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GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Avenue
Vanier, ON K1A 0L5XXXXXAttention: XXXXX
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Case: HQR0001727File: 11870-2, 11950-1May 21, 1999
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Subject:
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GST/HST INTERPRETATION
GST on Commercial Condominium Supplies
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Dear XXXXX
Thank you for your letter of (with attachments) concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your operations.
All legislative references are to the Excise Tax Act. (the Act)
Statement of Facts
From your letter and our telephone conversations of April 17 and May 7, 1999, our understanding is as follows:
1. A person who owns a condominium unit (the Owner) in a commercial condominium complex pays fees to a condominium corporation (the Corporation) on a monthly basis. The monthly fee constitutes consideration for the Corporation managing the complex and for the right of the Owner to use a parking space located in the complex.
2. The Corporation leases a block of parking spaces in the complex from an unrelated third person. The monthly fee charged to the Owners by the Corporation covers its cost of acquiring maintenance services for the complex and the cost of leasing the parking spaces.
3. An Owner subsequently rents their condominium unit to a tenant who pays a basic rent, and an additional rent equal to the monthly fee that the Corporation charges to the Owner. The tenant uses the unit to operate a business, e.g., a retail store.
4. The Corporation is operated on a not-for profit basis and does not issue share capital.
Interpretation Requested
1. Are the fees charged by the Corporation to an Owner subject to the GST/HST?
2. Are the fees charged by an Owner to a tenant subject to the GST/HST?
3. Is the Corporation required to pay the GST/HST on the lease of the block of parking spaces provided by an unrelated third person?
4. Does the Corporation have to file GST/HST returns to claim input tax credits for the GST/HST paid on the lease of the parking spaces?
Interpretation Given
Before addressing your specific questions, we would like to explain some general provisions of the Act that relate to this situation.
Generally, every person who makes a taxable supply in Canada in the course of a commercial activity engaged in by the person in Canada is required to be registered. One exception to the registration requirement, which may be relevant to the situation you described, is for a person who is a small supplier.
A person is a small supplier during any particular calendar quarter and the following month if the total value of the consideration for taxable supplies, including zero-rated supplies, made by the person (or an associate of the person who was an associate at the beginning of the particular calendar quarter, i.e., the calendar quarter in which the calculation is being made) that became due, or was paid without becoming due, in the previous four calendar quarters does not exceed $30,000, or in the case of a public service body, $50,000. The calculation should not include consideration attributable to the sale of goodwill of a business or certain taxable supplies such as supplies of financial services and supplies by way of sale of capital property.
With few exceptions, a person must be engaged in a commercial activity in Canada in order to be eligible to register for the GST/HST. For example, if the Corporation were engaged only in the making of exempt supplies, it would not be entitled to register.
Subsection 123(1) defines a "non-profit organization" as:
"a person (other than an individual, an estate, a trust, a charity, a public institution, a municipality or a government) that was organized and is operated solely for a purpose other than profit, no part of the income of which is payable to, or otherwise available for the personal benefit of, any proprietor, member or shareholder thereof unless the proprietor, member or shareholder is a club, a society or an association the primary purpose and function of which is the promotion of amateur athletics in Canada".
The enclosed Departmental Policy Paper P-215, "Determination of Whether An Entity Is A 'Non-Profit Organization' For Purposes Of The Excise Tax Act", provides further explanation of the term non-profit organization. Part VI of Schedule V to the Act provides exemptions for certain supplies made by a non-profit organization.
We will now address your questions in the same order as presented above.
1. The monthly fee charged by the Corporation to an Owner will be subject to the GST if the Corporation is a GST/HST registrant.
2. The fees charged by an Owner to a tenant with respect to the supply of a condominium unit will be subject to tax if the Owner is a GST/HST registrant.
3. The Corporation is required to pay tax to the person who supplies the parking spaces if that person is a GST/HST registrant.
4. If a registrant, the Corporation will be required to file GST/HST returns in accordance with the general provisions of the Act. The Corporation is eligible to claim input tax credits for the tax paid or payable on the lease of parking spaces subject to the general provision of the Act.
It must be noted that a registrant means a person who is registered or is required to be registered for GST/HST purposes.
Analysis
Sections 13 and 9.1 of Part I of Schedule V to the Act, respectively, provide exemption for certain supplies made by a condominium corporation and supplies by way of lease, licence or similar arrangement of parking spaces in a condominium complex. However, these sections both require that the supply be in respect of a residential condominium unit. The term "residential condominium unit" and related definitions relevant to your questions are found in subsection 123(1) and are reproduced in the Appendix to this letter. As the supplies in the situation you described are not of residential nature, the exempting provisions of section 13 or 8.1 do not apply, nor are the supplies exempted in Part VI of Schedule V to the Act. Accordingly, the fees identified in paragraphs 1, 2 and 3 of 'Interpretations Given' will attract the GST when made by a GST/HST registrant.
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 me at (613) 954-4393.
Your truly,
Hugh Dorward
Real Property Unit
Financial Institutions and Real Property Division
GST/HST Rulings and Interpretations Directorate
"condominium complex" means a residential complex that contains more than one residential condominium unit;
"residential complex" means
(a) that part of a building in which one or more residential units are located, together with
(i) that part of any common areas and other appurtenances to the building and the land immediately contiguous to the building that is reasonably necessary for the use and enjoyment of the building as a place of residence for individuals, and
(ii) that proportion of the land subjacent to the building that that part of the building is of the whole building,
([b]) that part of a building that is
([i]) the whole or part of a semi-detached house, rowhouse unit, residential condominium unit or other similar premises that is, or is intended to be, a separate parcel or other division of real property owned, or intended to be owned, apart from any other unit in the building, and
([ii]) a residential unit,
together with that proportion of any common areas and other appurtenances to the building and the land subjacent or immediately contiguous to the building that is attributable to the unit and that is reasonably necessary for its use and enjoyment as a place of residence for individuals,
(c) the whole of a building described in paragraph (a), or the whole of a premises described in subparagraph (b)([i]), that is owned by or has been supplied by way of sale to an individual and that is used primarily as a place of residence of the individual, an individual related to the individual or a former spouse of the individual, together with
(i) in the case of a building described in paragraph (a), any appurtenances to the building, the land subjacent to the building and that part of the land immediately contiguous to the building, that are reasonably necessary for the use and enjoyment of the building, and
(ii) in the case of a premises described in subparagraph (b)(i), that part of any common areas and other appurtenances to the building and the land subjacent or immediately contiguous to the building that is attributable to the unit and that is reasonably necessary for the use and enjoyment of the unit,
(c.1) REPEALED,
(c.2) REPEALED,
(d) a mobile home, together with any appurtenances to the home and, where the home is affixed to land (other than a site in a residential trailer park) for the purpose of its use and enjoyment as a place of residence for individuals, the land subjacent or immediately contiguous to the home that is attributable to the home and is reasonably necessary for that purpose, and
([e]) a floating home,
but does not include a building, or that part of a building, that is a hotel, a motel, an inn, a boarding house, a lodging house or other similar premises, or the land and appurtenances attributable to the building or part, where the building is not described in paragraph (c) and all or substantially all of the leases, licences or similar arrangements, under which residential units in the building or part are supplied, provide, or are expected to provide, for periods of continuous [possession] or use of less than sixty days;
"residential condominium unit" means a residential complex that is, or is intended to be, a bounded space in a building designated or described as a separate unit on a registered condominium or strata lot plan or description, or a similar plan or description registered under the laws of a province, and include any interest in land pertaining to ownership of the unit;
"residential [u]nit" means
(a) a detached house, semi-detached house, rowhouse unit, condominium unit, mobile home, floating home or apartment,
(b) a suite or room in a hotel, a motel, an inn, a boarding house or a lodging house or in a residence for students, seniors, individuals with a disability or other individuals, or
(c) any other similar premises, or that part thereof that
(d) is occupied by an individual as a place of residence or lodging,
(e) is supplied by way of lease, licence or similar arrangement for the occupancy thereof as a place of residence or lodging for individuals,
(f) is vacant, but was last occupied or supplies as place of residence or lodging for individuals; or
(g) has never been used or occupied for any purpose, but is intended to be used as a place of residence or lodging for individuals;
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