherwise dispose of territorial lands, and to make regulations authorizing the Minister to do the same, subject to such limitations and conditions that may be prescribed.

6. Subsection 9(2) of the TLA states that "A notification may be issued to a registrar directing the registrar to issue a certificate of title to a person named therein in respect of territorial lands ..." According to subsection 9(4), the issue of a notification pursuant to this subsection has the same force and effect as a grant of territorial land made by letters patent under the Great Seal. "Notification" is defined under the TLA as a direction in a form prescribed by the Governor in Council pursuant to paragraph 23(k) and issued pursuant to subsection 9(2). Registrar has the same meaning assigned by the Land Titles Act.

7. Section 12 of the TLA provides the Governor in Council with the authority to make regulations for the leasing of mining rights in, under or on territorial lands and the payment of royalties. Regulations made pursuant to this provision must provide for the protection of and compensation to the holders of surface rights.

8. Out of every grant of territorial lands, section 15 of the TLA deems all mines and minerals whether solid, liquid or gaseous that may be found to exist in, under or on those lands, together with the right to work the mines and minerals and for this purpose to enter on, use and occupy the lands or so much thereof and to such extent as may be necessary for the working and extraction of the minerals; and all rights of fishery and fishing occupation in connection therewith on or around or adjacent to those lands to be reserved to the Crown.

9. Paragraphs 23(i) and (k) of the TLA authorizes the Governor in Council to

"(i) prescribe a tariff of fees for copies of maps, plans, field notes, documents, papers and other records pertaining to territorial lands, and for the preparation of documents evidencing a sale, lease or other disposition of territorial lands and for the registration of any documents pertaining to territorial lands ...

(k) prescribe the form of notification that may be issued pursuant to section 9 and the fee for the issue thereof ..."[.]

Territorial Land Use Regulations

10. Sections 8 and 9 of the Territorial Land Use Regulations (TLUR) prohibits persons from carrying on any work or undertaking on territorial lands unless they are holders of a Class A or B Permit.

11. Subsection 22(1) of the TLUR provides that a person who is eligible for a permit can submit an application for a permit to the engineer designated by the Minister of DIAND to serve the area in which the lands are located. Every permit application must be accompanied by the application fee set out in Schedule I, the land use fee set out in Schedule II and a preliminary plan. A blank "Application for Land Use Permit" was submitted for review[.]

12. Subsection 22(2) of the TLUR states that "Every permit application submitted pursuant to subsection 1 shall be accompanied by the application fee set out in Schedule I, the Land use fee set out in Schedule II and a preliminary plan ..."[.]

13. Subsection 34(2) of the TLUR provides that where an application for a land use permit is refused, the land use fee submitted with the application shall be refunded to the applicant. Subsection 34(3) states that no application fee shall be refunded.

14. Schedule I to the TLUR sets out the fees charged by DIAND relating to land use permits; namely,

(a) a land use permit application - $150;

(b) assignment of the permit - $50; and

(c) copies of documents set at $1 per page.

15. Schedule II to the TLUR describes the category of land use permits issued and fees charged by DIAND for each.

The fee payable for a land use permit is based upon the number of hectares to be used in the land use operation; namely,

(1) where area of lands proposed to be used as shown on the preliminary plan is less than or equal to 2 hectares a permit fee of $50 is charged;

(2) where area of lands proposed to be used as shown on the preliminary plan is greater than 2 hectares a permit fee of $50 is charged plus $50 per hectare for each hectare or portion of a hectare in excess of 2 hectares.

Territorial Land Regulations

16. Section 4 of the Territorial Lands Regulations (TLR) provides that an application to lease or purchase territorial lands must be made to land agent, designated by the Minister of DIAND, and the application fee set out in the schedule must accompany that application.

17. Section 6 of the TLR requires every person wishing to purchase territorial lands to enter into an agreement for the sale with the Minister. A generic "Agreement of Sale" was provided for our review.

18. Section 12 of the TLR states that "Every lease of territorial lands shall contain ... a reservation of

(a) all mines and all minerals whether solid, liquid or gaseous which may be found to exist ... together with the full powers to work the same and for the purpose to enter upon, use and occupy the lands ...

(b) the rights of the recorded holders of mineral claims and other claims or permits ..."[.]

A generic lease agreement was provided for our review.

19. Section 14 of the TLR states that a lessee who wishes to assign his lease shall pay all outstanding rent ... of the lease together with the registration fee set out in the schedule ...[.]

20. The "Schedule" to the TLR sets out the fees charged by DIAND relating to the lease and purchase of territorial lands; namely,

(1) application for lease, purchase or other disposition - $150;

(2) preparation of document evidencing lease, sale or other disposition - $50;

(3) renewal of lease - $50;

(4) registration of assignment - $50;

(5) issue of letters patent - $50;

(6) issue of notification - $50;

(7) copy of document -$1 per page;

(8) copy of survey plan or map - $5 per page;

(9) preparation of submission to the Governor in Council - $50.

It is assumed that the fee charged under (2) above is for a copy of the document; under 3 is to cover DIAND's cost in renewing a lease; and (5) is to cover DIAND's cost in arranging to have a certificate of title issued to its client.

Federal Real Property Act

21. Section 4 of the Federal Real Property Act (FRPA) states "Subject to any other Act, no sale, lease or other disposition of federal real property shall be made and no licence shall be given in respect of federal real property except in accordance with this Act. "Federal real property" means real property belonging to Her Majesty, and includes any real property of which Her Majesty has the power to dispose ..."[.]

22. Subsection 16(2) of the FRPA states that "The Governor in Council may, on the recommendation of the Treasury Board, make regulations

(a) respecting the sale, lease or other disposition of federal real property for which sale, lease or disposition there is no provision in or under any other Act ...

(j) imposing fees for the provision of copies of maps, plans, field notes, documents, papers and other records pertaining to federal real property, for the preparation of documents evidencing a sale, lease or other disposition of federal real property and for the deposit in a department of documents relating to federal real property ..."[.]

Federal Real Property Regulations

23. Subsection 4(2) of the Federal Real Property Regulations states that

"(2) A Minister may, in respect of real property,

 (a) give a licence or acquire a licence ..."[.]

24. A generic "Licence" agreement (Agreement) was provided for review. The preamble to the Agreement states that "in consideration of the Licence fees ... Her Majesty grants unto the Licencee in accordance with the Federal Real Property Regulations Section 4(2)(a) for a period of thirty (30) years ... a Licence to enter, construct, operate, maintain, inspect, alter, remove, replace, reconstruct or repair an electrical power transmission line upon the lands described ..."[.]

25. Clause 1 of the Agreement states that "The Licencee will pay to Her Majesty...an annual fee of one hundred fifty ($150.00) dollars ..."[.]

26. Clause 20 states that the Agreement "operates as a Licence only and does not confer any exclusive possessory right or leasehold interest in the said lands."

Transaction(s)

DIAND charges fees for permits issued pursuant to XXXXX or services rendered in connection with the issuance of those permits.

DIAND leases and/or sells territorial lands pursuant to the Territorial Lands Act.

DIAND supplies licences pursuant to the Federal Real Property Act.

Ruling Requested

DIAND is required to charge GST on the supplies it provides, as described XXXXX Schedules I and II to the Territorial Land Use Regulations[.]

DIAND is required to charge GST on the supplies it provides, as described in XXXXX Schedule to the Territorial Lands Regulations[.]

DIAND is required to charge GST on the supply of a right to enter federal real property, as provided for through a Licence agreement, made pursuant to the Federal Real Property Regulations[.]

Ruling Given

Based on the facts set out above, we rule that

Territorial Land Use Regulations

Land Use Permit Application Fee ($150) and

Land Use Fee (Dependent Upon Land to be Used)

Pursuant to subsection 162(1) of the Excise Tax Act (ETA), a land use permit application is not subject to GST provided that the permit for which the application is made is for the supply of a right described in paragraph 162(1)(b) of the ETA.

Land use, regardless of the area of lands to be used, is deemed not be a supply pursuant to paragraph 162(1)(b) of the ETA provided that the land use operation relates to a right to explore for or exploit a natural resource described in paragraph 162(1)(a) of the ETA.

Where a land use permit application does not relate to a right described in paragraph 162(1)(b), both the land use permit application fee and land use fee are consideration for a taxable supply and therefore subject to GST as no exemption provisions within the ETA apply.

Assignment of the Permit ($50)

The registering of an assignment of a permit is an exempt supply pursuant to paragraph 20(a) of Part VI of Schedule V to the ETA and therefore not subject to GST.

Copies of Documents ($1 per page)

Paragraph 20(e) of Part VI of Schedule V to the ETA exempts a supply of a service of providing information, or of any certificate or other document, in respect of (i) the title to, or any right or estate in, property, (ii) any encumbrance or assessment in respect of property, or (iii) the zoning of real property. Paragraph 20(f) of the same Part and Schedule to the ETA exempts a supply of a service of providing information under the Privacy Act, the Access to Information Act or any similar provincial legislation. Copies of documents, as described in paragraph 23(i) of the Territorial Lands Act, are not subject to GST where the conditions of paragraph 20(e) or (f) of Part VI of Schedule V to the ETA are met.

An example of when one of these exempting paragraphs would not apply is where a supply of a commercial map is made.

Territorial Land Regulations

Application for Lease, Purchase or Other Disposition x ($150)

An application for the lease, purchase or other disposition of territorial lands is a taxable supply and therefore subject to GST as no exempting provisions within the ETA apply.

Preparation of Document Evidencing Lease, Sale or Other Disposition XXXXX

A copy of a document evidencing lease, sale or other disposition is an exempt supply pursuant to subparagraph 20(e)(i) of Part VI of Schedule V to the ETA and therefore not subject to GST.

Renewal of Lease ($50)

The renewal of a lease is a taxable supply and therefore subject to GST as no exempting provisions within the ETA apply.

Registration of Assignment ($50)

The registration of an assignment of a lease is an exempt supply pursuant to paragraph 20(a) of Part VI of Schedule V to the ETA and therefore not subject to GST.

Issue of Letters Patent ($50)

The issue of letters patent is an exempt supply pursuant to paragraph 20(e) of Part VI of Schedule V to the ETA and therefore not subject to GST.

Issue of Notification ($50)

The issue of notification is an exempt supply pursuant to paragraph 20(e) of Part VI of Schedule V to the ETA and therefore not subject to GST.

Copy of Document ($1 per page)

A copy of a document, as described in paragraph 23(i) of the Territorial Lands Act, is an exempt supply and therefore not subject to GST where the conditions of paragraph 20(e) or (f) of Part VI of Schedule V to the ETA are met.

Copy of Survey Plan or Map ($5 per page)

A copy of a survey plan or map is a taxable supply and therefore subject to GST unless paragraph 20(e) or (f) of Part VI of Schedule V to the ETA applies.

Preparation of Submission to the Governor in Council ($50)

The preparation of a submission to the Governor in Council is a taxable supply and therefore subject to GST as no exempting provisions within the ETA apply.

Federal Real Property Regulations

For GST/HST purposes, supplies of real property are taxable unless specifically exempted under the ETA. The supply of real property through the Licence Agreement is taxable and therefore subject to GST as no exempting provisions within the ETA apply.

On April 1, 1997, the harmonized sales tax (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%[.] Example: Goods that are delivered or made available in a participating province are subject to the HST, to the extent that they are taxable supplies (which are not zero-rated), tax must be collected at the harmonized rate.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to departmental interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

The supply of natural resource property rights listed below is deemed under subsection 162(1) of the Excise Tax Act not to be a supply, and any consideration paid or due, or any fee or royalty charged or reserved, is deemed not to be consideration. As such, GST does not apply to the consideration charged for the supply of these rights. Subsection 162(1) of the ETA reads as follows:

"162.(1) Natural resources - For the purposes of this Part, the supply of

(a) a right to explore for or exploit a mineral deposit, a peat bog or deposit of peat or a forestry, water or fishery resource,

(b) a right of entry or user relating to a right referred to in paragraph (a), or

(c) a right to an amount computed by reference to the production (including profit) from, or to the value of production from, any such deposit, bog or resource,

shall be deemed not to be a supply and any consideration paid or due, or any fee or royalty charged or reserved, in respect of the right shall be deemed not to be consideration for the right."

The exception to this rule is where supplies of this nature are made to a consumer or to a non-registrant who is in the business of making supplies of the products, minerals or peat to consumers.

"Mineral" is defined in the ETA and includes petroleum, natural gas and related hydrocarbons and sand and gravel.

Section 20 of Part VI of Schedule V to the ETA exempts the following supplies when made by a government.

"(a) a supply of a service of registering any property or filing any document in a property registration system ...

(c) a supply of a licence, permit quota or similar right (other than such a right supplied in respect of the importation of alcoholic beverages), and the supply of any service in respect of an application for such a right ...

(d) a supply of a service of providing information, or of any certificate or other document, in respect of

(i) the title to, or any right or estate in, property,

(ii) any encumbrance or assessment in respect of property, or

(iii) the zoning of real property ..."

Paragraphs (k) and (l) of the above-mentioned paragraph specifically excludes from exemption, and therefore taxes, the following supplies:

"(k) a supply of a right to take or remove forestry products, products that grow in water, fishery products, minerals or peat, where the supply is made to

(i) a consumer, or

(ii) a person who is not a registrant and who acquires the right in the course of a business of the person of making supplies of the products, minerals or peat to consumers, or

(l) a supply of a right to enter, to have access to or to use property of the government. ..."

For greater certainty, section 146 of the ETA deems the supplies made under paragraphs 20(k) and 20(l) above, to be made in the course of a commercial activity.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 954-7952.

Yours truly,

Lynn F. Renner
Governments Unit
GST/HST Rulings and Interpretations Directorate

c.c.:

D. Harding L. Renner

ATIP
Legislative References:	Sections 146, 162 and Paragraphs (a), (e), (k) and (l) of section 20 of Part VI of Schedule V to the ETA
NCS Subject Code(s):	11847-6