10 March 2000 GST/HST Ruling 8337/HQR0001943 - Municipal Designations

Dear XXXXX

Thank you for your facsimile received in this office on September 2, 1999, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the facts described below.

Please note that as of November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency ("CCRA").

Statement of Facts

Our understanding of the facts is as follows:

1) Your client, XXXXX completed construction of a XXXXX unit non-profit housing complex in XXXXX[.]

2) XXXXX requested municipal designation for XXXXX on May 18, 1999, with respect to its supply of subsidized residential accommodation.

3) XXXXX was granted municipal designation in our letter dated July 5, 1999, with an effective date of May 1, 1995, four years retroactive from the date of its application.

XXXXX

Ruling Requested

You have requested that the effective date of designation of May 1, 1995, granted to XXXXX be changed to March 31, 1993. It is your view that CCRA's administrative policy outlined in policy statement P-204 dated January 19, 1996, effective April 1, 1996, provides for retroactivity in exceptional cases.

Ruling Given

Pursuant to subsection 259(1) of the Excise Tax Act ("Act"), the Minister of National Revenue may designate organizations as municipalities but only in respect of their activities specified in the designation that involve the making of supplies (other than taxable supplies) of municipal services. Because there are no provisions in the Act concerning the effective date of these designations, policy statement P-204 concerning the effective date of municipal designations and determinations was issued. Policy statement P-204 states, in part, that where the tax status of supplies does not change as a result of a designation, the effective date of the designation will be the first day of the fiscal year of the applicant in which it made the application. Previous to this, our policy with respect to non-profit organizations providing housing on a rent-geared-to-income basis was to allow designation retroactively for a maximum of four years where the non-profit organization met all the conditions.

Based on policy statement P-204, XXXXX was entitled to be designated as a municipality effective January 1, 1999, which is the first day of XXXXX fiscal year in which the application for municipal designation was made. However, in light of numerous requests for designation received from non-profit organizations making supplies of housing on a rent-geared-to-income basis who were unaware of this change in administrative policy as outlined above, internal discretion was used to retroactively allow an effective date of designation that is prior to the fiscal year of these organizations in which they made their application. We have, therefore, been designating these organizations retroactively for a maximum of four years (unless they requested a later date) to coincide with the four year time period permitted for the payment of rebates pursuant to subsection 259(5) of the Act. As a result of this, XXXXX was designated as a municipality retroactive to May 1, 1995, rather than January 1, 1999. We cannot, therefore, designate XXXXX earlier than May 1, 1995, which date was four years retroactive from the first day of the month in which their application for designation was made as there is no basis to do so.

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%, 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.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact Mr. Owen Newell, Manager, Municipalities and Health Care Services Unit at (613) 941-3268 or the undersigned at (613) 954-4395.

Yours truly,

Neil Minken
Municipalities and Health Care Services Unit
Excise and GST/HST Rulings Directorate