GST/HST Ruling

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

[Addressee]

Case Number: 244574
Business Number: […]

Dear [Client]:

Subject: GST/HST RULING
Application of GST/HST on the supply of seafood products and […] [a beverage] powder

Thank you for your correspondence of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) on the supply of […] (Product A), […] (Product B), and […] (Product C).

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

We understand the following:

1. […] (the Retailer) is a registrant for GST/HST purposes.

2. You are enquiring about the application of GST/HST on supplies of [seafood] Product A, [seafood] Product B, and [beverage powder] Product C.

3. Product A is produced by […][Manufacturer X].

4. Product A comes in a [#] gram bag containing […][individually wrapped items]. Each […][item] weighs approximately [#]g.

5. Product A is sold as a dry grocery item. Directions on the packaging instruct the consumer to refrigerate the product once the outer bag has been opened.

6. The packaging for Product A describes the product […].

7. The ingredients listed on the packaging for Product A are as follows: […]

8. Product B is also produced by the […][Manufacturer X].

9. Product B comes in a resealable [#] gram bag.

10. The packaging for Product B describes the product […].

11. Visually, Product B appears to be shredded, clumpy and stringy.

12. The instructions on the packaging for Product B suggest to keep the product in a cool and dry place away from heat and light.

13. The ingredients listed on the packaging for Product B are as follows: […].

14. Product C is produced by […][Manufacturer Y] and can be described as a […] drink powder mix.

15. Product C is sold in the dry grocery area.

16. Product C comes in a box containing […][the beverage powder] with a net weight of [#] grams.

17. Product C is mixed with water to create a […][carbonated] beverage. The packaging describes the resulting drink […].

18. The ingredients on the packaging for Product C are as follows: […].

RULING REQUESTED

You would like to know how the GST/HST applies to supplies of Product A, Product B, and Product C.

RULING GIVEN

Based on the facts set out above, we rule that, as none of the exclusionary paragraphs to section 1 of Part III of Schedule VI apply, supplies of Product A, Product B and Product C are zero-rated.

EXPLANATION

Section 1 of Part III of Schedule VI to the ETA zero-rates supplies of food or beverages for human consumption, including sweetening agents, seasonings and other ingredients to be mixed with or used in the preparation of such food or beverages, other than supplies excluded from zero-rating by way of paragraphs (a) to (r) of that section.

Product A and Product B are primarily […][seafood]-based products. The composition, texture (chewy, soft), packaging, marketing and format for both Product A and Product B is similar to a loose, jerky-type product. Although paragraph (f) of section 1 applies to some types of snacks, neither Product A nor Product B are captured by paragraph (f). Therefore, as none of the exclusionary paragraphs to section 1 of Part III of Schedule VI apply, supplies of Product A and Product B are zero-rated.

Product C is a powder which, when added to water, forms a […][carbonated] beverage. Although the supply of carbonated beverages are excluded from zero-rating by paragraph (c) of section 1, the exclusion to zero-rating under paragraph (c) does not apply to Product C as it is supplied in a powdered form and only produces a carbonated beverage when added to water. Therefore, as none of the exclusionary paragraphs to section 1 of Part III of Schedule VI apply, the supply of Product C is zero-rated.

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 ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) 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 905-429-1696. 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 or by fax to 1-418-566-0319.

Sincerely,

Siraj Patel
Senior Rulings Officer
Strategic and Emerging Issues Unit
General Operations and Border Issues Division
GST/HST Rulings Directorate

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
Place de Ville, Tower A, 5th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]
Case Number: 236685a
Business Number: [...]

[Client]:

Subject: GST/HST RULING
Purchase of a residential condominium unit

[…][This is concerning your letter] on the application of the goods and services tax/harmonized sales tax (GST/HST) to the purchase of a condominium unit.

[…]

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

You submitted the following documents for our review:

* Statement of Adjustments, […].

* […][Agreement A], signed and dated [mm/dd/yyyy] - only portions of this agreement were provided.

* Statements on letterhead of […] indicating lease payments on each of [mm/dd/yyyy], [mm/dd/yyyy] and [mm/dd/yyyy].

* Land Transfer Tax Statement evidencing conveyance of property […].

* […][Lease Agreement] - an incomplete document: it does not identify the parties to the agreement nor is it signed or dated.

Based on your submission and our telephone conversations, we understand the following:

1. You represent […] (the Individuals) who are the purchasers of a condominium unit that is legally described as […] (the Unit).

2. The Individuals purchased the Unit from […] (the Corporation) on[mm/dd/yyyy] and paid HST in the amount of $[…] to the Corporation.

3. The Land Transfer Tax Statement dated [mm/dd/yyyy] identifies the transfer of the Unit and includes the following details:

* The Transferor is the Corporation

* The Transferees are the Individuals, as joint tenants.

4. At the time of purchase, the Individuals intended to lease the Unit to a tenant who would facilitate and manage the Unit for use as short term accommodation.

5. On [mm/dd/yyyy], the Individuals entered into […][Agreement A] with […][X]. […] of […][Agreement A] provides that [X] is Tenant and the Individuals are the Landlord. [Agreement A] sets out the following definitions and terms of the arrangement:

Definitions (Footnote 1)

* Clients means those persons to whom the Tenant intends to rent the Premises.

* Commencement Date means the first day upon which the Landlord has the right of occupancy of the Premises.

* Effective Date is [mm/dd/yyyy].

* Permitted Use has the meaning ascribed to it in […].

* Premises means the Unit and Parking Unit, if applicable, as set out in […]. (Footnote 2)

* Rent means the Unit Lease Rate plus the Parking Unit Lease Rate(s), if applicable. (Footnote 3)

* Tenant means [X] and its successors and permitted assigns.

* Term means the initial term of the Lease as set out in […] (see below).

Terms

* The Landlord will lease the Unit to the Tenant in consideration of the Rent to be paid. (Footnote 4) (The amount of Rent was not set out in the documentation provided for our review.)

* The Tenant will use the Unit for the Tenant’s business of renting the Unit to Clients on a daily and short term basis (the Permitted Use). (Footnote 5)

* The term of the Lease is for a period of ten years commencing on the Commencement Date and ending on the tenth anniversary of the Commencement Date unless terminated earlier as provided in the Lease. (Footnote 6)

* The Tenant will not assign the Lease to a new tenant without the prior written consent of the Landlord. (Footnote 7)

* The Tenant may rent the Unit for the Permitted Use without the Landlord’s prior written consent, provided that the term of the arrangement does not extend past the term of the Lease. (Footnote 8)

Certain statements in [Agreement A] suggest that it supports or is ancillary or supplementary to some other lease agreement that the Landlord and Tenant may have entered into at an earlier date. For example, page [#] of the [Agreement A] states, in part, that the “Landlord and Tenant have entered into a Lease… ” and that the “… Landlord and Tenant wish to enter into this agreement to further determine their rights and obligations in connection with the Lease.”

The [Agreement A] is incomplete as some of the pages are missing or truncated. The […] Lease Agreement offers no further clarification. (Footnote 9)

6. Three statements on the Tenant’s letterhead indicate that the Tenant made a lease payment to the Landlord in the amount of $[…] on each of [dd/mm/yyyy], [dd/mm/yyyy] and [dd/mm/yyyy]. Each statement sets out the following details:

* Income Collected – […] $[…]
* Expenses Incurred – […]$[…]

Although the terms of the lease payments are not set out in the documentation provided, the statements suggest the lease is paid on a monthly basis.

7. The Individuals registered a business for GST/HST purposes by telephone and a GST/HST account was opened under the Business Number with an effective date of [dd/mm/yyyy]. The type of ownership of the business entity is identified as a partnership; the Individuals are indicated as the partners and the business activity is indicated as “Residential Buildings and Dwellings - Residential.”

8. Neither of the Individuals is registered for the GST/HST.

9. We were provided with no agreements between the Tenant and any person to whom the Unit was rented. However, we understand that, during the Individuals’ ownership, the Unit has been used only for short-term accommodation as described in […] of [Agreement A].

10. In [dd/mm/yyyy], a […], GST/HST New Residential Rental Property Rebate Application (the Rebate) was filed under the Business Number for a portion of the GST/HST paid on the purchase of the Unit. The Rebate was disallowed as the conditions for the Rebate were not met.

11. A GST/HST return was filed under the Business Number, and an input tax credit (ITC) was claimed, for the reporting period ending [dd/mm/yyyy]. The ITC claim was allowed and adjusted to include the full amount of GST/HST that was paid on the acquisition of the Unit. In [mm/yyyy], the amount was disbursed as a refund.

RULINGS REQUESTED

You would like to know:

1. Are the Individuals eligible to claim an ITC for the GST/HST paid on the acquisition of the Unit?

2. Are the Individuals required to self-assess the GST/HST with respect to the acquisition of the Unit?

RULINGS GIVEN

Based on the facts set out above, we rule that:

1. The Individuals are not eligible to claim an ITC for the GST/HST paid on the acquisition of the Unit.

2. The Individuals are not required to self-assess the GST/HST that was payable on the acquisition of the Unit; the GST/HST was correctly paid to the Corporation.

EXPLANATION

Ruling 1 – ITC eligibility

Although not addressed in your submission, we have stated as a fact that, for purposes of the GST/HST, an account was opened as a partnership. Below, we explain the importance of determining the identity of the owner of real property and the implications for GST/HST registration and for claiming ITCs.

For purposes of the GST/HST, a “person” registers for the GST/HST as a business entity that operates a commercial activity. In part, the term “person” is defined to mean an individual, a partnership or a corporation and therefore, a partnership is considered to be an entity that exists as a separate person from an individual.

Partnership

It is a question of fact and law as to whether a partnership exists. The law governing partnerships will apply in the relevant province or territory. Under real property law in common law jurisdictions […], the fee simple estate can be fragmented into its legal and equitable (or beneficial) component interests. A partnership cannot hold legal title recognized by common law and provincial statute law. However, for GST/HST purposes, a partnership could lawfully own the beneficial interest in real property while the partners could own the legal interest in the same real property.

The CRA will not generally consider that a partnership has a beneficial interest in real property unless it can be reasonably substantiated, and without such substantiation, the CRA will consider the entire estate (including the beneficial interest) in the real property to belong to the person who holds the legal interest.

Indications that a partnership may own the beneficial interest in real property could include:

* A notation on land transfer documents indicating that the real property is purchased on behalf of a partnership.

* A written partnership agreement stating that a purpose for forming the partnership is to acquire real property.

* An agreement setting out that the partnership will lease the real property (as lessor) to the partners (as lessees).

Additional factors that may be relevant in determining the identity of the beneficial owner of real property may be the source of the funds used to purchase the real property (for example, the owner of a bank account) and how the purchase was recorded in books and records (for example, whether the asset was recorded by a partnership or by the partners).

The fact that persons may describe themselves as partners or that they register for GST/HST purposes as a partnership does not prevail over the actual facts or the law.

In the present case, the Individuals are named as the purchasers of the Unit on the Statement of Adjustments. The Individuals are named as the transferees of the Unit on the Land Transfer Tax Statement; the type of ownership is noted as joint tenants. Joint tenants of real property have an identical and undivided interest in the real property and therefore, each joint tenant owns 100% of the property. Legal title is held by each of the joint tenants as if they are a single owner.

[Agreement A] names the Individuals as the Landlord. There is no partnership agreement and there is no evidence that a partnership has beneficial ownership in the Unit nor that the Individuals purchased the Unit on behalf of a partnership. We note that the laws governing partnerships provide that joint tenancy does not of itself create a partnership as to anything so held or owned, whether the tenants or owners do or do not share any profits made by the use thereof. (Footnote 10)

Input tax credits

The eligibility criteria for claiming an ITC are set out in section 169 and outlined in paragraph 3 of GST/HST Memorandum 8.1, General Eligibility Rules. One of the conditions that must exist before a person is eligible to claim an ITC is that the property or service must be acquired, imported or brought into a participating province by a person for consumption, use or supply in the course of the person’s commercial activities. Another condition for claiming an ITC is that the person is a registrant during the reporting period in which the GST/HST on the property or service becomes payable by the person or is paid without having become payable.

In the present case, the Individuals paid the HST on the acquisition of the Unit. Neither Individual was a GST/HST registrant in the reporting period in which the Unit was acquired and therefore, neither Individual is eligible to claim an ITC for the HST paid on the purchase of the Unit. Although a Business Number was opened with an ownership type identified as a partnership, a partnership did not exist and therefore a partnership could not acquire or pay the HST on the purchase of the Unit. Accordingly, a partnership was not eligible to claim an ITC.

Ruling 2 – obligation to self-assess

The general rule for the collection of the GST/HST is that every person who makes a taxable supply shall collect the GST/HST payable by the recipient in respect of the supply. There are certain exceptions where the supplier of a taxable supply of real property is not required to collect the GST/HST that is payable by the recipient.

One such exception applies where the recipient of the supply is registered for the GST/HST and, in the case of a recipient who is an individual, the property is neither a residential complex nor a cemetery plot or place of burial, entombment or deposit of human remains or ashes. In such a case where the exception applies, the recipient may be required to report and remit (self-assess) the GST/HST that is payable on the supply.

Where consideration is payable under an agreement for a supply, the “recipient” of the supply is the person who is liable under the agreement to pay that consideration. In this case, the Individuals are the recipient of the Unit.

The exception to the collection of the GST/HST does not apply in the present case where the Individuals are the recipient of a supply of a residential complex (which includes a condominium unit): the Individuals are not required to self-assess the GST/HST on the Unit. As the exception does not apply, the Corporation was required to collect the GST/HST on the sale of the Unit.

Please refer to paragraphs 26 to 29 of GST/HST Memorandum 3.1, Liability for Tax for further information on the collection of GST/HST on the taxable supply of real property.

ADDITIONAL INFORMATION

A person who acquires real property for consumption, use or supply in a commercial activity should be clear in their intentions for the operations of the business entity before registering for the GST/HST. For a partnership, such intention may be demonstrated by a partnership agreement or with other supporting documentation as described above. The CRA will not accept a partnership agreement as having retroactive effect.

Subsection 221(1) provides that a person who makes a taxable supply shall collect the tax that is payable by the recipient as agent of the Crown. Subsection 222(1) deems the person to hold the amount collected as tax in trust until the amount is remitted to the Receiver General or withdrawn as an input tax credit or net tax deduction.

As noted above, where real property is held in joint tenancy, each joint tenant is considered to hold the same interest in the property. A supply of real property that is held in joint tenancy is considered to be a single supply made by all joint tenants as each has 100% interest in the property. Where joint tenants hold real property for supply in a commercial activity, for example, for the lease of short-term accommodation, the joint tenants are jointly and severally liable to account for the GST/HST that is collectible on the lease payments. Further, the lease payment including the applicable tax is considered to be a payment to all joint tenants.

Where one joint tenant accounts for the tax collected, the accounting for, and the remittance of net tax by that joint tenant will discharge the liability of the other joint tenants. This means that only one of the joint tenants may be required to register for the GST/HST. A joint tenant who is registered for the GST/HST may be eligible to claim an ITC for the GST/HST paid on the acquisition of real property to the extent that the property will be used in commercial activities of the joint tenants.

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 CRA is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) 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. The interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.

CONTACT

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 780-504-3442. 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,

Johanne Cairo
Senior Rulings Officer
Real Property Unit 1
Financial Institutions and Real Property Division
GST/HST Rulings Directorate

FOOTNOTES

1 The definitions are set out differently in the […][Agreements].

2 As no Parking Unit was identified in […], we have presumed none was applicable and therefore the Premises includes only the Unit.

3 The portion of […] provided for our review does not include the definitions for Unit Lease Rate and Parking Unit Lease Rate.

4 […] .

5 Ibid, […].

6 Ibid, […]

7 Ibid, […].

8 Ibid, […]

9 Neither copy was provided in its entirety.

10 [...]

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
Place de Ville, Tower A, 5th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 174441
Business Number: […]

Dear [Client]:

Subject: GST/HST RULING and GST/HST INTERPRETATION
Application of GST/HST on funds raised through crowdfunding

Thank you for your letter of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) on funds raised through crowdfunding. We apologize for the delay in our 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

We understand the facts as follows based on your letter, the crowdfunding website […][the Platform], and telephone conversations between [you] and an HQ officer on [mm/dd/yyyy] and [mm/dd/yyyy]:

1. […] ([…] [the Company]) […] based in [Canada] […][raised funds to create the Product] (the Project).

2. The Company is incorporated as a for-profit entity and registered for GST/HST with Business Number […].

3. Funds necessary for […] the Company’s Project were raised through the crowdfunding website […] (the Platform).

4. Each project on the Platform is independently created […] by the person or team behind it (i.e. […][X]). Each […][X] has complete control and responsibility over their projects […][including website, pledge amounts and reward related decisions]. […][Supporters (Y) pledge funds to support X’s project] in exchange for a reward such as a copy of […][a product], a limited edition, or a custom experience related to the project. The Platform is “reward-based”.

5. […][Y may] make pledges […] from around the world […], [and will be] charged the amount of their pledges on their credit card and entitled to the corresponding reward.

6. […][Information about Platform fees and payment processing].

7. […].

8. […] the Platform creates a contract between [X] and […] [Y]. […][X, by] posting a project is making an offer and […][Y, by pledging funds to] the project is accepting [X]’s offer and forming that contract. […].

9. […][Information about X’s responsibility with respect to the payment of Platform fees and applicable taxes].

10. […][The Platform does not accept projects with incentives such as equity, revenue sharing and investment opportunities](Footnote 1).

11. […]. The Project obtained $[…] in pledges […].

12. […][Information on the Platform about the Company’s Project and the fulfillment of rewards](Footnote 2).

13. The Project is described as […].

14. The following reward packages, established by the Company, received [funding] pledges from [Y] […]:

[…][Description of items included in each package]

15. The pledge amounts ranged from $[…] to $[…] and the reward packages included […][various elements]. There was no mention in the description of each package if GST/HST is included or in addition to the pledge amount.

16. […].

[…]

RULING REQUESTED

You would like to know the following;

1. Is GST/HST applicable to the funds pledged for this Project?

2. If GST/HST is applicable:

a. Who is responsible for collecting and remitting the GST/HST?

b. What is the consideration used to determine the GST/HST to be remitted?

c. Is the GST/HST calculated on a tax extra or tax included basis on the consideration?

d. What is the correct rate to charge, does it differ based on [Y]’s province of residence?

e. Is GST/HST still applicable […][if Y] did not request or claim their reward?

[…]

We acknowledge your request for rulings on the above matters. However, as noted in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, a ruling provides the Canada Revenue Agency's (CRA's) position on specific provisions of the legislation as these relate to a clearly defined fact situation of a particular person. As the circumstances are such that all of the pertinent facts cannot be established at this time, we are unable to rule on some of these issues. Rather, we are providing general information which we trust will be of assistance.

RULING GIVEN

Based on the facts set out above, we rule that:

1. The GST/HST is applicable to the funds pledged for this Project.

2a. The Company is responsible for collecting and remitting the GST/HST on the funds it received as pledges for the Project.

EXPLANATION

Ruling #1:

Generally, all supplies of property and services made in Canada are taxable unless an exemption from the GST/HST applies. Taxable supplies are supplies made in the course of a commercial activity and may be taxable at the rate of 0% (zero-rated supplies), 5%, 13%, or 15% on the value of the consideration for the supply depending on the province in which the supply is made. Zero-rated supplies are included in Schedule VI. Exempt supplies are not subject to the GST/HST and are included in Schedule V.

Subsection 123(1) defines key terms as follow:

“Supply” as the provision of property or a service in any manner, including sale, transfer, barter, exchange, licence, rental, lease, gift or disposition.

“Property” to mean any property, whether real or personal, movable or immovable, tangible or intangible, corporeal or incorporeal, and includes a right or interest of any kind, a share and a chose in action, but does not include money.

“Service” to mean anything other than property, money, and anything that is supplied to an employer by a person who is or agrees to become an employee of the employer in the course of or in relation to the office or employment of that person.

“Taxable supply” is a supply that is made in the course of a commercial activity.

“Commercial activity” is defined to include a business carried on by a person except to the extent to which the business involves the making of exempt supplies.

According to the [Platform’s terms of use ], a project cannot offer equity. Investment is not permitted and projects cannot offer incentives like equity, revenue sharing, or investment opportunities. Accordingly, the funds raised by the Company through the Project is not a capital contribution, loan or gift. Supporters, referred to as [Y] […], made pledges and […] were charged for the amount of their pledge and were entitled to a “reward” in return.

The Company is a GST/HST registrant and operates a business that is a commercial activity. The Company raised funds to create a new product, that was sold in the business, through reward-based crowdfunding. The rewards provided by the Company for this Project are taxable supplies per subsection 123(1).

Ruling #2a:

[…] (Footnote 3) […] the Platform provides a funding platform for creative projects. When [X] posts a project on the Platform, they’re inviting other people to form a contract with them. […][By making a pledge to support a project, Y] is accepting [X]’s offer, and forming that contract. The Platform is not a part of this contract – the contract is a direct legal agreement between [X] and [Y]. [X] is solely responsible for fulfilling the promises made in their project. […].

As the Company is the supplier it is required to account for the tax in the reporting period of the Company on the earlier of the day the consideration is paid or becomes payable.

INTERPRETATION GIVEN

Single or Multiple Supplies

The Company established [#] different reward packages each composed of different elements for the Project. It must first be determined whether a transaction is a single supply or multiple supplies. To help with this determination the Canada Revenue Agency (CRA) has published GST/HST Policy Statement P-077R2, Single and Multiple Supplies (P-077R2).

P-077R2 outlines the principles used to determine whether a transaction consisting of several elements is to be regarded as a single supply or multiple supplies. They are as follows:

1. Every supply should be regarded as distinct and independent.

2. A supply that is a single supply from an economic point of view should not be artificially split.

3. There is a single supply where one or more elements constitute the supply and any remaining elements serve only to enhance the supply.

Two or more elements are part of a single supply when the elements are so intertwined or interdependent that they must be supplied together. Conversely, multiple supplies occur when one or more of the elements can sensibly or realistically be broken out.

It should also be remembered that the way in which the price for a transaction is set out does not in itself determine whether there are one or more supplies. A single price does not automatically mean that there is one supply. Equally, separately identified prices for certain elements do not necessarily mean that there are two or more supplies.

P-077R2 provides a number of questions that should be asked:

1. Is the property/service provided by two or more suppliers?

2. Is there more than one recipient?

3. What did the supplier provide for the consideration received?

4. Is the recipient made aware of the elements (in detail) that are part of the package?

5. In the context of the particular transaction, does the recipient have the option to acquire the elements separately or to substitute elements?

As previously indicated, […] when [X] posts a project on the Platform, they’re inviting […][Y] to form a contract with them and the Platform is not a part of this contract. The contract is a direct legal agreement between [X] and [Y]. Therefore, the rewards were provided by one supplier, the Company, to one recipient, [Y].

The elements included in each of the packages established by the Company are described […] on the Platform […]

The packages are made up of a mix of […][elements]. […][The Product] is a predominant element based on the goal of the Project which is […][to create the Product]. […][Some] elements, […], have the common characteristic of having a promotional purpose to enhance or promote the [Product].

[…][Element A and element B] are distinct, independent and do not serve to enhance or promote the [Product].

As a result, [#1] Packages […] are a single supply of [the Product which is considered to be intangible personal property (IPP)] . [#2] Packages […] are separate supplies of [the Product] and […][element A, considered to be IPP)]. Package […][#3] is a separate supply of [the Product] and […][element B, which is considered to be IPP].

Where [Y] added […][a supply of element C or element D] to their reward [package] this would be a separate supply of [Tangible Personal Property (TPP)].

Characterization of Supply

As stated previously, the Company is a GST/HST registrant that supplied property for consideration in the course of its commercial activity. […].

A supply made by electronic means is characterized as either a supply of intangible personal property (IPP) or a supply of a service. A number of factors are considered in that determination such as the nature of the agreement between the supplier and the customer, and whether the agreement is in substance for work (or work and materials), or for property (including a right or interest of any kind).

[…][The Product and other IPP elements were sent to Y by email to be downloaded by Y]

Supplies that involve a customer downloading a digitized product from a supplier are generally characterized as supplies of IPP. […].

Please refer to GST/HST Technical Information Bulletin B-090, GST/HST and Electronic Commerce, for more information on the characterization of supplies made by electronic means.

Tax Extra or Tax Included

Subsection 223(1) imposes disclosure requirements on a registrant who makes a taxable supply. Essentially, where the tax is charged on a tax-extra basis, the registrant must indicate the total amount of tax payable in respect of the supply. Where the tax is included in the amount charged for the supply, the registrant must indicate that the amount charged includes the tax payable in respect of the supply.

As per section 165, GST/HST is calculated on the value of the consideration for the supply. It is a question of fact whether tax has been added to the value of consideration or if the GST/HST is extra.

[…] of the Platform’s terms of use requires the Company to pay any taxes associated with the use of the platform […].

GST/HST Policy Statement P-118R (P-118R), Assessments on a Tax Extra or Tax Included Basis, may provide you with some guidance as to whether GST/HST should apply to the pledge amounts on a tax-included or tax-extra basis. P-118R provides that the determination of whether a tax-extra or tax-included assessment should be made is a question of fact to be resolved by the auditor based on the facts and the circumstances of the particular situation. Factors such as the invoicing practices, industry practices and supporting documentation will be pertinent and used in the determination.

Place of Supply

The GST (or federal part of the HST) is imposed under subsection 165(1) in respect of taxable supplies that are made in Canada. The provincial part of the HST is imposed under subsection 165(2) in addition to the federal part of the HST in respect of taxable supplies that are made in a participating province.

Subparagraph 142(1)(c)(i) deems a supply of IPP to be made in Canada if the IPP may be used in whole or in part in Canada. As such, the place of supply is determined based on where the rights can be used and not where they are actually being used at a particular time. In determining whether IPP may be used in Canada, reference may be made to the terms of a written agreement to determine if there are any restrictions regarding the place of use of the IPP. Where there are no such restrictions, it will always be the case that the IPP may be used in whole or in part in Canada.

In determining whether a supply of IPP is made in a province, the place of supply rules require a determination of the extent, if any, to which the use of the Canadian rights is restricted to one or more provinces. The Canadian rights in respect of IPP means that part of the IPP that can be used in Canada.

Generally, if there are no restrictions with respect to where the Canadian rights can be used, paragraph 8(b) of the New Harmonized Value-Added Tax System Regulations (the Regulations) would deem the supply of the IPP to be made in a province if:

• in the ordinary course of business of the supplier, the supplier obtains a particular address that is:
• if the supplier obtains only one address that is the home or business address in Canada of the recipient, the home or business address in Canada obtained by the supplier,
• if the supplier obtains more than one such address, the home or business address in Canada of the recipient that is most closely connected with the supply, or
• in any other case, the address in Canada of the recipient that is most closely connected with the supply;
• the particular address is in the province, and
• the IPP can be used in the province.

If a supplier does not obtain an address of the recipient, such as the case where [Y] is receiving [IPP] and no address was requested or obtained, paragraph 8(b) of the Regulations would not determine the province in which the supply of IPP is made. Instead, either paragraph 8(c) or section 11 of the Regulations would determine where the supply is made. Paragraph 8(c) provides that the supply is made in the participating province for which the tax rate is the highest among the tax rates for the provinces in which the property can be used.

However, if the property can be used in two or more participating provinces with the same highest tax rate, then section 11 of the Regulations would determine the province where the supply is made. Section 11 of the Regulations specifies which one of the participating provinces with the same highest tax rate (known as the specified provinces) will be the province where the supply is made. Where section 11 applies, the supply is made in the specified province where the supplier’s business address most closely connected with the supply is located. If the business address is not located in one of the specified provinces, then the supply is made in the specified province closest in proximity, determined in any reasonable manner, to the supplier’s business address that is most closely connected with the supply.

Where the Company obtained an address of [Y] the supply of the IPP would be made in a particular province if the address of [Y] is in that province. Otherwise, paragraph 8(c) or section 11 of the Regulations would determine where the supply is made.

A supply of [element A] is considered to be a supply of IPP. Under subsection 6(1) of the Regulations, a supply of IPP (other than IPP that relates to real property or to TPP) in respect of which the Canadian rights can only be used primarily in participating provinces is made in a participating province if an equal or greater proportion of those Canadian rights cannot be used in another participating province. Conversely, under section 7 of the Regulations, a supply of IPP (other than IPP that relates to real property or to TPP) in respect of which the Canadian rights can only be used primarily in non-participating provinces is made in a non-participating province. […]

A supply of IPP made to a non-resident who is not registered for GST/HST when the supply is made may be zero-rated pursuant to section 10.1 of Part V of Schedule VI if certain conditions are met. Please refer to GST/HST Info Sheet GI-034, Exports of Intangible Personal Property, for additional information.

A supply of TPP, such as [element C or element D], is deemed to be made in Canada pursuant to paragraph 142(1)(a) if the property is or is to be delivered or made available in Canada to the recipient of the supply. Whether a supply made in Canada is made in a participating province or non-participating province is determined by section 144.1 and Schedule IX. Section 144.1 provides that a supply is deemed to be made in a province if it is made in Canada and is, under the place of supply rules set out in Schedule IX, made in a province. Further, under section 144.1, a supply made in Canada that is not made in a participating province is deemed to be made in a non-participating province.

Pursuant to section 1 of Part II of Schedule IX, a supply of TPP is made in a province if the supplier delivers the property or makes it available in the province to the recipient of the supply. This rule is generally based on the province in which legal delivery of the property occurs. For purposes of this rule, under section 3 of Part II of Schedule IX, property is deemed to be delivered in a particular province if certain conditions are met, including if a supplier sends the property by mail or courier to an address in the particular province.

Timing of Tax Payable

Whether the amounts collected from [Y] […][on] a reward-based crowdfunding [project] are an advance payment is a question of fact.

As per subsection 168(1), tax in respect of a taxable supply is payable by the recipient on the earlier of the day the consideration for the supply is paid and the day the consideration for the supply becomes due.

Under section 133, the entering into of any agreement to supply any property is deemed to be a supply of the property made at the time the agreement is entered into. The provision of the property under the agreement is treated as being a part of the same supply and not as a separate supply. As a result, the tax applies to any advance payment or part payment of the consideration for a supply even if, at the time payment is made, property has not in fact been transferred.

Generally, an advance payment is an amount paid on account of a payment to become due under an obligation and recorded in the supplier's books and records as income. GST/HST is payable at the time the advance payment is made, pursuant to paragraph 152(1)(c), assuming that the advance payment did not become due at an earlier time. If under a written agreement, a customer is required to make an advance payment equal to 100% of the consideration for property to be supplied in the future, the customer would be required to pay, and the supplier would be required to collect, the GST/HST calculated on the amount at the earlier of the time the advance payment became due under the agreement or was paid.

Consideration is defined under subsection 123(1) to include any amount that is payable for a supply by operation of law. [Y] is required to pay GST/HST on the full consideration payable for the pledge amounts that was supplied by the Company. Tax is calculated on the pledge amount and not the amount received by the Company after the fees are deducted from the Platform and the payment processor.

Adjustments, Credits and Refunds

The Company would be required to account for the GST/HST on all pledges in the reporting period of the Company on the earlier of the day the consideration is paid or becomes payable. It is noted on the Platform website that if [Y] wants a refund of their collected pledge once a […] project has ended, they will need to reach out to [X] directly.

Subsection 232(2) provides that where a particular person has charged to, or collected from, another person tax under Division II calculated on the consideration or a part thereof for a supply and, for any reason, the consideration or part is subsequently reduced, the particular person may adjust, refund, or credit, the amount of tax as calculated on the value of consideration that was reduced. The supplier has up to four years after the end of the reporting period in which the consideration was reduced to adjust the amount of tax charged or to refund or credit the tax collected to the recipient.

In issuing a credit note to a person the Credit Note and Debit Note Information (GST/HST) Regulations identifies the information that must be contained within the credit note. The information requirements are further discussed in GST/HST Memorandum 12.2 – Refund, Adjustment, or Credit of the GST/HST under Section 232 of the Excise Tax Act. The legislative provisions and information supplements make it clear that all credit notes issued must contain;

1. a statement or other indication that the document is a credit note;

2. the name of the supplier or an intermediary in respect of the supply, or the name under which the supplier or the intermediary does business, and the registration number of the supplier or the intermediary;

3. the name of the recipient or name of the recipient's business or the name of the recipient's duly authorized agent or representative;

4. the date on which the note is issued.

Further, where the note is issued for a total amount that includes the amount by which the consideration and the tax calculated thereon have been reduced in respect of multiple taxable supplies, the note should contain the total amount of the adjustment, credit, or refund of tax. Without the latter, the issuer of the note must include a statement to the effect that the adjustment includes an amount as tax, the total of the rates at which tax was paid or payable in respect of each of the taxable supplies that is not a zero-rated supply and for which there is a reduction in tax, and either the total reduction of consideration and tax in respect of each such supply or the total reduction of consideration and tax in respect of all such supplies to which the same total tax rate applies.

The legislative framework is specific. Section 232 only applies in circumstances where a reduction in consideration is provided to a person who has paid, or has been charged, the GST/HST on an original taxable supply and for any reason the amount of consideration has subsequently been reduced.

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 CRA is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) 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. The interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA's interpretative policy could affect the interpretation(s) or the additional information provided herein.

CONTACT

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 343-553-3972. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

David Phoenix, CPA, CGA
Services and Intangibles Unit
General Operations and Border Issues Division
GST/HST Rulings Directorate

FOOTNOTES

1 [...][Website information]

2 [...][Website information]

3 [...][Website information]

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
Place de Ville, Tower A, 5th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 245070

Dear [Client]:

Subject: GST/HST RULING and GST/HST INTERPRETATION
Supply of […][a drug]

Thank you for your correspondence of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies of […][a drug]. 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

We understand the following:

1. An event such as a flu pandemic can occur and create an urgent public health crisis. Sometimes a drug that is needed for immediate use to respond to such an urgent public health crisis is not authorized for sale in Canada but may be authorized for sale in another country.

2. Regulatory pathways that provide access to drugs, that are not authorized for sale in Canada, that are intended for emergency use, include Health Canada's Special Access Programme (SAP).

3. The “SAP enables drugs that are not marketed in Canada to be requested by practitioners for the treatment, diagnosis, or prevention of serious or life-threatening conditions when conventional therapies have failed, are unsuitable, or unavailable. Non-marketed drugs may be unauthorized if they have not been approved by Health Canada.” (Footnote 1)

4. The SAP administers the "Sale of New Drugs for Emergency Treatment" which is an exemption to the Food and Drugs Act (FDA) and the Food and Drug Regulations (FDR).

5. Under section C.08.010(1) of the FDR, the Minister of Health may issue a letter of authorization allowing a manufacturer to sell a drug to a requesting practitioner to treat one, or several patients in a medical emergency. As per the FDR, drugs requested under these provisions (i.e. C.08.010 and C.08.011) must be non-marketed drugs in Canada.

6. […] (the Corporation) is a company located […] [outside of Canada] that develops medicines to improve and extend the lives of patients facing deadly diseases.

7. […] (the drug) […] was developed by the Corporation to treat […][a disease].

8. […]

9. The drug is not currently licensed to be sold into Canada.

10. […].

11. Pursuant to section C.08.010 of the FDR, the Minister of Health issued a letter of authorization, allowing the Corporation to sell the drug to […],[…] for future emergency use for the indication of [the disease].

12. The letter specifies that the Corporation may sell […][a certain quantity of the drug] to […].

RULING REQUESTED

You would like to know whether:

1. The importation of the drug into Canada is taxable.

2. The supply of the drug is zero-rated, provided it becomes licensed for sale in Canada.

RULING GIVEN

Based on the facts set out above, we rule that no GST/HST is payable on the importation of the drug into Canada pursuant to section 213 and section 6 of Schedule VII.

As the drug is not currently licensed for sale in Canada, we consider the ruling request 2 to be in respect of a hypothetical situation. Consistent with the guidelines set out in GST/HST Memorandum 1.4 Excise and GST/HST Rulings and Interpretations Service, the CRA will not issue a ruling in hypothetical circumstances. We will however provide you with general comments in the section entitled “Interpretation”.

EXPLANATION

Non-taxable importations

Pursuant to section 212, every person who is liable under the Customs Act to pay duty on imported goods, or who would be so liable if the goods were subject to duty, is liable to pay the GST on the goods calculated at the rate of 5% on the value of the goods.

Section 212.1 imposes the provincial part of the HST at the appropriate rate in respect of non-commercial importations by a person who is resident in a participating province (i.e., Nova Scotia, New Brunswick, Ontario, Prince Edward Island or Newfoundland and Labrador). This tax applies in addition to the tax imposed under section 212.

Generally, all goods imported into Canada are subject to tax unless specifically relieved under section 213. Importations of goods relieved of tax under section 213 are set out in Schedule VII.

Section 6 of Schedule VII provides for the non-taxable importation of goods the supply of which is included in any of Parts I to IV and VIII of Schedule VI, other than section 3.1 of Part IV of that Schedule.

Supplies of the drug are zero-rated under paragraph 2(f) of Part I of Schedule VI. Pursuant to section C.08.010 of the FDR, the Minister of Health has authorized the drug to be sold for use in an emergency treatment for [the disease]. As such, the drug currently meets the conditions under paragraph 2(f) of Part I of Schedule VI and is a zero-rated supply. Consequently, its importation into Canada is not subject to tax pursuant to section 213.

INTERPRETATION GIVEN

Should the drug become licensed for sale in Canada, the question as to whether supplies of the drug would be taxable or zero-rated under Part I of Schedule VI cannot be answered in a ruling because the facts are hypothetical. Instead, an interpretation of paragraph 2(f) of Part I of Schedule VI is provided.

Paragraph 2(f) of Part I of Schedule VI

Paragraph 2(f) of Part I of Schedule VI zero-rates a drug the supply of which is authorized under the Food and Drug Regulations for use in an emergency treatment, but not including a supply of a drug or substance when it is labelled or supplied for agricultural or veterinary use only. Therefore, to be zero-rated under this provision, a supply must meet the following conditions:

• The supply must be a supply of a drug,
• The supply of the drug must be authorized by the FDR,
• The authorization must be for use in an emergency treatment, and
• The drug is not labelled or supplied for agricultural or veterinary use only.

Sections C.08.010 and C.08.011 of the FDR provide for the sale of a new drug used in an emergency treatment. The Special Access Program for drugs: Guidance document for industry and practitioners (Footnote 2) for sections C.08.010 and C.08.011 of the FDR specifically states that the drug in question must be “a non-marketed drug in Canada” (Footnote 3) . Where the drug is approved to be sold in Canada, the drug would not fall within sections C.08.010 and C.08.011 of the FDR, as it will no longer be a non-marketed drug. A letter of authorization from the Minister of Health will no longer be necessary to sell the drug. In addition, the drug will not be used exclusively in an emergency treatment. Consequently, the conditions under paragraph 2(f) of Part I of Schedule VI would not be met if the drug becomes licensed for sale in Canada.

Therefore, where the drug becomes licensed for sale in Canada, the supply would not be zero-rated under paragraph 2(f) of Part I of Schedule VI. It could however be zero-rated under another provision of Part I of Schedule VI depending on its classification by Health Canada.

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 ruling given in this letter provided that: none of the issues discussed in the ruling 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. The interpretation given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.

CONTACT

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 873-455-1361. 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,

Kassandra Leonard
Rulings Officer
Health Care Sectors Unit
Public Services Bodies and Governments Division
GST/HST Rulings Directorate

FOOTNOTES

1 Special Access Program for drugs: Guidance document for industry and practitioners - Canada.ca, Introduction, Purpose/overview

2 Idem

3 Idem, Overview of the regulatory framework

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
Place de Ville, Tower A, 5th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 245071
Business Number: […]

Dear [Client]:

Subject: GST/HST RULING
Application of HST to prenatal classes

Thank you for your correspondence of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to prenatal classes.

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

We understand the following:

1. You are a Registered Nurse registered in […][Province X].

2. You are registered for the GST/HST under the name […] since [mm/dd/yyyy] with the GST/HST account [#].

3. You teach in-person and online prenatal classes and are actively involved in preparing and presenting the classes.

In-person and online classes are very similar. The in-person classes are [#]-weeks long and done in a group setting where [#] participants attend. In-person classes are only offered to residents of [Province X]. The in-person classes allow you to demonstrate various techniques to the individual participants, for example, the different positions for labour techniques.

4. The online classes have on average [#] individuals signed on for the weekly live classes. The online classes are only open to Canadian residents and while the majority of individuals are within [Province X], some participants are from other […] provinces.

5. The classes are not covered under the [Province X] health care plan.

6. […]

7. You provided a letter from the Nurses Association of [Province X] (the Association) dated [mm/dd/yyyy], that confirms that the Association recognizes all hours of practice related to course development, instructing the classes, individual client counseling and supervising staff engaged in course development and service delivery in assessing whether you meet the practice hours requirement for your annual renewal.

8. You also provided extracts from the Canadian Nursing Association Framework for the Practice of Registered Nurses in Canada that shows that education is part of the areas of practice of the profession of nursing.

9. […][Quote from the provincial association about the nurse-client relationship] .

10. […].

RULING REQUESTED

You would like to know if your supplies of in-person and online prenatal classes are exempt services for purposes of the GST/HST.

RULING GIVEN

Based on the facts set out above, we rule that your supply of in-person and online prenatal classes are subject to the GST/HST.

EXPLANATION

Generally, most supplies of property and services made in Canada are taxable for GST/HST purposes, unless they are exempt supplies. Exempt supplies are listed in Schedule V to the ETA. Part II of Schedule V provides that certain health care services are exempt from GST/HST.

In order for a supply of property or a service to be exempt from GST/HST under Part II of Schedule V, a specific exempting provision included in Part II must apply to that particular supply.

Section 6 of Part II of Schedule V

Section 6 of Part II of Schedule V exempts a supply of a nursing service by a registered nurse, a registered nursing assistant, a licensed or registered practical nurse or a registered psychiatric nurse, if the service is rendered to an individual within a nurse-patient relationship.

Given the preceding, there are three criteria that the supply must meet to be exempt; It must be a service that:

1. is rendered by a registered nurse, a registered nursing assistant, a licensed or registered practical nurse, or a registered psychiatric nurse;

2. is a nursing service;

3. is rendered to an individual within a nurse-patient relationship.

The GST/HST is a transactional tax and as such, the exempting provisions in Part II of Schedule V apply on a supply-by-supply basis. These provisions set out specific criteria that must be met in order for a particular supply of a service to fall within those provisions. For every supply or transaction, the supplier must determine whether these criteria are met or whether the tax is applicable. Thus, regardless of the manner in which nursing services may be defined, the tax status of a particular supply of nursing services will be conditional on whether the supply meets all of the criteria set out in the exempting provision, as explained below.

1. Rendered by a registered or licensed nurse

You are a registered nurse in [Province X] and you therefore meet this criteria.

2. Scope of nursing services

a. Nursing services are generally understood to be the provision of care for, and the treatment of the health conditions of, a patient where the care and treatment services are performed by registered or licensed nurses. These are supportive, preventive, therapeutic, palliative and rehabilitative services that are rendered to assist the patient in attaining or maintaining optimal function.

b. In determining the scope of nursing services we also consider the scope of nursing services to include the diagnosis and treatment of health problems, assessment of a patient’s nursing needs, the preparation of nursing care plans for the patient and the manner in which the nursing profession is regulated by provincial laws. You mentioned in your letter that the Association recognizes hours of practice related to course development, instructing the classes, individual client counseling, supervising staff engaged in the course development and service delivery in assessing whether you meet the practice hours requirement for your annual renewal. You also provided extracts from the Canadian Nursing Association Framework for the Practice of Registered Nurses in Canada that shows that education is part of the areas of practice of the profession of nursing.

Training or teaching services can therefore be considered within the scope of nursing services.

3. Rendered to an individual within a nurse-patient relationship

a. Even where an activity falls into the practice of nursing, as noted above, the activity will not be an exempt supply for purposes of section 6 of Part II of Schedule V where it does not constitute a nursing service rendered to an individual within a nurse-patient relationship.

b. A registered or licensed nurse establishes and maintains a nurse-patient relationship by using nursing knowledge and skills to render patient care services involving supportive, therapeutic, palliative and rehabilitative services to assist the patient in attaining or maintaining optimal function, such as treating the health problems of a patient, administering medications and performing other interventions. We interpret the phrase “rendered within a nurse-patient relationship” to mean nursing services that involve personal interaction between a nurse and an individual who is a patient where there is an established or ongoing relationship between the nurse and the patient and the nurse is a direct care provider of the patient.

c. […]

d. […][Publicly available information] indicates: […] [that an individual’s participation in these online and in-person prenatal classes does not constitute a nurse-patient relationship […].

Accordingly, we can not conclude that the classes you are providing are rendered within a nurse-patient relationship. The supply of the classes are therefore subject to the GST/HST.

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 ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) 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.

CONTACT

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 438-304-4971. 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,

Robert Demers
Industry Sector Specialist
Health Care Sectors
Public Sector Bodies and Governments
GST/HST Rulings Directorate

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
Place de Ville, Tower A, 5th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 244917

Dear [Client]:

Subject: GST/HST RULING
GST/HST implications of constructing a laneway house

Thank you for your correspondence of [mm/dd/yyyy], sent on behalf of your clients who constructed a laneway house to lease to individuals for occupancy as a place of residence. You are requesting confirmation of the application of the goods and services tax/harmonized sales tax (GST/HST) to the activity of constructing the laneway house and whether your clients are entitled to any GST/HST rebates relating to the newly constructed laneway house. 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

We understand the following:

1. Two individuals, [Individual A] and [Individual B] entered into a joint venture agreement (the Agreement) effective [mm/dd/yyyy] with […][Corporation C] and […][Corporation D] [(the Corporations)] for the purpose of acquiring, holding, developing, redeveloping, renovating, refinancing, managing and the eventual sale of lands and buildings (the Property) described in Schedule A to the Agreement.

2. Schedule A identifies the Property with the civic address of […].

3. You provided a copy of a [provincial government] form […] dated [mm/dd/yyyy] that indicates that [Individual A and Individual B] (the Owners, or, when referring to one of the Owners, the Owner) acquired the Property as joint tenants. The [...] form states that the total consideration and the value of the real property (land, building, fixtures and goodwill) purchased by the Owners was $[…].

4. The Agreement refers to the Owners as the “Investor”. Clause 3 states that the parties (the Venturers) are not partners and nothing in the Agreement nor their conduct shall make them partners or constitute them as agents for the other or impose any fiduciary duty, liability or obligations upon any of them except as set out in the Agreement.

5. Clause [#] states that the Venturers acknowledge and agree that they have an equal interest in the joint venture. We understand this to mean that the parties may have an equal interest in the business and profits earned from the activity of the joint venture and not an equal interest in the Property used in the joint venture. No evidence was provided to show that […][the Corporations] hold any beneficial interest in the Property.

6. Clause [#] states that title to the Property is in the name of the Owners and that the Owners acknowledge that they hold the Property in trust for the joint venture. No trust agreement was provided and therefore, the nature of the trust arrangement between the Owners, [and the Corporations] is unknown.

7. Clause [#] provides that management of the Property is to be agreed in writing between the parties. An addendum to the Agreement, signed on [mm/dd/yyyy], is effective [mm/dd/yyyy] and provides:

• [the Corporations] are identified as Party A; the Owners are identified as Party B.
• The term of the joint venture agreement for the Property is [#] years or extended by mutual agreement.
• The intent of the joint venture is to purchase the legal second suite property, renovate its interior and add a 3rd legal detached dwelling in the rear yard. Once construction is complete, the Property will be refinanced to its new and higher value and all units are to be rented.
• Party A will be responsible for the following with respect to the Property:

o Property maintenance

o Tenant relations

o Bookkeeping

o Emergencies 

• Cash flow will be divided between Party A and Party B on a 50% basis and paid out quarterly.
• Party A will charge $[…] plus HST for renovation management, which will be charged to the Property.

8. Clause [#] provides that all profits and losses of the joint venture will be divided equally between the Venturers.

9. Clause [#] and clause [#] provide that the Owners will be responsible for financing the acquisition of the Property including any additional amounts necessary to cover the cost of the acquisition including land transfer tax and legal costs as well as financing all renovations of the Property and [Corporation C] will be responsible for completing the renovations. We understand there is a joint bank account to pay for these costs.

10. The Venturers made no joint venture election under section 273 of the ETA.

11. You advised that the Owners constructed a laneway house on the Property and construction was completed on [mm/dd/yyyy]. [Corporation C] entered into a Tenancy Agreement (TA) with two individuals for lease of the laneway house as a place of residence; the individuals are not related to the Owners. The effective date of the TA is [mm/dd/yyyy] with an end date of [mm/dd/yyyy].

12. The Owners voluntarily registered for GST/HST purposes by telephone on [mm/dd/yyyy] and a GST/HST program account was opened under the Business Number […], effective [mm/dd/yyyy] with […] a [mm/dd] fiscal year end. The Owners requested registration on the assumption that registration was required in order to claim a housing rebate. The GST/HST registration identifies the type of ownership of the business entity as a partnership.

13. The Owners requested to have their GST/HST registration backdated to [mm/dd/yyyy]; this request was denied as the Owners were unable to demonstrate that they were required to be registered.

14. In a telephone conversation on [mm/dd/yyyy], you advised that the Owners have not formed a partnership.

15. The Owners have not claimed any input tax credits relating to the construction of the laneway house.

16. In our telephone conversation of [mm/dd/yyyy], I advised you of rebates that may be available under sections 256.2 and 257 of the ETA and that a two-year limit applies for those rebates. We discussed the requirement under subsection 191(1) to report a self-supply of a laneway house when it is first leased to an individual for occupancy as a place of residence.

17. You have provided a copy of the building permit issued by the City […]on [mm/dd/yyyy] to [Corporation C] to construct a detached second suite and a copy of the drawing list that describes the site plan dated [mm/dd/yyyy] submitted to the City […] for the laneway house. You also provided an itemized list of costs and copies of invoices relating to the laneway house.

RULINGS REQUESTED

You would like a GST/HST ruling to confirm the following:

1. Is the laneway house subject to GST/HST as a result of the lease to the individuals for occupancy as a place of residence?

2. Are the Owners entitled to a GST/HST new housing rebate?

You have also asked for clarification as to whether the Owners required GST/HST registration.

RULINGS GIVEN

1. At the time the Owners leased the laneway house for occupancy as a place of residence, the Owners were deemed under subsection 191(1) to have made and received a taxable supply of the laneway house (this is referred to as a self-supply). The Owners were required to account for the GST/HST based on the fair market value of the laneway house at that time.

2. The Owners are not entitled to a GST/HST new housing rebate. Instead, the Owners may be entitled to a different rebate for new residential rental properties. We discuss eligibility conditions for other rebates in the Additional Information section below.

Clarification with regard to the Owners’ requirement to be registered is provided in the Additional Information section below.

EXPLANATION

Ruling 1

We first set out our understanding of the ownership of the Property and the business relationship between the Venturers.

Ownership of real property

Recognizing who has an interest, including beneficial interest, of real property is significant for GST/HST purposes with respect to who is the builder of a residential complex and for the reporting and remitting of tax on the self-supply of the complex under section 191(1). A person who is a builder may also qualify for a rebate under subsection 256.2(3) for the tax remitted on the self-supply.

Under real property law in common law jurisdictions […], a joint venture cannot hold legal title or beneficial ownership of real property recognized by common law and provincial statute law.

The information provided indicates that the Owners (as joint tenants) are the only persons who have an interest in the Property on which the laneway house is situated. Generally, joint tenants have an identical and undivided interest in real property and therefore, each joint tenant owns the entire property. Where more than one individual holds legal title to real property as a joint tenant, the Canada Revenue Agency (CRA) would consider that each of those individuals has 100% interest in the real property.

The Agreement provides that each Venturer has an equal interest in the joint venture. However, interest in a joint venture does not necessarily equate to an interest in real property that is the subject matter of the joint venture. An interest in a joint venture is not the same as an interest in real property that is held in joint tenancy. Although the Owners acquired the Property subsequent to entering into the Agreement and the purpose of the Agreement refers to acquiring and selling land and buildings, there is no evidence that [the Corporations] have an interest in the Property.

In order to comment on the application of the GST/HST to the activity in question, the relationship of the parties to each other must be determined. Upon reviewing the Agreement, it is not clear whether the construction of the laneway house is truly a joint venture. There are a number of indicia which usually must be present to characterize an enterprise as a joint venture. For example, joint venture participants contribute resources, such as money, property, skills or time for use in the performance of the joint venture activities. There is also joint ownership in the venture subject matter and participants may have one of several types of interests in the underlying assets, including joint tenancy, tenancy in common, joint property, common property or part ownership in the underlying assets.

Under real property law in common law jurisdictions, the fee simple estate can be fragmented into its legal and equitable (or beneficial) interests. The definition of real property in subsection 123(1) includes an interest in real property, whether legal or equitable. Accordingly, the ownership of real property can include a legal or an equitable interest. By severing the estate into its two component interests, one person could lawfully own the beneficial interest in real property while another person could own the legal interest. It is the CRA’s position to consider the entire estate, including the equitable (beneficial) interest in the real property to belong to the person or persons who hold the legal interest unless there is documentation to substantiate that a transfer of beneficial interest has been made to another person.

In this specific case, only the Owners have acquired the Property and hold an interest in the Property. It is not clear that the acquisition of the Property was undertaken in the course of the joint venture activity. It would appear that the acquisition of the Property by the Owners was a preliminary step to their participation in the development of the Property, which includes the construction of the laneway house. Thus, the money paid to acquire the Property may not be a contribution by the Owners to the joint venture activity as they paid money to acquire legal title to the Property. The Owners may then have contributed the Property to the joint venture activity.

We note that a person cannot make a contribution of real property to a joint venture if the person does not have any interest in the property. Generally, joint venture participants may retain title to any property they contribute to be used in the joint venture, unless some of the property is sold to the other participants or was acquired on behalf of the other participants.

There is no evidence that the Owners made a supply of an interest in the Property to [the Corporations]. A statement in the Agreement that the Venturers agree that they all have an equal interest in the joint venture does not substantiate that a supply of real property was made to [the Corporations] As noted in Fact 6 above, the Agreement provides that the Owners hold the Property in trust for the joint venture. However, no trust agreement was provided to indicate that the Owners purchased the Property on behalf of [the Corporations] to indicate that [the Corporations] have any beneficial ownership of the Property. Therefore, we would consider the entire Property, including the beneficial interest, to belong solely to the Owners who hold the legal interest and who own the Property in joint tenancy.

Builder of a residential complex

The term builder is defined in subsection 123(1). Under paragraph (a) a person is the builder of a residential complex if, at a time when the person has an interest in the real property on which the complex is situated, the person carries on or engages another person to carry on for the person, the construction or substantial renovation of the complex. A person is considered to have engaged another person to carry on for the person the construction or substantial renovation of the complex where the person has, in their own right, the control or authority to obtain or contract with another person for this purpose.

The term residential complex is defined in subsection 123(1) to include a building in which residential units are located together with any common areas and other appurtenances to the building and land immediately contiguous to the building that is reasonably necessary for the use and enjoyment of the building as a place of residence for individuals. A residential unit is defined to include a detached house that is occupied by an individual as a place of residence.

GST/HST Info Sheet GI-168, The GST/HST Implications of the Construction of Secondary Housing Units (Laneway Housing) explains the GST/HST obligations and entitlements of individuals who construct a laneway house on their land. A laneway house is generally described as a detached secondary house built on a pre-existing lot. For GST/HST purposes, a laneway house is a single unit residential complex that is a separate, detached housing unit constructed on the same parcel of land as another residential complex.

A person who constructs or substantially renovates a residential complex for the primary purpose of leasing the complex in the course of a business is generally considered to be a builder of the complex for GST/HST purposes. A person is also a builder of a residential complex if the person hires someone to construct or to substantially renovate the complex for the primary purpose of leasing the complex in the course of a business.

The information provided indicates that the Owners are the only persons who have an interest in the Property on which the laneway house is situated. Further, the laneway house was constructed for the purpose of making a supply of a long-term residential lease, which is exempt under paragraph 6(a) of Part I of Schedule V.

As indicated above, it is not clear whether the construction of the laneway house is a joint venture. Other indicia which usually must be present to characterize an enterprise as a joint venture include a right of mutual control or management of the enterprise by all the participants. In the present case, the details regarding management of the enterprise do not set out any rights of mutual control or management by all of the participants. The management fee paid to [Corporation C] is consideration for a taxable supply and as indicated in the addendum to the Agreement, HST applies to this supply.

While there is a provision for sharing profits and losses equally, the basis for profits and losses is not identified. Governance of the joint venture is not explained, such as how business decisions will be made. The Agreement sets out that financial contributions in respect of the Property, which we understand includes the construction of the laneway house, are made only by the Owners.

Further, it is not clear whether the terms of the Agreement provide that the Owners built the laneway house or engaged [Corporation C] to construct it. The Agreement has the characteristics of construction management and ongoing property management services whereby [Corporation C] managed the construction of the laneway house and provides ongoing property maintenance including tenant relations and other services to the Owners. The information suggests that [Corporation C] is making taxable supplies of services to the Owners by constructing the laneway house on the Owners’ land. For example, the addendum provides that [the Corporations] will charge $[…] plus HST for renovation management to the Property. We understand this to mean that the charge will be made to the Owners of the Property.

As the sole legal owners of the real property on which the laneway house is situated, the Owners are the persons making a supply of the laneway house by way of lease to the tenant. [Corporation C] does not make a supply of the laneway house because it has no interest in the real property on which the laneway house is situated.

When real property held in joint tenancy is supplied by way of sale, or by way of lease, licence or similar arrangement, the supply is a single supply made by all of the joint tenants because each has 100% interest in the property. In turn, a payment of consideration and tax made by the recipient of a supply of real property that is held in joint tenancy is a payment made to all of the joint tenants.

Accordingly, only the Owners are builders of the laneway house for purposes of the GST/HST.

Self-supply under subsection 191

Under subsection 191(1), when a builder constructs or substantially renovates a single unit residential complex (such as a laneway house) and subsequently supplies the complex by way of lease, licence or similar arrangement for purposes of its occupancy as a place of residence by an individual, the builder is deemed to have made and received a taxable supply of the complex (referred to as a self-supply). The builder is deemed to have paid as a recipient and to have collected as a supplier tax in respect of the supply calculated on the fair market value of the complex at the later of the time when the construction or substantial renovation is completed and the time when possession of the complex is given for occupancy to an individual as a place of residence. The self-supply applies whether the builder is registered for GST/HST or not.

A builder of a residential complex will report the GST/HST deemed to have been collected calculated on the fair market value of the newly constructed residential complex on a GST/HST return and will remit the tax owing to the CRA. A builder that is a GST/HST registrant will report and remit the tax due on the self-supply with their regular return. A builder that is not a GST/HST registrant must report and remit the tax due on the self-supply by filing the non-personalized return, Form GST62, Goods and Services Tax/Harmonized Sales Tax Return (Non-Personalized).

The self-supply rule in subsection 191(1) does not provide for the division of the tax payable on the deemed supply among multiple builders who own the residential complex in joint tenancy. The supply deemed to have been made is that of the residential complex and not of an interest in the complex.

In the current situation, the residential complex is the laneway house, including the land necessary for the use and enjoyment of the laneway house. The GST/HST is required to be collected and remitted to the CRA calculated on the fair market value of the laneway house, which would include the land that is reasonably necessary for the use of the laneway house as a place of residence.

In light of the common-law principles that apply in respect of real property that is held in joint tenancy, both of the Owners, as joint tenants of the Property, are builders of the laneway house for GST/HST purposes and both Owners would be deemed as having made a self-supply of the laneway house under subsection 191(1). Therefore, each Owner is deemed to have paid as a recipient and to have collected as a supplier tax in respect of the deemed supply calculated on the fair market value of the laneway house at the later of the time when the construction is substantially completed and the time when possession of the house is given for occupancy to an individual as a place of residence.

Further, subsection 222(1) deems both Owners to hold the amounts deemed to have been collected as or on account of tax in trust for the Crown until the amounts are remitted to the Receiver General or withdrawn as an input tax credit or net tax deduction under subsection 222(2). Therefore, each Owner is jointly and severally liable for the GST/HST remittable on the self-supply of the laneway house.

However, where one joint tenant accounts for amounts collected as or on account of tax in respect of a self-supply made under subsection 191(1), the accounting of the amount and the remittance of any resulting positive amount of net tax by that joint tenant will discharge the liability of the other joint tenants.

Therefore, only one of the Owners is required to report and remit the GST/HST deemed to have been collected calculated on the fair market value of the newly constructed laneway house on [mm/dd/yyyy], which we understand is the later of the time when the construction was completed and the time when possession of the laneway house was given for occupancy to an individual as a place of residence.

Ordinarily, amounts collected by a non-registrant as or on account of tax are to be reported on GST/HST returns, each reflecting the amounts collected during a particular calendar month. A non-registrant is required to file its returns and remit the net tax by the end of the month following the month in which the tax was collected.

Since neither of the Owners were GST/HST registrants on [mm/dd/yyyy], whichever one of the Owners that chooses to report and remit the tax on the deemed supply must do so on Form GST62, a non-personalized GST/HST return. That Owner was required to account for the tax on the deemed supply calculated on the fair market value of the laneway house by reporting the tax deemed collected on Form GST62 and remitting the amount by the end of the month following the month during which the self-supply occurred, which in this case was [mm/dd/yyyy].

Ruling 2

The GST/HST new housing rebate under section 256 may apply where an individual constructs or substantially renovates his or her own primary place of residence or the primary place of residence of a relation of the individual, or who hires another person to do so. As the Owners have constructed a laneway house that was leased to an unrelated person, they are not entitled to this rebate.

We will address two other rebates that may be available to the Owners in respect of the construction and self-supply of the laneway house in the Additional Information section below:

• Where a person is a non-registrant for GST/HST purposes and makes a taxable sale of real property, the person may be eligible for a rebate under section 257 for the GST/HST the person has paid for the construction costs of the residential complex.
• A builder who was required to report a deemed supply of a residential complex under subsection 191(1) may be eligible to claim a GST/HST new residential rental property rebate (NRRPR) under subsection 256.2(3) for a portion of the GST or the federal part of the HST the builder was deemed to have paid as a recipient. A person who qualifies for an NRRPR may be able to claim an Ontario NRRPR for a portion of the provincial part of the HST if the subject property is situated in Ontario.

As outlined in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Services, a GST/HST Ruling is a written statement the CRA provides to a taxpayer that sets out the CRA’s position on how the relevant provisions of the ETA apply to a clearly defined fact situation of the taxpayer. The CRA will issue a ruling only when all of the relevant facts of a transaction or series of transactions together with supporting documents are provided.

We are unable to issue a ruling as to whether the Owners are eligible for a rebate under section 257 or under subsection 256.2(3) as the eligibility for these rebates depends on a number of specific conditions being met which cannot be verified and because there are unknown factors with respect to the ownership of the Property and the joint venture arrangement for the construction of the laneway house. For example, one of the conditions for the rebate eligibility involves a determination of whether there is a principal/agency relationship between the Owners and [Corporation C].

ADDITIONAL INFORMATION

Non-registrant’s sale of real property (section 257 rebate)

Where a person is a non-registrant for GST/HST purposes and makes a taxable supply of real property by way of sale, which includes where the person is required to report a self-supply of a residential complex under subsection 191(1), the person may be eligible for a rebate of all or part of the GST/HST paid by the person on the last acquisition of the real property plus the GST/HST paid on improvements made to the property. The rebate is equal to the lesser of the basic tax content of the real property at the time of the sale and the GST/HST payable in respect of the sale.

The term basic tax content is defined in subsection 123(1). In general, the basic tax content of a property of a person is the tax payable by the person on the last acquisition of the property, plus any tax payable on any subsequent improvements made by the person to the property (e.g., the construction of the laneway house), less rebates (but not input tax credits) the person was entitled to claim, minus an adjustment for the depreciation, if any, in the fair market value of the property since the property was last acquired. Pursuant to subsection 123(1), improvement, in respect of property of a person, means any property or service supplied to, or goods imported by, the person for the purpose of improving the property, to the extent that the consideration paid or payable by the person for the property or service or the value of the goods is, or would be if the person were a taxpayer under the Income Tax Act, included in determining the cost or, in the case of property that is capital property of the person, the adjusted cost base to the person of the property for the purposes of the Income Tax Act.

Information on the calculation of the basic tax content as it relates to the rebate under section 257 is included in GST/HST Memorandum 19.3.6, Rebate on Non-registrant's Sale of Real Property. To claim a rebate under section 257, a person must complete Form GST189 – General Application for Rebate of GST/HST (GST189), using Reason Code 7. Step-by-step instructions on how to complete the rebate form are provided in the guide RC4033, GST/HST General Rebate Application.

When [Corporation C] purchases goods or services or makes supplies as part of the construction and leasing of the laneway house, it is not clear whether [Corporation C] is acting in the capacity of:

• agent of the Owners, or
• making a supply of construction services to the Owners.

We note that the Agreement sets out the relationship between the Venturers and states that their conduct shall not constitute them as agents for the other or impose any fiduciary duty, liability or obligations upon any of them and that all Venturers have an equal interest in the Property. However, while a written agreement may state that a person is not an agent, such a statement is not conclusive in itself as to whether or not an agency relationship has been established for a specific purpose. Whether a person is acting as agent in entering into a particular transaction on behalf of another person is not always clear.

GST/HST Policy Statement P-182R, Agency, and GST/HST Info Sheet GI-012, Agents, discuss the essential qualities of agency. P-182R notes that the absence of an agency agreement is not sufficient to conclude that an agency relationship does not exist and case law supports the possibility that two parties may be engaged in an agency relationship provided their actions indicate that one party is acting as agent on behalf of another.

However, it could be the case that the Owners hired [Corporation C] to construct the laneway house as the Agreement has characteristics of construction management and ongoing property management by [Corporation C] including ongoing property maintenance, tenant relations and other services to be provided to the Owners in respect of the laneway house.

Generally, if a co-venturer of a joint venture purchases property or services otherwise than as agent on behalf of the other joint venture participants, the co-venturer may be considered to be making a supply of the property or services to the other co-venturers. If the other joint venture participants subsequently reimburse the co-venturer for all or part of the purchase, the reimbursement is regarded as part of the consideration for the supply of services made by the co-venturer to the participants and is subject to GST/HST.

Where the existence of an agency relationship is a factor in reviewing a rebate claim, the rebate claim may be subject to review by the CRA. Therefore, it may be necessary to review the conduct of the parties relating to the construction of the laneway house to determine whether their conduct supports an agency relationship. Alternatively, the review may find that the Owners engaged [Corporation C] to carry on the construction of the laneway house.

If the Owners (as joint tenants) are eligible for a rebate under section 257, only the Owner who reported the self-supply is entitled to claim the rebate. Since that Owner owns an undivided interest in the entire Property, which includes the laneway house, the rebate would be in respect of the tax payable on the entire laneway house; a section 257 rebate can only be claimed once.

Subsection 257(2) provides that a rebate claim under section 257 may only be made by the person who made the particular taxable supply of real property by way of sale, which includes a deemed supply of a residential complex under subsection 191(1), and the CRA is only authorized to pay a rebate to that person. Section 67 of the Financial Administration Act does not permit another person to either make a claim for, or be paid, a rebate. Therefore, [Corporation C] could not submit a claim for a rebate under section 257 in respect of a deemed supply of the laneway house made by the Owners.

A rebate under section 257 shall not be paid to a person unless the person files an application for the rebate within two years after the day the consideration for the supply of the real property became due or was paid without having become due. In this specific situation, if there is eligibility for the rebate under section 257, the application must be filed before [mm/dd/yyyy]. A rebate is not available for expenses incurred after the deemed supply, that is, expenses incurred after [mm/dd/yyyy].

New residential rental property rebate (subsection 256.2(3) rebate)

A builder who is subject to a self-supply under subsection 191(1) may qualify for a new residential rental property rebate (NRRPR) under subsection 256.2(3) for a portion of the federal part of the HST that was remitted on the self-supply. A person who qualifies for an NRRPR may be able to claim […] a portion of the provincial part of the HST if the subject property is situated in [the that province].

Subsection 256.2(3) sets out the requisite conditions for the NRRPR in respect of a portion of the GST/HST paid by a person. […].

A builder will apply for the NRRPR using the prescribed form, GST524, GST/HST New Residential Rental Property Rebate Application for a residential unit that is leased under a long-term lease to an individual for use as a primary place of residence. […].

In a situation involving two or more builders who own a residential complex as joint tenants, as noted above, once one of the joint tenants has reported and remitted the GST/HST deemed to have been collected as a supplier and paid as a recipient of the self-supply of the residential complex under subsection 191(1), the other joint tenants are relieved of this liability. Therefore, the other joint tenants would not be eligible for an NRRPR.

Where the NRRPR is based on the amount of tax imposed under subsection 191(1), paragraph 256.2(7)(c) requires that in order to be eligible for this rebate, Form GST524 […] must reflect the amount the person reported on a return for the reporting period in which the person was deemed to have collected tax and that the person has remitted all tax remittable as reported in that return.

A person who is a builder of a residential complex must file Form GST524 […] within two years after the end of the month in which the tax became payable on the self-supply. In this specific situation, if there is eligibility for the rebate under subsection 256.2(3) in respect of a self-supply under subsection 191(1), the application forms must be filed before [mm/dd/yyyy].

Filing the rebate applications

A person may be able to include the rebate under section 257 and the NRRPR rebate under subsection 256.2(3) on their GST/HST return, which would include a GST62 return. In this case, the person would enter the total amount of the rebates on line 111 of the GST62 return. If the person files the GST189 and the GST524 forms together with the GST62 return, subsection 228(6) provides that the person will only be required to remit the difference between the tax owing, if any, on the deemed supply and the amount of the rebates.

The filing of a return is a self-reported document and is subject to verification. Generally, interest may be charged on any overdue balance owing on a GST/HST return and any other overdue GST/HST amounts that are remittable to the Receiver General.

GST/HST registration

The Owners voluntarily registered for GST/HST purposes and have an effective date of [mm/dd/yyyy]. In our telephone conversation of [mm/dd/yyyy], I confirmed that there is no requirement for the Owners to be registered for GST/HST in order to claim rebates and to report a self-supply under subsection 191(1).

Whether a partnership exists must be determined according to the law governing partnerships that applies in the relevant province or territory, […].

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 CRA is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) 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. The interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.

CONTACT

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-296-2530. 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,

Susan Eastman
Industry Sector Specialist
Real Property
Legislative Policy and Regulatory Affairs
GST/HST Rulings Directorate

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
Place de Ville, Tower A, 5th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 244638

Dear [Client]:

Subject: GST/HST RULING
Acting as an Intermediary Between a Merchant and an Acquirer under a Payment Card Network

Thank you for your letter of [mm/dd/yyyy], in which you requested a ruling on behalf of […] (the “Company”), with respect to the application of the goods and services tax/harmonized sales tax (GST/HST) to the services supplied by the Company.

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 below are to the Excise Tax Act (ETA) unless otherwise specified.

STATEMENT OF FACTS

For the purposes of your ruling request, you provided us with electronic copies of the following documents:

• Merchant Agreement between […][ACo] and a retailer (herein, the “Sample Merchant Agreement”)
• […] Agreement between the Company and [ACo] ([…][Agreement X])

Based on the information contained in your letter, the above documents and our telephone conversation of [mm/dd/yyyy], we understand the following:

1. The Company is retained by persons (each, an “Acquirer”) who supply merchants with the financial service (herein, an “Acquirer Service”) of acting as an acquirer under one or more payment card networks pursuant to Merchant Agreements of which the Sample Merchant Agreement is a representative example.

2. [Agreement X] is representative of the agreements that the Company enters into with Acquirers to provide them with services relating to their offering of Acquirer Services to merchants (each of which is hereinafter referred to as a “Client Agreement”).

3. The Company’s main duties and obligations under a Client Agreement with an Acquirer are as follows:

• soliciting prospective merchant customers of the Acquirer,
• negotiating terms and conditions of Merchant Agreements on behalf of the Acquirer, including rates, pricing and length of contract,
• assisting merchants with the completion of their application forms and verifying information,
• performing various checks (credit background and regulatory) and verifying the legitimacy of the merchant’s business in each case, including whether the merchant continues to comply with the relevant payment card network requirements, and
• educating and training merchants on the Acquirer’s services.

4. The Company negotiates each Merchant Agreement with the relevant merchant and then presents it to the Acquirer for consideration. The merchant will be bound by the terms so negotiated, subject to the Acquirer’s approval. The Company does not have the authority to bind the Acquirer. The Acquirer retains the right to accept or refuse to enter into a Merchant Agreement with a merchant.

5. For each transaction in respect of which an Acquirer provides its Acquirer Service to a merchant under a Merchant Agreement negotiated by the Company on behalf of the Acquirer, the Acquirer is liable to pay the Company a fee (the “Transaction-Based Fee”) as the sole form of consideration for the Company’s services to the Acquirer under their Client Agreement. This fee is generally calculated based on the difference between

(i) the Acquirer Service fee that the Company negotiated with the merchant; and

(ii) the sum of the interchange fee that was payable by the Acquirer to the card issuer in respect of the transaction and a base fee amount stipulated by the Acquirer to the Company (referred to as the “buy rate”).

RULING REQUESTED

You would like to know whether a supply made by the Company to an Acquirer pursuant to a Client Agreement is an exempt supply of a “financial service” within the meaning of the ETA.

RULING GIVEN

Based on the facts set out above, we rule that a supply made by the Company to an Acquirer pursuant to a Client Agreement is a supply of a “financial service” that falls under paragraph (l) of the definition of that term in subsection 123(1). Any such supply to an Acquirer is an exempt supply, unless it meets the conditions for being treated as a zero-rated supply under Part IX of Schedule VI to the ETA.

EXPLANATION

There are several elements of service that are provided by the Company to an Acquirer under a Client Agreement. Where an agreement provides for the provision of a combination of services and/or property, it must first be determined whether a single supply or multiple supplies are being made under the agreement.

Whether the provision of a combination of elements under an agreement constitutes a single supply or multiple supplies is a question of fact. GST/HST Policy Statement P-077R2, Single and Multiple Supplies provides guidance for making this determination, including the following principles.

1. Every supply should be regarded as distinct and independent.

2. A supply that is a single supply from an economic point of view should not be artificially split.

3. There is a single supply where one or more elements constitute the supply and any remaining elements serve only to enhance the supply.

In the present case, the Company receives a single consideration (in the form of the Transaction-Based Fee) for all of the elements that it provides to the Acquirer under a Client Agreement. The elements are provided together as integral components of what is a single supply from an economic point of view, which should not be artificially split. Accordingly, we conclude that the Company is making a single supply under a Client Agreement.

The next step is to determine the character of the supply that is made by the Company to an Acquirer under a Client Agreement. In particular, the question is whether the overall service supplied by the Company to the Acquirer is a “financial service”, within the meaning of the ETA.

A supply is one of a “financial service” for GST/HST purposes if the essence or essential character of the supply is captured by any of the inclusionary paragraphs (a) to (m) of the definition of that term in subsection 123(1) and is not captured by any of the exclusionary paragraphs (n) to (t) of the definition. The relevant inclusionary paragraphs for present purposes are paragraphs (a), (i) and (l).

Paragraph (a) includes the payment of money. Paragraph (i) refers to any service provided pursuant to the terms and conditions of any agreement relating to payments of amounts for which a credit card voucher or charge card voucher has been issued. Paragraph (l) refers to the agreeing to provide, or the arranging for, a service that is referred to in any of paragraphs (a) to (i) and not referred to in any of paragraphs (n) to (t).

The Acquirer Service falls under paragraph (a) and/or (i) of the financial service definition. Consequently, the service that is supplied by the Company to an Acquirer under a Client Agreement falls within the financial service definition under paragraph (l) thereof if the Company’s service can properly be described as arranging for the Acquirer Service that is supplied by the Acquirer.

In determining if a service is included in paragraph (l) of the financial service definition, all of the facts surrounding the transaction must be considered. Technical Information Bulletin B-105, Changes to the Definition of Financial Service (TIB B-105) sets out a number of factors to consider, including (but not limited to) the activities performed by the intermediary, the extent of involvement and effort of the intermediary in the provision of the financial service in question, the degree of reliance of either the supplier or recipient on the intermediary in the course of providing the financial service and the intention of the intermediary to effect a supply of the financial service.

In the present case, the purpose of the Company’s supply is to act as an intermediary to bring together the Acquirer and prospective merchant customers of the Acquirer with the view to causing supplies by the Acquirer of its Acquirer Service to occur. The Company is involved in the entire negotiation process for the supply of Acquirer Services by the Acquirer to merchants. In that process, it appears that in each case the Company is relied upon heavily by the merchant and the Acquirer. The Company delivers to the Acquirer a fully negotiated Merchant Agreement to which the merchant will be bound, subject to the Acquirer’s approval. We therefore conclude that under its Client Agreement with an Acquirer, the Company is making a supply of a service of “arranging for” the Acquirer Service offered by the Acquirer, within the meaning of paragraph (l) of the financial service definition. None of the exclusionary paragraphs of that definition apply in the circumstances. The Company’s service to the Acquirer is thus a financial service for GST/HST purposes.

A supply of a financial service is an exempt supply under Part VII of Schedule V to the ETA unless it meets the conditions for being treated as a zero-rated supply under Part IX of Schedule VI to the ETA. In this case, for the Company’s supply to an Acquirer to be a zero-rated supply, the Acquirer would have to be a non-resident person and, at the time of the supply, the Company would have to be a “financial institution”, within the meaning of the ETA. For more information regarding financial institution status, refer to GST/HST Memorandum 17-6, Definition of “Selected Listed Financial Institution”, and GST/HST Memorandum 17-7, De Minimis Financial Institutions.

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 ruling given in this letter provided that: none of the issues discussed in the ruling 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.

CONTACT

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 416-709-0130 or my manager, Hélène Lacasse, at 343-571-0207. 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,

Marlene Legare
Industry Sector Specialist
Financial Services Unit
Financial Institutions and Real Property Division
GST/HST Rulings Directorate

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
Place de Ville, Tower A, 5th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]

Case Number: 217305
Business Number: […]

Dear [Client]:

Subject: GST/HST RULING
Supplies of software and technical support services made with the help of non-resident […][Representatives]

Thank you for your correspondence of [mm/dd/yyyy], […], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies of […] software and technical support services made with the help of non-resident […][Representatives]. 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

We understand the following from […] [the] fax, additional documents including a sample […][agreement] (footnote 1) (the Agreement), the company’s website […], and [various] telephone conversations held between […] and […][CRA officials]:

1. […] ([…] [ACo]), […], is a non-resident corporation that is registered for the GST/HST under Subdivision d of Division V.

2. [ACo] is a software developer that develops cloud-based […] software products (Software) which are designed to enable users to safely access company networks electronically.

3. [ACo] supplies licenses to use the Software (Licenses), as well as technical support and maintenance services related to the Software (Services), to end-users.

4. [ACo] enters into a separate Agreement with each non-resident contract sales representative ([…][Representative]), allowing the [Representative] to solicit orders for the purchase of the Licenses and Services by end-users.

5. […] The end-users are business entities that use the Licenses and Services in the course of their business activities in Canada.

6. Under the terms of the Agreement, [ACo] appoints a [Representative] as its non-exclusive representative for the sale of the Licenses and Services during the term of the Agreement. In particular, […] of the Agreement states:

[…]

7. The [Representative] is not resident in Canada and performs […][Representative Services] for [ACo] wholly from outside Canada.

8. Under […] the Agreement, the [Representative] undertakes to make best efforts to actively market and promote the Software, to solicit new orders for the purchase of the Licenses and Services directly from new end-users and to solicit subscription renewals from existing subscribers. Under […][the Agreement], each prospective end-user must be individually approved in advance by [ACo] before any sale of a Licence and/or Services can be made to that end-user.

9. The Software is licensed exclusively by [ACo] directly to end-users under the […][License Agreement] which gives end-users a temporary right to use the Software and sets out the terms and conditions of use of the Licenses. […]

10. The Services component is mandatory in the first year that a License is purchased and is included with the supply of the License. In subsequent years, the Services are optional and available for separate purchase. The mandatory Services may appear as a separate line item on the invoice for the initial supply of a License.

11. The Services are provided remotely by [ACo]’s employees […][located outside of Canada] and enable end-users to understand how to use the Software and also how to troubleshoot any issues that arise. [ACo] does not have any employees in Canada; all of its employees are located [outside of Canada] from where they perform all of their technical support duties.

12. The [Representative] is not authorized and shall not perform any of the Services on behalf of [ACo]. The [Representative] is only authorized to perform [Representative Services] and such other services as provided in the Agreement. According to […] the Agreement:

[…]

13. Ownership of the Software vests exclusively with [ACo], who reserves all rights, title and interest therein. Nothing in the Agreement shall be deemed to grant to the [Representative] any ownership, license, entitlement or other proprietary rights with respect to the Software or any modifications or derivative works thereof, all of which shall be exclusively owned by [ACo]. The [Representative] acknowledges that nothing in the Agreement grants to the [Representative] any right, title or interest in the Software. According to […] the Agreement:

[…]

14. [ACo] retains exclusive ownership of all applicable copyrights, trade secrets, patents, and other intellectual property rights in the Software according to […] the Agreement, […]

[…]

15. The [Representative] does not have access to the software source code. Unless otherwise expressly authorized by [ACo], the [Representative] shall have no right to modify, copy, upgrade or reproduce the Software, and shall not reverse engineer or attempt to discover the underlying design, logic, or trade secrets embodied in the Software, including the source code. In addition, the [Representative] must immediately report any unauthorized use of the Software to [ACo] and cooperate in the enforcement of [ACo]’s proprietary rights in the software. Specifically, […] the Agreement state:

[…]

16. End-users receive a temporary, non-exclusive, non-transferable license to use the Software, subject to any restrictions placed on such use by the [License Agreement]. The [Representative] is not a party to the [License Agreement]. [ACo] has exclusive authority to modify the provisions of any [License Agreement].

17. The [Representative] must enlist prospective purchasers to sign […][an acknowledgement form], by which the end-user acknowledges that it is bound by the [License Agreement] between [ACo] and the end-user. Pursuant to […] the Agreement:

[…]

18. Under […] the Agreement, [ACo] may take measures to contact an end-user directly in the event of any breach of the terms of the [License Agreement] or failure to pay for the Licences and Services rendered by [ACo] in order to facilitate a resolution to the breach or to enforce its rights. The Representative must assist [ACo] in identifying any breach of the [License Agreement] and cooperate with any enforcement action taken by [ACo] in such cases.

19. [ACo] is solely responsible for giving access to the Software directly to end-users. This occurs when a completed purchase order for a License is accepted by [ACo], at which point [ACo] sends a link and a password electronically to the end-user in order to set up their account. The connection between the end-user and [ACo] through the [License Agreement] is maintained independently of whether the contractual relationship between the [Representative] and [ACo] is severed. An end-user’s [License Agreement] survives the expiration or termination of any Agreement between [ACo] and a [Representative], as stated in […] the Agreement:

[…]

20. Under […] the Agreement, [ACo] establishes the policies and procedures to be followed by the [Representative] for the ordering and delivery of Licenses and Services by end-users and specifies any requirements, as follows: any restrictions or conditions on the method of delivery; specification of the purchase order, such as name, address and other information required concerning the intended end-user; and […][other conditions].

21. Upon receipt of an end-user purchase request, the [Representative] must submit a purchase order form/invoice to [ACo] in writing, which becomes final once it is accepted by [ACo]. The purchase order form/invoice, as provided by [ACo], must provide details of the date of the transaction between the end-user and the [Representative], a correct description of the type and quantity of Licences and/or Services being ordered (including the version), the legal name and address or any other information about the end-user as [ACo] deems fit, the anticipated date of delivery of the Licences and/or Services to the end-user and the correct fees charged to the end-user by the [Representative].

22. Such purchase order form/invoice shall not have any terms concerning the Licence or Service fees charged to the end-user except in accordance with the Agreement, the policies and procedures issued by [ACo] or as agreed to by [ACo] in advance. Pursuant to […] the Agreement:

[…]

23. [ACo] has sole and absolute discretion to accept or refuse to fill any order submitted by a [Representative] on behalf of an end-user and no contract for the sale of Licenses or Services to an end-user is formed until [ACo] accepts to fulfill the particular purchase order. […]

24. [ACo] negotiates a price (list price) with each [Representative] that it expects to receive for the sale of Licences and Services to end-users. This list price may differ from [Representative] to [Representative] depending on their volume of sales. Other payment terms are more particularly specified in […] the Agreement. In the event that a [Representative’s] outstanding balance owing to [ACo] is […] past due, [ACo] may, in its discretion, suspend the [Representative’s] ability to place new purchase orders for Licences and Services and may also terminate end-users’ active Licences purchased through the [Representative]. […]

25. The [Representatives] independently establish and charge a price to the end-users (retail sale price) for the Licenses and Services. The [Representatives] have sole discretion in determining the retail sale price they will charge to end-users. However, the [Representative] remains obligated to [ACo] for any payments due under the Agreement regardless of whether an end-user has breached its own payment obligations to the [Representative] or the [Representative] has breached its contractual obligations to the end-user. The [Representative] must maintain detailed records relating to the distribution and licensing of the Software and sale of Services. […]

26. The difference between the list price established between [ACo] and each [Representative], and the retail sale price charged to end-users by the [Representatives], represents the commission earned by the [Representatives] on each sale of the Licenses and Services to an end-user. The [Representative] collects the full retail sale price from the end-user and only remits to [ACo] the list price negotiated with [ACo].

27. [ACo] issues an invoice to the [Representative] for the Licenses and Services ordered by the end-user, which indicates the list price agreed to by [ACo] and the [Representative], and also contains a reference to the end-user, including their name and address. This invoice also includes the name of the sales representative from the [Representative] organization responsible for making the sale. With your submission, you have provided three sample invoices containing the names and addresses of the [Representatives] and the end-users (redacted) and the name of the sales representative of the [Representative] organization involved in each transaction: […]

28. Pursuant to […] the Agreement, the [Representative] in turn issues a separate invoice to the end-user for the License and Services ordered, which invoice would indicate the retail sales price charged to the end-user on the sale.

29. The [Representative] is responsible for the creation and processing of invoices to end-users and the collection of accounts receivable arising from the sale of Licenses and Services to end-users.

30. The Agreement provides that all pricing and fees under the Agreement are exclusive of taxes. The [Representatives] shall pay any […] taxes, fees or duties […], including but not limited to, taxes due and owing on amounts due or collected from end-users to the [Representative]. […]

31. The [Representative] also agrees to charge and collect from end-users, and remit and pay to the appropriate governmental authorities, all value-added, sales and other similar taxes arising in connection with the transactions contemplated by the Agreement, including sales made to end-users.

32. Under […] the Agreement, the [Representative] shall maintain detailed records needed to comply with its responsibilities under the Agreement, such as […]

33. According to […], [Representatives] are not required to pay any amounts to [ACo], or make any required purchases from [ACo], in exchange for the [Representative Services] rights granted to them under the Agreement:

[…]

34. Pursuant to […] the Agreement, [ACo] and the [Representatives] are independent contracting parties for all purposes of the Agreement and neither one is deemed to be an agent, partner or employee of the other.

35. [Representatives] are not registered for GST/HST purposes under Subdivision d of Division V, and no GST506 form (Election and revocation of an election between agent and principal) has been executed that allows [Representatives] to account for GST/HST on behalf of [ACo].

RULING REQUESTED

You would like to know whether [ACo] must charge GST/HST on its supplies of Licenses and Services to [Representatives].

RULING GIVEN

Based on the facts set out above, we rule that [ACo] is not making a supply of Licences and Services to [Representatives]; as a result, it is not required to charge and collect GST/HST from the [Representatives].

EXPLANATION

Based on the information provided, [ACo] is not making supplies of Licenses and Services to [Representatives], but rather directly to end-users in Canada. The GST/HST applies to the supplies made in Canada by [ACo] to end-users, which under the Agreement [Representatives] are required to collect and remit.

[ACo] retains all ownership rights in the Software and reserves all its other rights therein, including the distribution rights. A [Representative] is not granted a license to use the Software or the right to reproduce, distribute or make the Software available and accessible to end-users. Furthermore, it is [ACo] that is solely authorized to provide Services to end-users.

[ACo] is therefore not required to collect GST/HST from the [Representatives] in respect of its supplies of Licenses and Services because the [Representatives] are not the recipients of such supplies.

ADDITIONAL INFORMATION

We understand that [Representatives] supply to [ACo] [Representative Services] in respect of [ACo]’s supplies of Licenses and Services to end-users, as well as invoicing and collection services. Where a [Representative’s] services are, or are to be, performed wholly outside Canada, the [Representative’s] supply of such services to [ACo] would be deemed to be made outside Canada under paragraph 142(2)(g) and would therefore not be subject to GST/HST. However, if in future a [Representative’s] services are, or are to be, performed in whole or in part in Canada, the [Representative’s] supply of such services would be deemed to be made in Canada under paragraph 142(1)(g), and would therefore generally be subject to GST/HST.

Additional information on the GST/HST place of supply rules may be found in GST/HST Memorandum 3-3, Place of Supply, as well as GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of supply rules for determining whether a supply is made in a province.

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 ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) 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. The interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.

CONTACT

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 343-553-3873. 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,

Anna Messore
GST/HST Rulings
Border Issues Unit
General Operations and Border Issues Division
GST/HST Rulings Directorate

FOOTNOTES

1. […]

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.

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]
Case Number: 219487

Dear [Client]:

Subject: GST/HST RULING
[…][Whether a conference is a foreign convention]

Thank you for your letter of [mm/dd/yyyy], concerning whether the above meeting qualifies as a foreign convention for purposes of the goods and services tax/harmonized sales tax (GST/HST).

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

We understand the facts to be as follows:

1. The [#] meeting of the […][Conference] will be held in […][Canada], from [mm/dd] to [mm/dd/yyyy], and will host the latest theories and research from the world’s best […][field of research] researchers.

2. The overall planning of the [Conference] is organized by […] (the […][Organization]) and […].

3. According to the [Organization’s] By-Laws and its website […]:

• The [Organization] is organized as a not-for-profit corporation under the laws of […][Country X] for scientific, charitable, and educational purposes.
• […][Description of the Organization’s mission].
• […][Description of the Organization’s membership].
• The [Organization] is governed by [#] directors comprised of a [#]-person executive committee (Past President, President, President-Elect, Secretary, and Treasurer) and [#] members-at-large. Presently, […][less than 10% of Directors are] Canadian and [#] directors are non-residents.
• The President-Elect is elected to serve a [#]-year term before automatic progression to a [#]-year term as President and a subsequent [#]-year term as Past President.
• The President-Elect is responsible for appointing a […][Conference Chair] for the […] meeting that occurs during the term the President-Elect will be President.
• Under the direction of a Board-approved [Conference Chair], the […][Organizing Committee] oversees the planning, development, confirmation and implementation of the scientific program for the […] meeting of the [Organization].

4. The [Organization’s] website provides the following information on the [Conference]:

• [Description of the Conference’s theme].
• The [Conference] is being organized under the leadership of the [Organization’s] President, […] ([…][affiliated university outside Canada]) and President-Elect […] ([…][affiliated university outside Canada]), with support from the Board of Directors and multiple subcommittees.
• […][Organizing Committee member names and affiliated university. - 67% of these members are outside Canada] .
• The sessions at the [Conference] are delivered in three formats:
• The pre-conference workshops are to provide teaching opportunities, allowing participants to acquire or extend their skills, learn about new techniques or technologies, or gain in-depth knowledge in a particular topic relating to [the field of research].
• Poster and oral sessions are for material that can be explained briefly and that is suited for graphic or visual presentation, and/or where the presenter would benefit from high levels of interaction and discussion.
• A paper symposium session is a cohesive cluster of research presentations and theoretical perspectives. To attain cohesion, the symposium should focus on a specific topic and emphasize conceptual issues and the integration of findings.
• The [Organization] will review abstract submissions for the sessions under these [#] panels: […].

5. In your submission, you made the following statements on behalf of the [Organization]:

• The principal purpose of the [Conference] is not to provide any of the following:

• provide any type of amusement, entertainment, or recreation
• conduct contests, or games of chance, or
• transact the business of the convenor or attendees in the course of a trade show open to the general public, or otherwise than in the course of a trade show.

• The [Organization] expects that approximately [#] people will attend the [Conference] and that at least 85% of the paid admissions will be for non-residents of Canada based on statistics of the past three meetings:

• 2020 – Virtual Meeting – Total delegates = [#] (8% Canadian, top 3 countries: [Country X], Canada, [Country Y])
• 2018 – [City B, Country X] – Total delegates = [#] (7% Canadian, top 3 countries: [Country X], Canada, [Country Y])
• 2016 – [City C, Country X] – Total delegates = [#] (8% Canadian, top 3 countries: [Country X], Canada, [Country Y])

• The [Organization] will be in charge of supplying admissions to the [Conference] to attendees, as well as space to exhibitors who are authorized to promote their products at the [Conference].

6. According to the agenda you submitted, the [Conference] will consist of pre-conference workshops on the first day, two […] addresses and one […] reception, [#] […] keynote speakers, [#] […] sessions, [#] poster and exhibitor sessions and [#] […] awards ceremony including a […] meeting.

RULING REQUESTED

You would like to know if the [Conference] is a foreign convention?

RULING GIVEN

Based on the facts set out above, we rule that the [Conference] is a foreign convention.

ADDITIONAL INFORMATION

The sponsor of a convention is defined under subsection 123(1) to mean the person who convenes the convention and supplies admissions to it. The sponsor must maintain documents supporting their calculation of the percentage of admissions that are reasonably expected to be supplied to non-residents in order to prove that a convention is a foreign convention, and make these documents available to the Canada Revenue Agency (CRA) on request. Under subsection 286(1), these documents must be kept in Canada unless the sponsor gets permission from the CRA to maintain them outside Canada.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the CRA is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) 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 343-553-3517. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Russell Vermette
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

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
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 234939

Dear [Client]

Subject: GST/HST RULING
[…][Whether the Congress is a foreign convention]

Thank you for your letter of [mm/dd/yyyy], concerning whether the above event qualifies as a foreign convention for purposes of the goods and services tax/harmonized sales tax (GST/HST).

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

We understand the facts to be as follows:

1. The […] (the Congress) will be held in […][Canada], from [mm/dd] to [mm/dd/yyyy].

2. The Congress is the […] meeting of the […] (the […][Organization]) and will present and discuss the latest research […][in the field of research], facilitate interaction between members who meet from all corners of the globe, and promote the broad discipline of […].

3. The overall planning of the Congress is organized by the [Organization] […].

4. The [Organization] is registered [in Country B] and is a staff-supported, member-driven organization with [#]+ members located in over [#] countries.

5. The [Organization] is a not-for-profit corporation organized for scientific, charitable, and educational purposes.

6. According to the [Organization]’s website at […]:

• The [Organization] is governed by a [#]-person Board of Directors, [15%] of whom are Canadian. Board terms typically last [#] years in duration and elections are held every [#] years.
• Board member’s responsibilities are to:
• Participate in quarterly meetings of the board (one meeting is a face-to-face meeting that takes place at the [Organization]’s […] congress, the other three meetings are managed by teleconference call).
• Represent the views of members of the [Organization] to the Board of Directors.
• Serve on standing or ad hoc committees as required.
• Maintain their membership in good standing for the duration of their term
• Participate without consideration of financial compensation
• Responsible for electing officers from within the qualified list of Board Members when these roles become vacant.
• Membership in the [Organization] is open to scientists, researchers, clinicians and students from around the world involved in the many research and practical aspects of […][the field of research]. Membership dues support the [Organization]’s mission of creating a community of [field of research] researchers and students.
• According to the […][Congress agenda], the Congress will begin with [#] […]-hour pre-congress workshops, followed by an opening ceremony, keynote lecture and reception. The remaining [#] days have [#] one and a half-hour periods that offer attendees a choice between [#] simultaneous oral or symposium sessions, [#] one-hour keynote lectures, [#] half-hour sessions for […], emerging scientist talk, honorary member presentation and annual general meeting and [#] […][…]-hour sessions for posters and exhibitors. The Congress will end with a gala dinner.

7. In your submissions, you made the following statements on behalf of the [Organization]:

• The purpose of the Congress is not to provide any of the following:

• provide any type of amusement, entertainment, or recreation,
• conduct contests, or games of chance, or
• transact the business of the convener or attendees, in the course of a trade show open to the general public, or otherwise than in the course of a trade show

• The [Organization] is the sponsor of the Congress, and is in charge of supplying admissions to attendees, and spaces to exhibitors authorized to promote their products.
• The [Organization] expects that approximately [#] people will attend the Congress and that at least 75% of the paid admissions will be for non-residents of Canada based on statistics of the past four meetings [in Canada and other countries]:

• [yyyy] – […][Country C] – Total delegates = [#] (18% Canadian […])
• [yyyy] – […][Country D] – Total delegates = [#] (20% Canadian […])
• [yyyy] – […][Country F] – Total delegates = [#] (25% Canadian […])
• [yyyy] – […], Canada – Total delegates = [#] (24% Canadian […])

• To accommodate persons […] who may be restricted from attending in person, an admission fee to attend the Congress virtually was added. The percentage of paid admissions by non-residents is still expected to be over 75% with the implementation of virtual attendance.

RULING REQUESTED

You would like know if the Congress is a foreign convention?

RULING GIVEN

Based on the facts set out above, we rule that the Congress is a foreign convention.

ADDITIONAL INFORMATION

The sponsor of a convention is defined under subsection 123(1) to mean the person who convenes the convention and supplies admission to it. The sponsor must maintain documents supporting its calculation of the percentage of admissions that are reasonably expected to be supplied to non-residents in order to prove that a convention is a foreign convention, and make these documents available to the Canada Revenue Agency (CRA) on request. Under subsection 286(1), these documents must be kept in Canada unless the sponsor gets permission from the CRA to maintain them outside Canada.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the CRA is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) 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 343-553-3517. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Russell Vermette
Services and Intangibles Unit
General Operations and Border Issues Division
GST/HST Rulings Directorate

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
Place de Ville, Tower A, 5th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 62355r2
Business Number: […]

Dear [Client]:

Subject: GST/HST RULING
Supplies of testing backflow devices

Thank you for your correspondence of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies of testing backflow devices. 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

We understand the following:

1. […][The Corporation] supplies services of testing and repairing backflow prevention assemblies installed on a property owner’s water line as a certified backflow assembly tester. [The Corporation] is registered for the GST/HST.

2. Backflow prevention assemblies are safety valves that are installed at connections to the water distribution system of a municipality to prevent contamination of potable water.

3. Through bylaws, municipalities require that property owners have the backflow prevention assemblies installed on their property tested upon installation and on an annual basis thereafter. The municipality informs the property owner, by written letter, that the backflow assembly must be tested at the owner’s expense, and that the testing must be done by an independent certified backflow assembly tester that is authorized by the municipality.

4. The certified backflow assembly tester records the results of the test on a backflow assembly test report, submits the report to the municipality, and pays a fee to submit the report.

5. […].

6. […].

7. You provided a sample invoice issued by [the Corporation] to a property owner in […][a municipality] for two backflow tests, […] $[…][for each backflow testing service and], $[…] [for the fees paid to the City to submit the backflow assembly test report], and […][GST/HST is charged on both the testing services and the fee paid to the City].

8. […][Information about another municipality]

9. […]

10. […].

RULING REQUESTED

You would like to know if the supply of [the Corporation’s] services of testing backflow prevention assemblies are exempt from the GST.

RULING GIVEN

Based on the facts set out above, we rule that [the Corporation’s] service of testing backflow prevention assemblies is a taxable supply. The amount invoiced for the […][backflow testing service] and the [fee paid to the City] together form the consideration for the taxable supply that is subject to the GST/HST.

EXPLANATION

Generally, most supplies of property and services made in Canada are taxable and subject to GST/HST, unless they are specifically exempt under Schedule V. An exempt supply is not subject to GST/HST. In order for a supply of property or a service to be exempt from GST/HST, a specific exempting provision must apply to the particular supply.

The GST/HST is a transactional tax, and each supply must be evaluated and characterized on a case-by-case basis in order to determine the application of the GST/HST. Part VI of Schedule V provides that certain supplies when made by a municipality are exempt from GST/HST. However, the tax status of supplies made by a municipality to property owners must be determined independently from the tax status of the supplies made by third party contractors to property owners.

There is no provision that exempts [the Corporation’s] service of testing backflow prevention assemblies.

[…]you refer to a sentence from guide RC4049, GST/HST Information for Municipalities, under the heading Municipal water distribution, sewerage, or drainage systems that states “A separate fee charged to a property owner or occupant for a service of repairing or maintaining part of an existing sewer or water line is exempt.” As stated on page 1 of RC4049, this guide uses plain language to explain the most common tax situations. It is provided for information only and does not replace the law. Further, the entire information under the heading Municipal water distribution, sewerage, or drainage systems in that guide must be read to understand the context and how the legislation applies to this type of supply.

That section of the RC4049 is in reference to section 22 of Part VI of Schedule V that exempts:

A supply of a service, made by a municipality or by an organization that operates a water distribution, sewerage or drainage system and that is designated by the Minister to be a municipality for the purposes of this section, of installing, repairing, maintaining or interrupting the operation of a water distribution, sewerage or drainage system.

[the Corporation] does not operate a water distribution system, […][and therefore] does not qualify to be designated a municipality for purposes of section 22 of Part VI of Schedule V. […][The Corporation’s] activities of installing, testing, and repairing backflow prevention assemblies do not consist of a service listed in […][section 22 of Part VI of Schedule V]; that is, of installing, repairing, maintaining or interrupting the operation of a water distribution system.

As [the Corporation] is not a municipality or an organization that operates a water distribution system that has been designated to be a municipality, section 22 of Part VI of Schedule V does not apply to exempt the supply of services provided by [the Corporation].

It is noted that RC4049 was updated in 2022 and the section under Municipal water distribution, sewerage, or drainage systems currently reads as follows:

A supply of a service of installing, repairing, maintaining or interrupting the operation of a water distribution, sewerage, or drainage system, is GST/HST exempt if the supply is made by a municipality or by an organization that operates a water distribution, sewerage, or drainage system and that is designated as a municipality for this purpose.

For example, where a municipality or a designated municipality repairs that part of a water or sewer line that is for the sole use of a property owner, and the municipality or designated municipality bills the owner, the amount billed is GST/HST exempt. A fee billed by a municipality or designated municipality to a property owner or occupant to turn the water supply on or off is also GST/HST exempt.

A supply of a service of operating or managing another person's water distribution, sewerage or drainage system is subject to the GST/HST.

Accordingly, the amount invoiced to the property owner for the [backflow testing service] is consideration for a taxable supply and subject to the GST/HST.

Furthermore, the […][fee that is] invoiced to the property owner, as reimbursement for the fee required to be paid by [the Corporation] to […][the City] for submitting the backflow assembly test report, also forms part of the consideration for the taxable supply of [the Corporation’s] services, and is subject to the GST/HST.

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 ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) 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.

CONTACT

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 289-257-6196. 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,

Maria Forte-Long
Industry Sector Specialist
Municipal Sectors Unit
Public Service Bodies and Governments Division
GST/HST Rulings Directorate

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
Place de Ville, Tower A, 5th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 244179

Dear [Client]:

Subject: GST/HST RULING
Supplies made by a strata corporation to the owner of a unit described by the strata plan as a non-residential unit, where the unit is used by the owner for residential purposes

Thank you for your correspondence of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies made by a strata corporation to the owner of a unit described by the strata plan as a non-residential unit, where the unit is used by the owner for residential purposes.

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

We understand the following:

1. You are the representative of […] the “Corporation”.

2. The Corporation is a strata corporation established upon registration of […] (the “Strata plan”).

3. The Strata plan is comprised of [#] non-residential strata lots and [#] residential strata lots.

4. The property is situated in [Province A].

5. The [...] non-residential units are described on the Strata plan as non-residential, and are zoned by the municipality for non-residential use only.

6. The Corporation has recently exceeded the small supplier threshold and has started charging GST on its supplies related to the four units described on the Strata plan as non-residential units.

7. You were informed by the owners of […][some] of the units described on the Strata plan as non-residential (strata lots […]) that the owners are using these units (the “Units”) as their place of residence, despite the zoning and Strata plan description.

RULING REQUESTED

You would like to know whether the supplies made by the Corporation to the owners of the Units are exempt.

RULING GIVEN

Based on the facts set out above, in particular the fact that the Units are each occupied by an individual as a place of residence, we rule that the supply of property or a service by the Corporation (otherwise known as the “Condominium fees”) to the owners of the Units described as strata lots [...] are exempt supplies pursuant to section 13 of Part I of Schedule V to the ETA.

EXPLANATION

For purposes of this ruling, we assume that the Units contain the amenities necessary for residential occupancy, since you have stated the owners are using them as their place of residence.

Section 13 of Part I of Schedule V to the Act exempts “a supply of property or a service, made by a corporation or syndicate established upon the registration, under the laws of a province, of a condominium or strata lot plan or description or similar plan or description, to the owner or lessee of a residential condominium unit described by that plan or description, if the property or service relates to the occupancy or use of the unit”.

The terms “residential condominium unit” and “residential complex” are defined in subsection 123(1).

If a condominium unit is not a residential complex, the unit is not a residential condominium unit for GST/HST purposes and the exemption under section 13 of Part I of Schedule V to the Act will not apply to a property or service supplied by a condominium corporation to the owner of the unit.

Each supply to each owner of a condominium unit must be analyzed separately to establish whether the supply is taxable or exempt pursuant to section 13. It is a question of fact as to whether a particular unit is a residential complex and a residential condominium unit for GST/HST purposes.

Consequently, we must determine if the Units are residential complexes and residential condominium units as per 123(1).

Paragraph (b) of the definition of “residential complex” in subsection 123(1) states:

(b) that part of a building that is

(i) the whole or part of a semi-detached house, rowhouse unit, residential condominium unit or other similar premises that is, or is intended to be, a separate parcel or other division of real property owned, or intended to be owned, apart from any other unit in the building, and

(ii) a residential unit,

together with that proportion of any common areas and other appurtenances to the building and the land subjacent or immediately contiguous to the building that is attributable to the unit and that is reasonably necessary for its use and enjoyment as a place of residence for individuals.

Further, a “residential unit” is defined in subsection 123(1) as:

(a) a detached house, semi-detached house, rowhouse unit, condominium unit, mobile home, floating home or apartment,

[…]

or that part thereof that

(d) is occupied by an individual as a place of residence or lodging,

[…]

The Units in the present case meet the conditions of the definition of “residential unit” in subsection 123(1) as they are “condominium units”, as described in (a), and are occupied by an individual as a place of residence.

The Units also meet the definitions of “residential complex” and “residential condominium unit” in subsection 123(1) since they are “residential units” that are “a separate parcel or other division of real property owned, or intended to be owned, apart from any other unit in the building”.

The requirements of section 13 include that the service must be made by a corporation established upon the registration of the strata plan and that the service must relate to the occupancy or use of the Units. As per the facts set out above, these two conditions are met. The final requirement is that the supply must be made to an owner of a residential condominium unit described by the strata plan. We have determined above that the Units meet the definition of “residential condominium unit” in subsection 123(1). Since the Units are described on the strata plan, even though they are described as non-residential on that plan, they are residential condominium units according to the definition of the ETA, and the supply of the Condominium fees to the owners of those Units meet all the requirements of section 13.

Accordingly, the supplies of Condominium fees by the Corporation to the owners of the Units will be exempt supplies under section 13 of Part I of Schedule V.

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 ruling given in this letter provided that: none of the issues discussed in the ruling 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.

CONTACT

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-291-0073. 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,

Stéphanie Blanchette
Senior Rulings Officer
Real Property Unit 2
Financial Institutions and Real Property Unit
GST/HST Rulings Directorate