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-120

DATE OF ISSUE

February 21, 1994

SUBJECT

Section 134 - Transfer of property on satisfaction of debt

LEGISLATIVE REFERENCE(S)

Sections 123(d) definition of a "financial service" and 134 of the ETA

NATIONAL CODING SYSTEM FILE NUMBER(S)

11585

EFFECTIVE DATE

January 1, 1991

TEXT

This policy statement will discuss whether the transfer of title to property to a purchaser\borrower on payment of debt is considered a supply.

A purchaser will often finance the purchase of property with debt. Some of the lenders retain title to and do not transfer title to the property until the debt is paid in full. While the retention of title occurs to some degree in all provinces, it is common in Quebec where the Civil Code applies.

Issue and Decision:

Some forms of financing do not transfer title until the debt is paid in full. The Province of Quebec's Civil Code allows the vendor to retain ownership of the property or an interest in property for purchases of goods financed through debt or obligation. The purchaser has possession of the property. Upon the last payment by the purchaser required under the agreement, ownership is transferred to the purchaser.

It is the Department's position that the transfer of ownership on payment of the debt or performance of the obligation or the forgiveness of the debt or obligation by the vendor, is not a supply and, therefore, will not be subject to the GST.

SAMPLE RULING