GST/HST Rulings and Interpretations
Place Vanier, Tower C, 10th Floor
25 McArthur Avenue
XXXXX Vanier, Ontario
XXXXX K1A 0L5
Dear Sir:
I refer to your facsimile message of July 24, 1996, (with attachments) and our subsequent meeting of March 24, 1998, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the situation as outlined below.
Statement of Facts
1. Under the Act respecting the cities and towns of XXXXX and XXXXX and XXXXX (the Act) the territorial limits of these cities are to be rectified.
2. Under article 1 of the Act the territory described in Schedule I to the Act is detached from XXXXX and attached to XXXXX Similarly, the territory described in Schedule II is detached from XXXXX and attached to XXXXX As a result of the realignment of territorial limits XXXXX shall pay an amount of XXXXX to XXXXX
3. Under article 2 of the Act the territory described in Schedule III to the Act is detached from XXXXX and attached to XXXXX Similarly the territory described in Schedule IV to the Act is detached from XXXXX and attached to XXXXX . As a result of the realignment of territorial limits XXXXX shall pay an amount of XXXXX to XXXXX
4. Under article 6 of the Act the territorial transfers come into force on December 31, 19 xx .
5. Under section 173 of the XXXXX the real estate assessment roll in force in the annexing municipality as amended for the annexation of properties shall constitute the real estate assessment roll for the annexing municipality's relevant fiscal year.
6. Title to the subject properties is not being transferred.
Interpretation Requested
Do the payments from XXXXX to XXXXX and XXXXX constitute consideration for a supply?
Interpretation Given
It is the Department's view that a supply of real property is not being made and the payments made by XXXXX to XXXXX and XXXXX are not consideration for a supply of real property. Title to the properties is retained by the owner after the transfer of territorial limits between the cities. The right to assess the subject properties for the purposes of imposing real estate taxes no longer rests with XXXXX and XXXXX and one would logically conclude that a supply of an intangible, i.e., the right to impose taxes, has taken place. It is the Department's view, however, that the payments made by XXXXX to XXXXX and XXXXX are not consideration for a supply. The payments made by XXXXX are compensatory payments made as the result of lost property tax revenues suffered by XXXXX and XXXXX as the result of a number of factors. Factors contributing to the compensatory payments could include a reduction in the real estate assessment bases, differences in the mill rates, and variations caused by less affluent neighbourhoods.
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact the undersigned at (613) 954-7656.
Yours truly,
Enikö Vermes
A/Director
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate
| c.c.: |
E. Vermes XXXXX
N. Minken
O. Newell |
Legislative References: ss. 123(1)
NCS Subject Code: I1
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