21 December 1999 GST/HST Interpretation 13139 - Rebate for Motor Vehicles that are Specially Equipped for Disabled Individuals

This is in reply to your request of August 6, 1999, sent by electronic mail concerning the proposed legislation contained in the Notice of Ways and Means Motion released June 2, 1999, which provides under section 258.1 for a partial tax rebate on the purchase of a specially equipped motor vehicle, and under section 258.2, for a tax rebate on the purchase of modification services that are made to a motor vehicle where the services are purchased outside Canada or outside a participating province.

First of all, you mentioned that you are preparing a Communiqué on this subject to be issued when the legislation receives Royal Assent. Since these are new provisions subject to interpretation, we would like to offer our assistance in reviewing the technical content of your Communiqué should you want us to do so. Further, I would also like to mention that at the Publications and Policy Review Committee meeting held on September 8, 1999, a Technical Information Bulletin was approved on this subject matter. You may want to discuss the availability of this publication with Mike McGlynn, manager of the Technical Publications Unit in GST/HST R&I Directorate.

Before addressing your specific questions, I would like to provide a general overview of the proposed rebate provisions to clarify the purpose of the rebates and how they apply.

Purchases of qualifying vehicles - section 258.1

The supply of a pre-modified new or used motor vehicle that is equipped with either an auxiliary driving control to enable an individual with a disability to operate the vehicle, or with a device designed exclusively to enable a wheelchair to be placed in the vehicle without having to collapse the wheelchair, is subject to the 7% GST or the 15% HST since there are no zero-rating or exempting provisions that apply to the supply of a specially equipped vehicle.

A rebate is proposed for the tax payable on a portion of the purchase price of a qualifying motor vehicle, defined as a motor vehicle that is equipped with either a device designed exclusively to assist in placing a wheelchair in the vehicle without having to collapse the wheelchair or with an auxiliary driving control to facilitate the operation of the vehicle by an individual with a disability, where the specially-equipped vehicle has never been used as capital property or held otherwise than for supply in the ordinary course of business.

The tax payable on the portion of the purchase price that can reasonably be attributed to the special features that have been incorporated into, or adaptations that have been made to the vehicle, for the purpose of its use by or in transporting an individual using a wheelchair or to equip the vehicle with an auxiliary driving control qualifies for a rebate. The supplier must certify in writing to the purchaser, i.e., the recipient, the portion of the purchase price that is reasonably attributed to these special features or adaptations in order for the purchaser to apply for the rebate of tax that relates to the certified amount. The purchaser can apply for the rebate either from the supplier to receive it at the point of sale, or by mailing an application to the Canada Customs and Revenue Agency.

Purchases anywhere in Canada

When the qualifying vehicle is purchased in Canada, the purchaser may claim a rebate for the 7% GST or the 15% HST that relates to the certified amount of the purchase price.

Purchases brought into a participating province from a non-participating province

A qualifying vehicle purchased outside a participating province is subject to the 7% GST and, as stated above, the purchaser is entitled to a rebate of the GST that relates to the certified amount of the purchase price. Since the GST will have been paid on the purchase of the vehicle, when that vehicle is subsequently brought into a participating province the vehicle becomes subject to the 8% provincial component of the HST. The tax payable is calculated on the value of the vehicle as determined by the applicable tax rate for the participating province. In this situation the rebate covers the provincial component of the HST calculated on that portion (i.e., the certified amount) of the purchase price of the vehicle that is included in the value on which the tax applies, since the person will have previously received the GST rebate.

Imports into a non-participating province

When the qualifying vehicle is purchased outside Canada and imported into a non-participating province, the GST is payable on the importation of the vehicle and is calculated on the value of the vehicle as determined for Customs purposes. In this case, the value of the vehicle is the total of the purchase price and the amount of all duties and taxes payable under any law relating to Customs. The purchaser may claim a rebate for the GST that relates to the certified amount of the vehicle's purchase price as well as the GST that relates to any Customs duties and taxes applicable to that certified amount.

Imports into a participating province

When the qualifying vehicle is purchased outside Canada and imported into a participating province, the HST is payable on the importation of the vehicle and is calculated on the value of the vehicle as determined for Customs purposes. In this case, the value of the vehicle is the total of the purchase price and the amount of all duties and taxes payable under any law relating to Customs. The purchaser may claim a rebate for the HST that relates to the certified amount of the vehicle's purchase price as well as the HST that relates to any Customs duties and taxes applicable to that certified amount.

Modification services - section 258.2

The GST/HST is not charged on services provided in Canada of modifying a motor vehicle to specially equip or adapt it so that the vehicle can be used to transport an individual using a wheelchair without having to collapse the wheelchair, or to specially equip a motor vehicle with an auxiliary driving control so that a person with a disability can operate the vehicle as these services are zero-rated under Part II of Schedule VI to the Excise Tax Act. When these modification services are performed outside Canada and the motor vehicle is subsequently imported, there are no zero-rating or exempting provisions that apply to the value added to the vehicle related to that service. Furthermore, when a vehicle is modified outside a participating province, there is no provision to relieve the provincial component of the HST that applies to the value that was added to it when that vehicle is subsequently brought into a participating province. The proposed tax rebate will address the latter situations in which the same modification service would be zero-rated if performed in Canada or in a participating province.

Services performed outside Canada and the vehicle is imported into Canada

When a person purchases a modification service that is performed on his or her vehicle outside Canada, the modified vehicle is subject to the 7% GST or the 15% HST on its importation. The GST/HST payable by the person is calculated on the value of the modified vehicle as determined for Customs purposes.

The proposed rebate will apply to the portion of the GST/HST payable on the value of the vehicle that is attributable to the value added by the modification service as well as any related parts (other than the vehicle) supplied with the service.

Services outside a participating province

When a person purchases a modification service that is performed on his or her motor vehicle in a non-participating province and that person subsequently brings the vehicle into a participating province, the modified vehicle is subject to the 8% provincial component of the HST. The tax payable by the person is calculated on the value of the modified vehicle at the time the vehicle is brought into the participating province.

The proposed rebate will apply to the portion of the provincial component of the HST payable on the value of the vehicle that is attributable to the value added by the modification service as well as any parts (other than the vehicle) supplied with the service.

Questions

Where the vehicle is delivered to the supplier's location for the purpose of having a modification service performed on the vehicle to specially equip or adapt it for use by or in transporting an individual using a wheelchair, or to install an auxiliary driving control to facilitate the operation of the vehicle by an individual with a disability, does the tax payable on the transportation expense qualify for a rebate under section 258.1 or 258.2?

No. Under section 258.1, the tax rebate is calculated on the portion of the purchase price that the supplier has certified as being reasonably attributable to the special features incorporated into, or adaptations made to, the vehicle to transport an individual using a wheelchair without having to collapse the wheelchair, or to install an auxiliary driving control. If the purchase price includes an amount for transporting the vehicle, the tax calculated on this portion of the purchase price does not qualify for a rebate since it is not attributable to a special feature of the vehicle.

A rebate under section 258.2 for the GST/HST or the provincial component of the HST is calculated on the portion of the value of the vehicle (as determined under either section 215 or for provincial sales tax purposes) that is attributable to the modification service performed on the vehicle, as well as any related property supplied with the service. Transportation services are not included in this section. Furthermore, a supply of a transportation service is generally a separate supply from the supply of the modification service and provided by a separate supplier.

For the purpose of section 258.1, what is meant by the portion of the consideration for the supply that can "reasonably be attributed" to the special features? What type of equipment is eligible for a rebate?

The portion of the consideration for the supply, i.e., the purchase price, to which the rebate applies must relate to the special features or adaptations of a qualifying motor vehicle where the purpose of these features or adaptations is to transport an individual using a wheelchair without having to collapse the wheelchair, or to equip the vehicle with an auxiliary driving control to facilitate the operation of the vehicle by an individual with a disability. One of the conditions of the rebate is that the supplier has to have certified, in writing, the portion of the purchase price attributable to these features and adaptations. Such features and adaptations may include:

•   lowered floor;

•   extended side sliding door for increased entry height;

•   removable front seats;

•   modified suspensions;

•   swing away manual ramp;

•   remote control for door and ramp;

•   fold out power ramp; and

•   hand controls.

Only the supplier, e.g., the manufacturer or dealer, can identify what special features have been incorporated into, or adaptations made to, the qualifying motor vehicle. We would suggest that you contact the industry to get information on what constitutes a necessary feature or adaptation. Also note that the portion of the purchase price attributed to these special features must be expressed as a specific dollar amount; not as a percentage of total vehicle cost.

Is there an expense limit to what a claimant can claim?

For the purposes of section 258.1, the rebate is limited to the special features and adaptations of the qualifying motor vehicle for use by or in transporting an individual using a wheelchair without having to collapse the wheelchair, or to equip the vehicle with an auxiliary driving control to facilitate the operation of the vehicle by an individual with a disability.

For the purposes of section 258.2, the rebate is limited to the modification service performed on a motor vehicle outside Canada or a participating province of specially equipping or adapting the vehicle for use in transporting an individual using a wheelchair or specially equipping the vehicle with an auxiliary driving control to facilitate the operation of the vehicle by an individual with a disability.

On the purchase of a qualifying motor vehicle, some of the devices installed by the vendor are zero-rated supplies, such as a portable wheelchair ramp. Is the vendor required to deduct these devices from the purchase price when calculating the total tax payable?

No, as the vendor has made a single supply of a taxable motor vehicle, the vendor must calculate the GST/HST payable based on the total purchase price of the qualifying motor vehicle. The vendor does not exclude from the consideration for the supply the value of any items that if sold as a separate supply, would be zero-rated under Part II of Schedule VI to the Excise Tax Act. Those devices that would, if supplied on their own, qualify as being zero-rated are subject to tax as they are an element of a single taxable supply of a motor vehicle. Relief from tax is provided by way of the rebate; i.e., the tax related to the portion of the purchase price attributable to these devices would be subject to a rebate pursuant to section 258.1.

If a person receives a grant from a government, charity, or non-profit organization to purchase a qualifying motor vehicle or to modify a motor vehicle to specially equip or adapt the vehicle for use by or in transporting an individual using a wheelchair without having to collapse the wheelchair, or to specially equip the vehicle with an auxiliary driving control so that it may be operated by an individual with a disability, is the person required to deduct the grant from the amount claimed as a tax rebate?

Unless the grant is accounted for in the invoice with conditions attached by the donor, the person would not be required to deduct the grant from the amount claimed as a tax rebate. Generally, the grant would be part of a separate transaction and not reflected in the invoice.

Other information

In addition to the rebate related to the purchase of a qualifying motor vehicle, subsection 258.1(7) provides that a person who first leases a qualifying motor vehicle will not pay tax on the portion of the lease amount that is attributable to the special features incorporated into, or adaptations made to the vehicle for its use or in transporting an individual using a wheelchair without having to collapse the wheelchair, or for specially equipping the vehicle with an auxiliary driving control to facilitate the operation of the vehicle by an individual with a disability. If this person subsequently purchases the qualifying motor vehicle, the person is entitled to a rebate for tax paid that relates to the special features or adaptations.

I trust that this information will assist you in preparing the Communiqué on specially-equipped motor vehicles.

Should you have any other questions or require additional information, please do not hesitate to contact me either by electronic mail or at 952-6761.