22 July 1998 GST/HST Interpretation HQR0001132 - Sale of Residential Complex

                                                                        GST/HST Rulings and Interpretations
  Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Road
Vanier, Ontario
XXXXX                                                                                 K1A 0L5

                                                                        July 22, 1998

Dear XXXXX

Thank you for your letter of April 7, 1998 concerning the application of the Goods and Services Tax (GST) to the proposed sale of a home owned by your company.

Facts

The facts as set out in your letter are as follows:

1. A residential property was initially owned by you and used as your principal residence for four years.

2. XXXXX you sold the property to your company.

3. During the entire time that your company has owned the property, it has leased it out for residential use.

4. Your company now intends to sell the property.

Interpretation Requested

You have asked us whether the proposed sale would be subject to GST.

Interpretation Given

The information provided in your letter is insufficient to allow us to determine whether the proposed transaction described in your letter will be subject to GST and we have not received a response to our request for additional information contained in our fax of April 21, 1998. However, we can provide you with some general information respecting the application of the GST to sales of residential property.

Generally, the sale of real property is subject to GST. However, there are exemptions for sales of residential housing, and these exemptions may apply to property that was held to earn rental income. However these exemptions apply only where:

•   the sale of the residential complex is made by a person (e.g. a corporation) other than a builder and no input tax credits have been claimed in respect of the residential complex or improvements to the residential complex; or

•   where the vendor is a builder for GST/HST purposes, the property was subject to the self supply rules or was acquired by way of an exempt sale and no ITC's have been claimed in respect of the residential complex or improvement to the residential complex.

Note, a residential complex can include a detached house and up to 12 hectare of land.

For further discussion on the above, including the terms "residential complex", "builder" and "self supply" we are enclosing a copy of section 2.1 of Chapter 19 of the GST/HST Memoranda Series which covers the sale of residential real property.

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/HST Memoranda Series, do not bind the Department with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact the XXXXX[.]

Yours truly,

Michael Ezri
A/Rulings Officer
Real Property Unit
Financial Institutions and Real Property Division
GST/HST Rulings and Interpretations Directorate