Please note that the following Policy Statement, although correct at the time of issue, may not have been updated to reflect any subsequent legislative changes.

GST/HST policy statement P-098R

Date of Issue

January 19, 1994
Revised February 8, 1999

Subject

GOLF CLUB SECURITIES

Legislative Reference(s)

Subsection 123(1) - Definition of "membership"; section 140 and paragraph 170(1)(a) of the Excise Tax Act (ETA)

National Coding System File Number(s)

11585-0

Effective Date

January 1, 1991 concerning the purchase of securities by the club that issued them.

January 1, 1991 - September 30, 1992 concerning the restriction of ITCs.
April 1, 1997 for HST

TEXT

This policy statement will discuss the GST/HST status of the repurchase by a golf club of securities it issued where the securities provide a membership in the club or a right to acquire a membership in the club, and the supply of the security is deemed not to be a financial service by virtue of section 140. It will also discuss the restriction of ITCs for tax paid by a registrant in respect of a share, loan or similar security, that provides a right to membership in a golf club.

Issue and Decision

What is the result when a person sells a security which represents a membership or a right to membership in a club back to the club which issued the security?

Where the security was not used in the course of a commercial activity of the person selling back the security, the sale would not usually be a taxable supply. Note that where the membership or right is held by an individual the initial presumption will be that it is not used in a commercial activity.

However where the security was used in the course of a person's commercial activity, the sale of the security by the person is a taxable supply even when it is supplied back to the golf club which issued it.

Is there a restriction of ITCs under paragraph 170(1)(a) for tax paid by a registrant in respect of a share, loan or similar security, that provides a right to membership in a golf club?

In the case of a security that is a right to a membership, paragraph 170(1)(a) does not restrict the ITC claimed by any registrant on the acquisition of the security where the security is acquired before October 1992. The restriction of ITCs on a right to a membership only applies to such rights acquired after September, 1992.

After September 1992 ITCs with respect to both a right to a membership and a membership are restricted by paragraph 170(1)(a). However, this restriction does not apply where the membership or right is acquired for supply in the ordinary course of the business of supplying such memberships or rights.

SAMPLE RULINGS

Example 1

Statement of Facts

A registrant corporate member of a club uses its membership in the course of its commercial activity. The member sells the security to which the right to the membership is attached back to the club after September, 1992. The club has repurchased the security with the intention of reselling it to a new member in the ordinary course of its business.

Rulings Given

The supply of the security, which represents a right to membership in a club and which was used in the course of the registrant's commercial activity, to the club which issued the security, is taxable.

Since the club acquires the security exclusively for supply in the ordinary course of its business, paragraph 170(1)(a) does not restrict the ITC claimable by the club on the acquisition of the security.