22 August 2001 GST/HST Ruling 33030 - Transfer of Latecomer Fees

Dear XXXXX:

I am writing in response to the letter dated September 18, 2000 (with attachments), from XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to latecomer fees transferred by the XXXXX (Municipality) to XXXXX. This letter was sent to the XXXXX GST/HST Rulings Centre and was referred to this office. As XXXXX no longer represents XXXXX, we are writing to you as President of XXXXX.

XXXXX, the Municipality amalgamated with the XXXXX. References to the Municipality will mean the XXXXX for transfers of latecomer fees taking place after that date.

Statement of Facts

Based on the documentation provided and from our telephone discussions, our understanding of the facts is as follows:

1. On XXXXX, XXXXX transferred these roads (XXXXX) and infrastructure consisting of drainage work and paving to the Municipality for no consideration.

2. XXXXX subsequently entered into an Agreement with the Municipality effective XXXXX, up to and including XXXXX. Under the terms of the Agreement, XXXXX was required to install certain services on property owned by the Municipality as a condition for approval by the Municipality of XXXXX plan of subdivision.

3. The lands on which services were to be provided by XXXXX are described in XXXXX of the Agreement. The installation of these services would benefit XXXXX benefiting area land and other benefiting area lands in accordance with the Development Charges Act of Ontario. These benefiting area lands named as XXXXX and XXXXX are described in the XXXXX of the Agreement.

4. XXXXX of the Agreement defines the services, namely the infrastructures installed by XXXXX, the estimated cost of the infrastructures, the cost of the infrastructures that were paid by XXXXX and the description of the benefiting area by frontage for each of the infrastructures. These included road construction, installation of utilities and the installation of sub-drains and culverts.

5. The Municipality and XXXXX agreed to the cost of the infrastructures as mentioned in the Agreement.

(a) XXXXX would cost XXXXX per meter for a land owner that will benefit from these services,

(b) XXXXX would cost XXXXX per meter for a land owner that will benefit from these services.

6. The Municipality requires each owner (latecomer) that benefits from the infrastructure mentioned in the Agreement to pay latecomer fees to the Municipality before receiving a development permit. The fixed amounts are written in the Agreement and are specified by location as XXXXX and XXXXX. The payment of the said amount is one of the conditions for having a development approval granted to the latecomer on any of these premises.

7. The established cost of the infrastructures mentioned in the agreement for the mentioned land areas, shall be indexed each year on the anniversary date of the registration of the Agreement in accordance with the XXXXX[.]

8. After the Municipality receives the monies from the latecomers, the Municipality shall pay XXXXX all of these monies less XXXXX, as stipulated in the Agreement which the Municipality keeps as an administrative fee.

Ruling Requested

Is the GST/HST applicable to the latecomer fees that are transferred from the Municipality to XXXXX?

Ruling Given

Based on the information provided, we rule that transfers of latecomer fees from the Municipality to XXXXX are subject to the GST at 7% (a non-participating province) as they are consideration for the supplies of construction services provided by XXXXX to the Municipality.

Explanation

Under the Agreement between XXXXX and the Municipality, XXXXX provided certain construction services to the Municipality in respect of land owned by the Municipality.

No invoicing is mentioned in the Agreement between XXXXX and the Municipality for these construction services. Rather, the Agreement provides that XXXXX will receive payment when a latecomer benefiting from the municipal infrastructures provided for under this Agreement, applies for a development permit and remits its payment to the Municipality. The Municipality then remits the latecomer fees to XXXXX, minus its XXXXX administrative fee. The latecomer payments collected and remitted to XXXXX by the Municipality are the only payments made in respect of XXXXX supply of construction services.

Pursuant to paragraph 152(1)(c) of the Excise Tax Act (ETA), where a supplier does not issue an invoice, consideration for a taxable supply becomes due on the earliest of the day the recipient is required to pay that consideration to the supplier under an agreement in writing. Therefore, when the Municipality transfers the latecomer fees to XXXXX pursuant to the Agreement, the GST should be collected and remitted by XXXXX as these payments are consideration for its supply of construction services to the Municipality.

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, there are no relevant changes in the future to the ETA, or to our interpretative policy, and that you have fully described all necessary facts and the transactions 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) 952-9592.

Yours truly,

Michel Guay
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate