GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Avenue
Vanier, ON K1A 0L5
XXXXX
XXXXX
XXXXX Case: HQR0001170
XXXXX Code: 11870-5; 11950-1
XXXXX June 10, 1998
Dear XXXXX
Thank you for your letter of May 4, 1998 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transaction described below.
Statement of Facts
Our understanding of the facts and the transaction is as follows:
1. Your clients, XXXXX , are the vendors of a building located at XXXXX which has been used partially as a place of residence and partially in commercial activities. They are not "builders" as defined for GST/HST purposes.
2. Your clients are not registrants for HST purposes, although the building has been partly used for commercial purposes for many years.
Transaction
3. Your clients are selling the building to XXXXX , who are registered for HST purposes (Registration XXXXX The purchasers are non-residents of Canada.
Ruling Requested
What is the HST status of the supply by way of sale of the building?
Ruling Given
Based on the facts set out above, we rule that
1. The sale of the subject building is considered to be two separate supplies by way of sale under subsection 136(2) of the Excise Tax Act (the Act):
i) the sale of the residential portion of the building, and
ii) the sale of the remaining portion of the building (commercial part).
2. The sale of the residential portion of the building qualifies for exemption from HST as a sale of a residential complex by a person who is not a builder of the complex, pursuant to section 2 of Part I of Schedule V to the Act, provided your clients have not claimed an input tax credit in respect of their last acquisition of the complex (i.e. residential portion of the building) or in respect of an improvement to the complex after acquisition.
3. The supply by way of sale of the remaining portion of the building (commercial part) is taxable as no exempting provision applies. Under paragraph 221(2)(b) of the Act, your clients are not required to collect the HST payable by the purchasers in respect of the supply of the commercial portion of the building because the purchasers are registered for HST purposes. Where the commercial portion is used primarily in commercial activity, under subsection 228(4) of the Act, the purchasers must account for the HST on its regular GST/HST return (Form 34 - GST/HST Return for Registrants) for the period in which they acquired the property. Furthermore, they may also claim any offsetting input tax credit on the same GST/HST return.
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 for which you requested a ruling.
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9587.
Yours truly,
Bao Tran
Real Property Unit
Financial Institutions and Real Property Division
GST/HST Rulings and Interpretations Directorate
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