Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5
[Client Address]
Case Number: 245570
Business Number: [#]
October 22, 2024
Dear [Client]:
Subject: GST/HST ruling - Supply of fractional ownership in a horse
Thank you for your correspondence of February 15, 2023, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the supply of a fractional ownership interest in a horse. We apologize for the delay in this response.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
Based on your correspondence and our telephone conversation, we understand the following:
1. You are a sole proprietor doing business […] in […][city outside Canada] where you own and breed […] horses.
2. You are a non-resident person who is registered as a sole proprietor for GST/HST purposes […].
3. […], you wish to purchase a share representing a […][fraction] ownership interest in […][horse name] (Horse).
4. The Horse […] was originally owned and raced by co-owners […][Owner 1] of [Canadian City], […][Owner 2] of [Canadian City] and […][Owner 3] of [city outside Canada], collectively the “Sellers”.
5. At the end of the [yyyy] racing season, the Sellers retired Horse from racing and syndicated him to stand at stud at […][Sellers’ Agent].
6. You have provided an […] agreement entitled […] (Agreement), […], by which the Sellers convert their undivided co-ownership of the Horse into distinct fractional ownership shares.
7. The Agreement assigns the day-to-day management of the Horse to [Sellers’ Agent], appointed agent of the Sellers and Syndicate Manager. […].
8. [Sellers’ Agent] is a Canadian resident corporation registered for the GST/HST.
9. The Agreement divides the ownership of the Horse into [#] distinct fractional ownership interests in the Horse (“shares”), each share representing an equal, undivided [fraction] ownership interest in the Horse. Each share is issued by and over the signature of the Syndicate Manager, acting as agent of the Sellers. […]
10. The Agreement lays out the terms and conditions that govern the ownership of the shares as well as the supervision and management of the Horse by the Syndicate Manager on behalf of the shareholders. […]
11. […]
12. The Horse is assigned to the care of the Syndicate Manager and is kept at their stables located at […][address in Canada] […].
13. The Syndicate Manager […] has complete custody, management and control of the Horse with full decision making authority, including for the management and supervision of the Horse’s breeding career. […]
14. The Sellers confirm that the sale of shares by them shall be arranged for and managed by the Syndicate Manager. […]
15. The Agreement accords the Syndicate Manager annual remuneration ($[...]) […]. Net revenues resulting from the Horse breeding program, less expenses, are distributed to the shareholders bi-annually. […]
16. […], each shareholder is required to pay to the Syndicate Manager, for each share owned, [fraction] of all […] expenses […] in connection with the maintenance, breeding and promotion of the Horse. […]
17. Each share gives the shareholder the right to exercise certain breeding rights in the Horse subject to the fees specified in the Agreement. […]
18. You propose to purchase one share in the Horse from [Owner 3] for a total of $[…].
19. [Owner 3] is a non-resident corporation that is not registered for GST/HST purposes.
RULING REQUESTED
You would like to know whether:
1. your purchase of a share in the Horse is subject to the GST/HST;
2. you are eligible to claim an input tax credit (ITC) with respect to the purchase of the share.
RULING GIVEN
Based on the facts set out above, we rule that:
1. your purchase of the share is subject to the GST/HST at the applicable rate;
2. you may be eligible to claim ITCs in respect of the GST/HST you have paid on a share acquired for consumption use or supply in the course of your commercial activities.
EXPLANATION
Under the terms of the Agreement, each share represents a [fraction] fractional ownership interest in the Horse. A horse, including an ownership interest in a horse, is considered to be tangible personal property (TPP) for GST/HST purposes.
The Sellers are engaged in a commercial activity with respect to the exploitation of the Horse, initially for racing and subsequently for breeding purposes, followed by syndication of the Horse whereby Sellers may collectively sell up to [#] separate fractional ownership shares in the Horse to third party purchasers. The commercial activity in connection with the Horse takes place in Canada where the Horse is located.
Pursuant to paragraph 142(1)(a), a supply by way of sale of TPP is deemed to be made in Canada if the TPP is, or is to be, delivered or made available in Canada to the recipient of the supply. "Made available" refers to situations where delivery of the TPP under the applicable law of the sale of goods is effected by constructive delivery (i.e., actual physical possession of the TPP is not transferred to the recipient of the supply yet is recognized as having been intended by the parties and as sufficient in law). The Horse remains standing at the Syndicate Manager’s farm in Canada and therefore it will be made available to you in Canada upon purchase of the share.
There are no exempting or zero-rating provisions that apply to [Owner 3]’s supply of the share to you. Accordingly, the supply is a taxable supply of TPP deemed to be made in Canada on which the GST/HST at the applicable rate must be collected either by [Owner 3], as a registrant, or by the Syndicate Manager as their agent.
Subsection 169(1) generally provides that a registrant is eligible to claim an ITC for GST/HST paid or payable on property or a service to the extent that the property or service was acquired, imported or brought into a participating province for consumption, use or supply in the course of the person's commercial activities, provided that all the conditions for claiming an ITC are met.
For more information with respect to the general ITC rules, please see GST/HST Memorandum 8.1, General Eligibility Rules.
DISCLAIMER
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the rulings given in this letter provided that: none of the issues discussed in the rulings are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 819-271-7136.
Should you have additional questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Sincerely,
Megan MacDonald
Rulings Officer
Border Issues Unit 2
General Operations and Border Issues Division
GST/HST Rulings Directorate
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