GST/HST Ruling

TRANSLATION FOLLOWS

Dear XXXXX:

Thank you for your letter XXXXX (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX (the product).

Statement of Facts

Our understanding of the facts is as follows:

1. The product comes in XXXXX ct and XXXXX ct cartons that are approximately XXXXX grams and XXXXX grams each.

2. Each bar is individually wrapped and weighs approximately XXXXX grams.

3. The ingredients listed on the product package include XXXXX sugar and unsweetened chocolate.

Ruling Requested

Is the supply of the product subject to the GST/HST?

Ruling Given

Based on the facts set out above, we rule that supplies of the XXXXX ct and XXXXX ct cartons are zero-rated.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act (ETA), or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Taxable supplies of goods and services made in Canada are generally subject to tax at 7% GST or 15% HST, as applicable. However, "zero-rated" supplies of goods and services are subject to tax at 0%. A zero-rated supply is any supply included in Schedule VI to the ETA.

Section 1 of Part III of Schedule VI to the ETA zero-rates supplies of food or beverages for human consumption and sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such food or beverages, unless one of the exclusions set out in paragraphs 1(a) through 1(r) applies.

Paragraph 1(m) of Part III of Schedule VI to the ETA excludes from zero-rating supplies of:

cakes, muffins, pies, pastries, tarts, cookies, doughnuts, brownies, croissants with sweetened filling or coating, or similar products where

(i) they are prepackaged for sale to consumers in quantities of less than six items each of which is a single serving, or

(ii) they are not prepackaged for sale to consumers and are sold as single servings in quantities of less than six, but not including bread products, such as bagels, English muffins, croissants or bread rolls, without sweetened filling or coating;

As supplies of the product are prepackaged for sale to consumers in quantities of 6 or more, each of which are single servings, the supply is zero-rated.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9585.

Yours truly,

Nicole Thomas, CMA
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

TRANSLATION OF ORIGINAL FOR CASE 47156

XXXXX

Nous avons bien reçu votre lettre XXXXX (avec documents en annexe) au sujet de l'application de la taxe sur les produits et services (TPS)/taxe de vente harmonisée (TVH) aux XXXXX (le produit).

Exposé des faits

Nous comprenons que les faits sont les suivants :

1. Le produit est vendu en multiple de XXXXX ou XXXXX barres et les boîtes sont d'environ XXXXX grammes et XXXXX grammes respectivement.

2. Chaque barre est emballée séparément.

3. La liste d'ingrédients inscrite sur la boîte inclue : XXXXX sucre et chocolat non sucré.

Décision demandée

Vous désirez savoir si la vente du produit constitue une fourniture taxable ou détaxée.

DÉCISION RENDUE

Compte tenu des faits précités, nous rendons la décision suivante : la vente du produit constitue une fourniture détaxée.

Cette décision est sujette aux restrictions et aux conditions générales énumérées à la section 1.4 du chapitre 1 de la Série des mémorandums sur la TPS/TVH. Cette décision nous lie si aucune des questions mentionnées ci-dessus ne fait actuellement l'objet d'une vérification, d'une opposition ou d'un appel, si aucune modification pertinente n'est apportée à l'avenir à la Loi sur la taxe d'accise (LTA), à son interprétation de politique ministérielle, et si vous avez entièrement décrit en détail tous les faits et les opérations nécessaires pour lesquels vous demandez une décision.

EXPLICATION

Les fournitures taxables des produits et services rendus au Canada sont généralement assujettis à la taxe aux taux de 7% TPS ou 15% TVH. Les fournitures détaxées des produits et services rendus au Canada sont assujettis à la taxe aux taux de 0%. Une fourniture détaxée est n'importe laquelle des fournitures figurant à l'annexe VI de la LTA.

L'article 1 de la partie III de l'annexe VI de la LTA détaxe la fourniture d'aliments et de boissons destinés à la consommation humaine, y compris les édulcorants, assaisonnements et autres ingrédients devant être mélangés à ces aliments et boissons ou être utilisés dans leur préparation, sauf les fournitures décrit aux alinéas 1(a) à 1(r).

L'alinéa 1(m) de la partie III de l'annexe VI de la LTA exclue:

les gâteaux, muffins, tartes, pâtisseries, tartelettes, biscuits, beignes, gâteaux au chocolat et aux noix (brownies) et croissants avec garniture sucrée, ou autres produits semblables (à l'exclusion des produits de boulangerie tels les bagels, les muffins anglais, les croissants et les petits pains, sans garniture sucrée) qui :

(i) sont pré-emballés pour la vente aux consommateurs en paquets de moins de six articles constituant chacun une portion individuelle,

(ii) ne sont pas pré-emballés pour la vente aux consommateurs et sont vendus en quantités de moins de six portions individuelles;

Puisque le produit est pré-emballé pour la vente aux consommateurs en paquets de plus de six articles constituant chacun une portion individuelle, le produit est détaxé.

N'hésitez pas à communiquer avec moi au 952-9585, si vous désirez de plus amples renseignements ou des éclaircissements concernant ce qui précède.

Veuillez agréer, Madame/Monsieur, l'expression de nos sentiments distingués.

Nicole Thomas
Unité des produits
Division des opérations générales et des questions frontalières
Direction de l'accise et des décisions de la TPS/TVH

Dear XXXXX

Thank you for your letter XXXXX with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to XXXXX (the Product).

Statement of Facts

1. The Product is packaged in XXXXX cartons that are approximately XXXXX grams each. Each carton contains XXXXX of approximately XXXXX grams each.

2. The product is available in the following flavours: XXXXX[.]

3. The main ingredients in the XXXXX flavour of the Product include: Rolled Oats, sugar/glucose-fructose, fruit pieces, rice, vegetable shortening, brown sugar, fructose, whole wheat, hydrogenated palm kernel oil, glycerin, natural and simulated flavours, salt, soya lecithin, milk ingredients, vitamins.

4. The Product package label states: XXXXX[.]

Ruling Requested

What is the tax status of the Product?

Ruling Given

Based on the facts set out above, we rule that the Product is taxable at 7% GST or 15% HST, as applicable, pursuant to section 165 of the Excise Tax Act (ETA).

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the ETA, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Taxable supplies of goods and services made in Canada are generally subject to tax at 7% GST or 15% HST, as applicable. However, "zero-rated" supplies of goods and services are subject to tax at 0%. A zero-rated supply is any supply included in Schedule VI to the ETA.

Section 1 of Part III of Schedule VI to the ETA zero-rates supplies of food or beverages for human consumption and sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such food or beverages, unless one of the exclusions set out in paragraphs 1(a) through 1(r) applies.

In accordance with paragraph 1(h) of Part III of Schedule VI of the ETA, the following products are taxable at 7% GST or 15% HST if applicable:

"granola products, but not including any product that is sold primarily as a breakfast cereal."

As the Product falls under this exclusion, it is taxable at 7% GST or 15% HST, as applicable.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9585.

Yours truly,

Nicole Thomas
Goods Unit
General Operations & Border Issues Division
Excise and GST/HST Rulings Directorate

Dear XXXXX:

Thank you for your letter XXXXX, wherein you have asked us to reconsider our ruling issued XXXXX based upon the additional information you have provided.

Statement of Facts

Based on the original submission XXXXX, the subsequent submission of XXXXX and the information provided by telephone XXXXX XXXXX, our understanding of the facts and transactions is as follows:

•   XXXXX adjoining townhouses located at XXXXX, (the subject properties) were purchased by XXXXX (the Company) from the XXXXX Municipality XXXXX XXXXX. The purpose for purchasing the subject properties was to restore them as heritage buildings and to substantially renovate them into a single apartment building containing XXXXX residential rental units.

•   Prior to their purchase by the Company, the subject properties had been unoccupied for about XXXXX years, except for trespassers. Although the subject properties were vacant at the time of their acquisition, their last use was as a "rooming house" rented out on a monthly basis to individuals for use as their place of residence.

•   The Company carried on or engaged other persons to carry on the restoration and substantial renovation of the subject properties.

•   Title to the subject properties was consolidated into a single legal description, hereafter referred to as the subject property.

•   After the substantial renovation was substantially complete, the subject property consisted of a single apartment building containing XXXXX residential units. For Harmonized Sales Tax (HST) purposes, the subject property had become a substantially renovated multiple unit residential complex, as defined in subsection 123(1) of the Excise Tax Act.

•   After the substantial renovation of the subject property was substantially complete, the Company gave possession of one or more of the residential units in the apartment building under a lease, licence or similar arrangement to person(s) for the purpose of occupancy as place(s) of residence of one or more individuals.

•   Thus for HST purposes, you considered the Company to be a "builder" of the complex, as defined in subsection 123(1), and the Company self-assessed the HST as required under subsection 191(3) of the Excise Tax Act.

•   The subject property (formerly properties) is a municipal heritage building, and changes to the exterior (excluding preservation) required approval of the Heritage Advisory Committee.

•   The XXXXX Municipality granted approval to construct a truncated pitched roof to replace the flat roofs on the subject properties by issuing a permit XXXXX. The issuance of this permit was unrelated to the request for approval of the conversion of the subject properties into an 8-unit apartment building.

•   The building permit for the conversion of the subject properties into one apartment building was granted XXXXX.

•   Work done prior to February 28, 2000 XXXXX was limited largely to work of a preservation nature. Some of the first brickwork done was part of the demolition process as the bricklayers had to disassemble two high chimneys and set about salvaging the brick. Very little re-pointing was actually done prior to the spring of XXXXX. None of the masonry work necessary to support a new roof was conducted until well after February 2000. No building permit was required to conduct the masonry demolition and initial re-pointing work.

•   Demolition of the interior of the subject property was conducted in XXXXX. The contract price of the demolition work was $XXXXX out of a total project cost of $XXXXX. A temporary electrical mast was erected around XXXXX to assist in the demolition process. Posts and framing were inserted to prevent the building from collapsing. The demolition work consisted of removing materials from the interior of the building such as the plaster (including walls and ceilings) however some of the elaborate plaster mouldings were preserved.

•   The configuration of the interior was left largely intact however some of the interior (non-supporting) walls were relocated. The basement floor was removed and replaced.

•   The reframing did not start until after February 2000. The framers were not hired until XXXXX. Until that time only casual labourers were used.

•   The Company purchased the last piece of land pursuant to an agreement which was negotiated in XXXXX but which was not on paper until XXXXX and which agreement was completed in XXXXX. This piece of land was consolidated with the rest of the subject property and formed part of the multiple unit residential complex.

•   You regard this project as your civic contribution. You were "in it" firstly to redirect yourself personally, and secondly, as a heritage buff.

•   You maintain that the possibility of abandoning the project was very much on your mind until the work moved ahead, which really only happened in XXXXX. In XXXXX the project turned around and you were able to direct events, instead of being carried away by them.

•   You also maintain that your intention to construct the apartment building was not fully formulated until long after construction started, though construction ebbed after the XXXXX gust of activity. Until XXXXX you found it was more palatable to swallow the losses than to continue with this project.

•   It is your position that if the builder's commercial intent to construct the multiple unit residential complex could be implied in the circumstances (as described above), you submit that "intention" cannot amount to "construction" within the ordinary definition of the word.

•   Finally you submit that the construction work done on the subject property up until XXXXX, was of a sustaining or stabilizing nature. Thus it is your submission that XXXXX was the date of commencement of construction.

TRANSACTION

Upon rental of the first residential unit in the newly reconstructed or substantially renovated multiple unit residential complex, the Company was deemed to have paid the HST under subsection 191(3) of the Excise Tax Act.

Ruling Requested

Is the Company, as builder of the multiple unit residential complex, entitled to claim a GST/HST New Residential Rental Rebate in respect of the federal portion of the HST that is it deemed to have paid under subsection 191(3) of the Excise Tax Act?

Ruling Given

Based on the facts set out above, we confirm the previous ruling issued XXXXX XXXXX, and we rule that the builder is not entitled to claim a GST/HST New Residential Rental Rebate in respect of the federal portion of the HST.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

After reconsidering all of the facts stated above and in particular the representations you made in your letter XXXXX and by telephone on XXXXX, it is our position that substantial renovation of the subject property, as defined for HST purposes, began prior to February 28, 2000.

Given the condition of the subject properties at the time of their acquisition, it is our position that the demolition of the interior of the building was a necessary and integral part of the substantial renovation of the complex. The demolition work conducted in XXXXX involved, to some extent, the removal of portions of the interior of the building (or buildings), such as the plaster on the interior walls and ceilings. The starting point for a substantial renovation, as set out in the terms of the definition in subsection 123(1) of the Excise Tax Act, is the building as it existed immediately prior to the removal or replacement work having begun. Thus, once the removal or replacement work commences with respect to parts of the pre-existing building, other than certain excluded parts of the building (i.e. the foundation, external walls, interior supporting walls, floors, roof and staircases), it cannot be said that substantial renovation has not begun.

In accordance with the coming-into-force rule set out in clause 15 of subsection 16(1) of Bill C-13 enacted on June 14, 2001, the GST/HST New Residential Rental Property Rebate is not available to builders who began a substantial renovation of a residential complex prior to February 28, 2000.

In addition we wish to clarify that even if the substantial renovation of the subject property had begun after February 27, 2000, the GST/HST New Residential Rental Property Rebate is not available with respect to construction costs. Rather it is available with respect to the federal portion of the HST paid to purchase the residential complex or on the federal portion of the HST paid under self-supply.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-8852.

Yours truly,

Daryl J.A. Hooley
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

Dear XXXXX:

Thank you for your letter XXXXX addressed to the XXXXX GST/HST Rulings Centre, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transactions described below. Your letter has been forwarded to us for our reply. We apologize for the delay in our response.

Statement of Facts

From the information contained in your letter, from our telephone conversation XXXXX XXXXX and from other information you have provided to the XXXXX GST/HST Rulings Centre our understanding of the facts, the transactions, and the purpose of the transactions is as follows:

1. XXXXX is structured into different distinct legal entities, XXXXX XXXXX (Fund), XXXXX. (XXXXX), XXXXX (Partnership) and XXXXX.(Inc.). The operations are at the partnership level where GST/HST is paid and collected.

2. XXXXX currently holds a XXXXX % limited interest in Partnership. It previously held a XXXXX % limited interest in Partnership. XXXXX only asset is its interest in Partnership. XXXXX incurred a number of administrative expenses on which it paid GST/HST.

3. Inc., the general partner, holds XXXXX % interest in Partnership.

4. Fund is a public entity structured as a trust fund. It owns XXXXX % of the outstanding common shares of XXXXX and XXXXX % of Inc. The capital received from the trust unit holders is loaned to XXXXX for use in Partnership. Fund's revenues are from interest and dividends and are always distributed to the trust unit holders. Fund incurred a number of expenses on which it paid GST/HST.

5. The administrative expenses incurred by Fund and XXXXX are mainly legal and audit fees. The legal fees relate to XXXXX negotiations to acquire Partnership units (XXXXX % to XXXXX %) and the Fund's expenses are in relation to the initial public offering of trust units and TSE listing fees.

The audit fees are from the public auditors. The audit is required for publicly traded companies. The audited financial statements produced are consolidated into Fund.

6. Partnership operates a XXXXX business. All employees that work for XXXXX are employed by Partnership.

7.  Each entity is registered for GST/HST purposes.

Ruling Requested

You have requested a ruling on whether Fund and XXXXX could claim GST/HST input tax credits (ITCs) on the administrative expenses.

Ruling Given

Based on the facts set out above, we rule that Fund and XXXXX are not eligible to claim ITCs with respect to the administrative, legal, professional and other expenses related to their investments. For GST/HST purposes, Fund and XXXXX have not used the inputs in the course of their commercial activities.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Subsection 169(1) of the Excise Tax Act (ETA) sets out the general rule for determining ITCs. It provides that, where property or a service is acquired or imported for consumption, use or supply by a registrant, the registrant is entitled to claim an ITC equal to the fraction of the tax paid or payable on the acquisition or importation that represents the extent to which the property or service is for consumption, use or supply in a commercial activity of the registrant.

Under subsection 169(1) Fund and XXXXX are not entitled to claim ITCs because they are not engaged in commercial activities. Fund incurred expenses related to its ownership of shares in XXXXX and XXXXX incurred expenses related to the holding of a partnership interest. The holding of shares and the holding of a partnership interest are not commercial activities on their own. No other provision in the ETA, the most relevant of which are outlined in the following paragraphs, would entitle Fund or XXXXX to claim ITCs.

Paragraph 272.1(2)(b) of the ETA provides that where property or a service is acquired or imported by a member of a partnership on its own account for consumption, use or supply in the course of activities of the partnership, for the purposes of determining an ITC or rebate of the member, the member is deemed to be engaged in those activities of the partnership. No ITCs are allowed for XXXXX because there is no property or services acquired or imported for consumption, use or supply in the course of activities of Partnership.

Where a member of a partnership acquires or imports property or services related to the raising of funds, negotiation or legal services that the member will use to acquire or maintain an interest in a partnership, such property or services will not be considered to have been acquired or imported for consumption, use or supply in the course of activities of the partnership. The deeming provision in paragraph 272.1(2)(b) of the ETA would, therefore, not apply for the purposes of determining an ITC of the member in respect of such property or services.

Subsection 186(1) of the ETA provides that a corporation that is a registrant and resident in Canada may claim ITCs for the tax paid or payable on property or services acquired, imported or brought into a participating province for consumption or use in relation to the shares or indebtedness of a corporation. No ITCs are allowed for XXXXX because the legal and accounting services incurred are not in relation to the shares or indebtedness of a corporation. As for Fund no ITCs are allowed because it is not a corporation.

Subsection 185(1) of the ETA provides that where tax in respect of property or a service acquired, imported or brought into a participating province by a registrant becomes payable by the registrant at a time when the registrant is neither a listed financial institution nor a person who is a financial institution, the registrant can claim ITCs to the extent that the property or service was acquired, imported or brought into the province as the case may be, for consumption, use or supply in the course of making supplies of financial services that relate to commercial activities of the registrant. ITCs are not allowed for XXXXX nor Fund under this provision because neither is engaged in commercial activities.

Note that Partnership can only claim ITCs on property or a services acquired or imported for consumption use or supply in its own commercial activity and not on property or services acquired or imported for consumption, use or supply in the activities of Fund or XXXXX.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8221.

Yours truly,

Denise Villeneuve
Corporate Reorganizations Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

Dear XXXXX:

Thank you for your correspondence XXXXX (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transaction(s) between XXXXX, as the administrator of its pension plan trusts, the investment managers and the custodial trustee involving the salaried and hourly pension plan master trusts (and unitized trusts) in the context of XXXXX pension plan operations as described in the agreements provided and in our discussions.

Unless otherwise indicated, all legislative references contained herein are references to the Excise Tax Act (ETA).

Statement of Facts

You have provided the agreements relevant for the purposes of determining the GST implications of the transactions described in your request. These agreements are set out in Appendix 1 to this ruling letter.

In your letter XXXXX you have indicated that the terms of the Salaried and Hourly Unitized Trust Agreements are substantially identical as are the agreements entered into with offshore and resident investment managers, with the exception of the two agreements entered into by XXXXX with XXXXX (investment manager) and XXXXX (insurer). Based on the agreements provided and our discussions, our understanding of the facts, the transaction(s), and the purpose of the transaction(s) is as follows:

Parties and relationships:

XXXXX has established separate pension plans for hourly employees and for salaried employees.

XXXXX is the administrator of both its hourly and salaried employees' pension plans and it is governed as such by the provisions of the XXXXX XXXXX and related regulations.

As administrator of each of the plans, XXXXX is required to establish a trust fund for payment of pension benefits to beneficiaries of each of the plans. Both pension trusts are persons resident in Canada and registrants for the purposes of the ETA.

Certain corporations affiliated with XXXXX participate in the salaried plan so that their employees are covered by that plan; nevertheless, XXXXX has all the responsibilities as administrator. XXXXX, as administrator of the XXXXX plan trusts, has a fiduciary duty with respect to the assets of the trusts. Additionally, XXXXX has sole responsibility for the general administration of both of the plans (and is thus the only person empowered to deal with plan assets, except where it confers this power upon others by agreement).

XXXXX has retained XXXXX as the custodial trustee of both trusts. Under the master trust agreements, XXXXX performs all of the duties of a trustee. By virtue of the sub-agreements, XXXXX (or one of its delegates) is required to hold the plan assets and carry out "authorized instructions" in respect of the assets that it holds in trust for beneficiaries under the plans. Further, XXXXX has authority to take investment decisions in respect of assets of the trusts only if an investment manager ceases to act in respect of plan assets and is not replaced by XXXXX or XXXXX, or if XXXXX requests XXXXX to do so. According to discussions with the taxpayer representative, XXXXX has not acted as an investment manager to date.

For each plan, the trust arrangement is two-tiered: XXXXX has established master trusts ("MT") into which it pays the contributions required in relation to the individual plans (in the case of the salaried plan, the other employers pay contributions commensurate with coverage provided to their employees.) The funds in each of the MTs are invested in units of unitized trusts ("UT"), and the funds in the UTs are then assigned in differing portions to investment managers who have responsibility for managing the investment account ("IA") made up of specified plan assets and for making decisions to invest the funds in specific securities. In this scenario, the hourly and salaried employee plans each have a MT. In both cases, XXXXX contributions go into the MTs which then invest in UTs, which are vehicles or ways of pooling assets for investments. There are UTs for foreign and Canadian investments. On the books, MT purchases units of UT and UT issues units to MT. Therefore, on the books of the MT, there is an entry for the purchase of x units of xyz of the UT, and the supply is treated as an exempt financial service.

The types of investment for both the hourly and salaried plan are determined by XXXXX, and the contracts provided indicate the following types of investment: domestic equity, foreign equity, domestic fixed income, domestic short-term fixed income. Prior to XXXXX, all investment management agreements ("IMAs") were entered into between XXXXX and the individual investment managers.

XXXXX appointed XXXXX as the primary investment manager of the assets of the unitized trust funds (hourly and salaried), with power to delegate to sub-investment managers in its discretion, and XXXXX acknowledged that it is XXXXX agent and fiduciary with respect to the assets of the trust funds, and the unitized trust funds. XXXXX XXXXX requested the consent of all investment managers to its assignment of all investment management agreements to XXXXX, a non-resident, non-registrant. Such consent was granted, as evidenced by signature of the requests, with varying effective dates.

Under the terms of the plan documents, and in accordance with the terms of the XXXXX, both plans set out the mechanism for payment of the cost of administration of the pension plan and pension fund XXXXX XXXXX as being payment directly from XXXXX to the investment manager who has provided the services in respect of that trust with reimbursement directed to XXXXX from the relevant trust or payment directly out of the relevant trust upon the direction of XXXXX (or XXXXX following its appointment as principal investment manager). XXXXX XXXXX sets out that a "statement of changes in net assets" will include administration fees, including amounts paid to and on behalf of the administrator, inferring that the practice of having the administrator contract for supplies to a pension trust and be reimbursed by the trust was not unforeseen by the legislator. In this regard, you have indicated that in circumstances where there are not sufficient assets in the trusts, XXXXX is precluded from seeking reimbursement from the trusts under this Act, but that this did not occur during the periods relevant to the XXXXX rebate claims that formed the subject-matter of this request originally.

Hourly Plan Trust

Prior to Assignment of IMAs by XXXXX to XXXXX:

The hourly plan is funded through a trust fund created by a trust agreement between XXXXX and XXXXX in XXXXX, under which XXXXX holds and administers the trust fund as custodial trustee. XXXXX entered into a unitized trust agreement with XXXXX in respect of domestic pension investments, whereby XXXXX in its capacity as custodial trustee of the Trust, agreed to act on the authorized instructions of XXXXX or its investment managers with respect to the assets of the trusts. This plan is a single employer pension plan entitled to benefit from the administrative treatment set out in TIB-B032R.

XXXXX, as principal, has engaged the domestic investment managers, as its XXXXX XXXXX[.]

Pursuant to the terms of the IMAs relating to XXXXX, the investment managers agree that they XXXXX XXXXX[.]

Additionally, the IMAs set out, with respect to XXXXX XXXXX XXXXX[.] Following the Assignment of IMAs by XXXXX to XXXXX entered into an investment management agreement with XXXXX, appointing XXXXX as the primary investment manager of the assets of the unitized trust fund, with the power to delegate to sub-investment managers in its discretion, in accordance with the terms of the agreement. Under this agreement, XXXXX acts as XXXXX with respect to the assets of the trust. On the same day, XXXXX amended its hourly foreign unitized trust agreement with XXXXX, to the effect that, XXXXX in its capacity as custodial trustee of the plan trust agrees to act on the authorized instructions of XXXXX, XXXXX or its investment managers with respect to the assets of the trust. XXXXX has the same authority to act in respect of the trust assets as do the other investment managers, as well as additional powers, including the power to authorize XXXXX to disburse fees of other investment managers from the investment accounts and the power to re-allocate assets as between investment accounts.

XXXXX requested the consent of its investment managers to the assignment of its hourly investment management agreements to XXXXX ; all but one investment manager agreed to the assignment with XXXXX amended the document to read XXXXX as opposed to XXXXX[.]

Salaried Plan Trust

The plan documents were received XXXXX. According to the letter XXXXX, the salaried plan is comprised of terms substantially identical to those in the hourly plan document. However, this plan involves more than one employer and both employee and employer contribute to the plan whereas the hourly plan is a single employer plan funded by employer contributions only. The plan is registered and is not a multi-employer pension plan for the purposes of section 261.01 and would not be eligible to benefit from the administrative treatment set out in TIB-B032R. Notwithstanding these basic differences, given that XXXXX is the administrator of both plans, bears sole responsibility for their administration, and its obligations and treatment of supplies by investment managers to both trusts are similar, the analysis relating to the application of GST to transactions involving assets of the hourly plan trust will apply to the transactions of the salaried plan trust.

Pre-Assignment:

The investment managers invoice XXXXX directly for a taxable supply of investment management services.

Post-Assignment of Agreements from XXXXX to XXXXX:

The sub-investment managers invoice XXXXX directly and XXXXX, as primary investment manager, directs XXXXX to pay the sub-IM fees out of the trust fund assets (either as reimbursement to XXXXX or directly to the sub-investment manager). XXXXX, invoices XXXXX directly for its services as primary investment manager, XXXXX pays the invoice and directs XXXXX to reimburse XXXXX for this amount.

Ruling Requested

1. That the trusts for the XXXXX pension plans are not required to self-assess GST with respect to investment management services provided by offshore investment managers, both for the period XXXXX covered by the rebate claims which the XXXXX TSO has approved, and for subsequent periods;

2. That XXXXX is entitled to claim input tax credits (ITCs) with respect to investment management services that it has procured under agreements with investment managers that are registered for GST because XXXXX is the administrator of the XXXXX pension plans and has acquired the investment managers' services in relation to its commercial activities: (In fact, upon discussion with the taxpayer representative, where a taxpayer administers a pension plan, the legislation, agreements, and so forth, all indicate that the pension fund is the employers' responsibility and risk. In this context, XXXXX would like the CCRA to confirm the following three corollaries that it has presented:

Corollary #1: IMs in Canada — XXXXX pays GST on consideration and wants ITCs (investment advice as input to commercial activities of XXXXX;

#2 offshore IMs (GST remitted in error by XXXXX on behalf of XXXXX pension plan, subsequently returned by way of rebate) — XXXXX wants a ruling to the effect that XXXXX does not have to self-assess GST because of paragraph 217(a)(i) of the ETA (supply is excluded from definition of "Imported taxable supply" where it is acquired for consumption, use or supply exclusively in the course of commercial activities of the person"); and

#3 XXXXX wants ruling that it is entitled to full ITCs on GST paid to Canadian IMs)[,] and

3. That XXXXX is not required to charge GST on a notional "resupply" of the investment management services referred to in (b) to the Trusts for the XXXXX pension plans, because XXXXX itself has consumed those services; did not procure the services for the purpose of "resupply"; and had no contractual relationship with the Trustee to provide services to the Trustee or the trusts.

Ruling Given

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

1. Where XXXXX is the recipient of the supply of investment advice provided by the investment managers, XXXXX is required to self-assess GST with respect to investment management services provided by offshore investment managers under the provisions of Division IV of the ETA, both for the period XXXXX XXXXX and for subsequent periods.

2. XXXXX is not entitled to claim ITCs with respect to investment management services that it has procured under agreements with investment managers because these services are acquired by XXXXX solely for consumption by the registered pension trusts resident in Canada and are not acquired by XXXXX for use, consumption or supply in the course of its own commercial activities. Further, the supplies made by non-resident investment managers for direct consumption by the trusts, with XXXXX as recipient are "imported taxable supplies" pursuant to s. 217 and XXXXX must therefore self-assess GST/HST on these supplies; and

3. XXXXX is not required to charge GST on its supply of the investment management services referred to in (2) to the trusts for the XXXXX pension plans. XXXXX has entered into agreements with the investment managers in its capacity of administrator of the trusts. According to the plan and trust agreements provided, XXXXX in its role as administrator of the plans has the responsibility of providing administration and investment advice to the trusts and the XXXXX pension plan trusts have the obligation to either pay directly for supplies of investment management services or, where XXXXX has paid for such supplies to the trust, to reimburse XXXXX for the amounts so paid. The plan and trust documents clearly set out that the advice is for consumption by the trust, with respect to plan assets held by the trustee. XXXXX has not acquired the services for resupply to the trusts, rather the supply to XXXXX is clearly intended for direct consumption by the trusts.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

XXXXX and each of the trusts are persons under the definition of "person" found at subsection 123(1). Each of these persons are Canadian residents and "registrants" under the ETA. When contracting for the supply of services to the trusts, prior to XXXXX, as the person liable under the agreement to pay the consideration for the supply of investment management services, is the "recipient," under the terms of the ETA, of the investment management services provided to the trusts by its investment managers (both resident and non-resident). Under the terms of the agreements provided, these supplies are solely for consumption by the trusts which are held in Canada.

Section 165 imposes GST/HST on the "recipient" of a "taxable supply." The supplies from the investment managers to XXXXX are taxable supplies and XXXXX is liable for the GST/HST relating to these supplies. Subsection 169(1) sets out the general rule for ITCs. XXXXX is not entitled to claim input tax credits (ITCs) with respect to investment management services procured by virtue of agreements with investment managers because, XXXXX as the administrator of the XXXXX pension plans, has acquired the investment managers' services for use otherwise than in the course of XXXXX commercial activities. The terms of the investment agreements clearly indicate that the services provided by the investment manager are to be provided in relation to the trust assets, through direct communication with the custodial trustee, and that the parties intend that the services be for use by the trusts as set out in each of the IMAs, viz., XXXXX XXXXX XXXXX obtains these services in order to fulfil its responsibilities under XXXXX, which sets out that the administrator of a pension plan has a fiduciary duty relating to the administration and investment of the pension fund. For these reasons, it is our view that the services are acquired by XXXXX in its role as administrator of the trusts, solely for consumption by the trusts, in the hands of the custodial trustee, and not for use, consumption or supply by XXXXX in the course of XXXXX commercial activities.

Pursuant to paragraph 169(1)(c), XXXXX would be eligible for ITCs only with respect to supplies that it acquires "for consumption, use or supply in the course of commercial activities of the person [XXXXX]." For the purposes of section 169, XXXXX cannot make the case that it is entitled to ITCs in respect of the supply because XXXXX has confirmed to us that it does not acquire the services for resupply to the trusts and because the stated intention in the agreements structuring these supplies is their consumption by another person.

Additionally, section 218 imposes tax on the "recipient" of an "imported taxable supply." The supplies of investment management services from non-resident IMs are taxable supplies acquired for consumption in Canada by the trusts in the course of their activities and are "imported taxable supply" as defined at section 217. Accordingly, XXXXX must self-assess the GST/HST payable with respect to these supplies.

As you may be aware, exports of services may be zero-rated under certain circumstances set out in Part V of Schedule VI to the ETA; however, in this fact scenario, the terms of the agreements as between XXXXX and XXXXX clearly indicate that XXXXX acts as agent and fiduciary of XXXXX when entering into agreements for the supplies of the sub-IMs and when directing the Trustee to effect payment of IM fees to the sub-IMs from the Trust. Where neither the services, nor payment for the services is reflected in the supply by XXXXX to XXXXX, it is our view that the IMs have made a supply to XXXXX as administrator of the Trust. For this reason, following the assignment of agreements from XXXXX to XXXXX as agent and fiduciary of XXXXX, XXXXX remains the recipient of all supplies made by investment managers for consumption in Canada by the XXXXX pension plan trusts. Therefore, supplies by Canadian IMs will not be zero-rated as exports in such circumstances.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 613-952-9262.

Yours truly,

Sheena France
Financial Institutions Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

Please note that the following documents, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ces documents, bien qu'exacts au moment émis, peuvent ne pas représenter la position actuelle de l'Agence.

Dear XXXXX

This is in response to the letter XXXXX submitted by XXXXX on your behalf, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the sale of the condominium unit owned by you XXXXX XXXXX. This response is being addressed to you directly as per your e-mail request XXXXX.

All legislative references are to the Excise Tax Act (ETA) unless otherwise stated.

Statement of Facts

From the letter XXXXX, your subsequent e-mail XXXXX, and my discussions with the insurance adjustor who handled the claim, our understanding of the facts is as follows:

1. You were the owner of condominium unit XXXXX, and described as XXXXX.

2. The condominium complex was built in XXXXX. From the time you purchased the residential condominium unit XXXXX, the condominium unit was owner occupied.

3. XXXXX there was a fire on the top XXXXX floor of the residential condominium complex (the "RCC") in which the condominium unit was located. While the fire was confined to the XXXXX floor, there was extensive water damage to the building. All residents of the XXXXX units in the complex were required to vacate the premises.

4. An insurance claim was commenced in respect of the RCC, which resulted in the rebuilding of the complex. The RCC was rebuilt by a contractor under the supervision of the insurance company.

5. The XXXXX Corporation's building insurance paid for the costs of the repairs/reconstruction, estimated at approximately $XXXXX, plus GST. No ITCs have been claimed in respect of the reconstruction.

6. Although the exterior walls and foundation were not replaced, we understand that the RCC was essentially stripped back to its frame and that the following elements were replaced: the roof, all drywall, insulation, floor coverings, cabinetry, lighting fixtures, baseboard heaters, and appliances. We are further advised that a balcony and some windows and doors on the top XXXXX floor of the complex were replaced while the remaining windows and doors, as well as the elevator remained.

7. The RCC remained vacant for approximately XXXXX months, until the reconstruction was completed, and the Municipality XXXXX issued an occupancy permit in XXXXX. The RCC now resembles its condition prior to the fire, albeit with much newer material.

8. The condominium unit was not occupied after reconstruction was completed. The unit remained empty until it eventually sold XXXXX.

9. You indicated that in the summer of XXXXX you were looking to purchase a house with the intention of selling your principal residence at XXXXX. With this in mind, you did not move back into the condominium unit after reconstruction in order to keep it "clean and new for the sale".

10. Pursuant to an agreement of purchase and sale XXXXX, you sold the condominium unit. The sale was completed XXXXX.

11. You confirmed that the condominium unit was your personal residence and that it was never used for any other purpose either before or after the fire.

Ruling Requested

Whether the sale of the residential condominium unit XXXXX, is subject to the GST/HST.

Ruling Given

Based on the facts set out above, we rule that the sale XXXXX of the residential condominium unit XXXXX is an exempt supply under section 2 of Part I of Schedule V to the ETA.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

The sale of a residential complex (including a residential condominium unit) is generally taxable under section 165 unless specifically exempted under another provision of the Act. Part I of Schedule V contains a number of exempting provisions with respect to the supply of real property. Specifically, section 2 of Part I of Schedule V exempts the sale of a residential complex by a person other than a builder, unless the person has claimed an input tax credit in respect of the last acquisition of the complex or in respect of an improvement to the complex.

In this particular case, no ITCs have been claimed with respect to the reconstruction of the RCC. In addition, an individual who undertakes the construction of a residential complex for personal use is not a "builder" under the ETA since, under such circumstances, we would not consider the individual to have been involved in a business or adventure or concern in the nature of trade.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9212.

Yours truly,

Carmela Antonelli
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

Please note that the following documents, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ces documents, bien qu'exacts au moment émis, peuvent ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX, with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the Interchange Canada Agreement XXXXX (the participant) from XXXXX. (the sponsoring organization) to XXXXX (the host organization), a federal government department.

Statement of Facts

Our understanding of the facts, from your letter, is as follows:

The participant is an employee of the sponsoring organization, an independent consultancy group XXXXX that operates for profit by providing engineering, economics and environmental consulting services to clients worldwide.

The host organization, the sponsoring organization and the participant entered into an agreement that sets out the terms and conditions covering the assignment of the participant from the sponsoring organization to the host organization. The assignment is arranged under the auspices of the Government of Canada's Interchange Canada program. The assignment period took effect on XXXXX, and will terminate on XXXXX, with provision for extension subject to the agreement of all parties or to early termination with three months' notice in writing from any of the parties.

The participant will be performing the duties of XXXXX reporting to XXXXX.

The participant will continue to receive XXXXX salary and employer-paid benefits from the sponsoring organization. The host organization undertakes to reimburse the sponsoring organization the sum of $XXXXX per annum plus XXXXX% for employer-paid benefits, and to increase this amount by any increase that may become due to the participant during the period of assignment, under the sponsoring organization's salary system. The sponsoring organization will provide XXXXX% for employer-paid benefits to the participant with no reimbursement sought from the host organization. Other job related costs such as training and travel will be borne by the host organization. Travel entitlements shall be "traveller" provisions for non-public servants, in accordance with the Treasury Board Travel Directive, rates and allowances, and the Special Travel Authorities.

The participant is entitled to take annual leave and sick leave earned during the period of assignment in accordance with the Terms and Conditions of Employment or the Collective Agreement applicable toXXXXX in the sponsoring organization. Annual leave arrangements will be worked out in cooperation between the participant and XXXXX in light of operational requirements and personal needs. The host organization will cover any entitled vacation or sick days taken by the participant without asking for any reductions in the reimbursements provided to the sponsoring organization. A report of any leave taken by the participant will be provided on a quarterly basis by the host organization to the sponsoring organization.

If the participant is injured in the performance of XXXXX duties, XXXXX shall be compensated by the applicable Worker's Compensation Act to which the host organization is subject. If the participant is deemed liable to third parties as a result of an action in the performance of assigned duties, XXXXX shall be treated in the same way as employees of the host organization and the acts applicable to said employees shall apply to XXXXX. The participant shall also receive the same protection under the same conditions as employees of the host organization when travelling on duty.

The host organization will provide the sponsoring organization, upon request, with a written evaluation report on the performance of the participant on an annual basis or at the end of the assignment, if shorter.

The assignment shall be considered "employment" for the purposes of the Official Secrets Act of the Government of Canada and the participant will be bound by Section 4 of the Act regarding wrongful communication of information, etc. In addition, articles 49 and 50 of the Conflict of Interest and Post Employment Code for the Public Service, Government of Canada, shall apply to the participant and that declaration of actual or potential conflict of interest shall be made prior to the commencement of the assignment. Further, while on assignment, the participant will perform XXXXX duties so as to respect the principles and intent of the Conflict of Interest and Post Employment Code for the Public Service.

All material supplied to the participant will be returned to the host organization on termination of this assignment. It is agreed that all documents, reports and other productions made by the participant or anyone acting on XXXXX behalf, for the purpose of fulfilling or carrying out any duty related to the assignment are the property of Her Majesty in Right of Canada and shall not be released to any person other than representatives of the host organization, unless written permission is obtained from the Deputy Head or XXXXX delegate.

At the end of the assignment the participant will return to a position equivalent to XXXXX current one and at a rate of remuneration of not less than XXXXX salary plus any increases that may become due to XXXXX during the period of the agreement, according to the sponsoring organization's salary system unless other arrangements have been agreed to by all parties concerned. If the sponsoring organization is subject to workforce reduction during or at the end of this assignment, the participant will be accorded the same treatment and entitlements as all other sponsoring organization employees.

Ruling Requested

You would like to know if the host organization is required to pay the GST/HST on the reimbursement payments to the sponsoring organization under the Public Service Commission of Canada's Interchange Canada program.

Ruling Given

Based on the facts set out above, we rule that the host organization is not required to pay the GST/HST on the reimbursement payments to the sponsoring organization under the Public Service Commission of Canada's Interchange Canada program.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-4157.

Yours truly,

Trent MacDonald
Government Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

Please note that the following documents, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ces documents, bien qu'exacts au moment émis, peuvent ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX, (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transactions described below.

All legislative references are to the Excise Tax Act unless otherwise noted.

Statement of Facts

Our understanding of the facts and transactions is as follows:

1. The XXXXX (hereafter "the RM") is the registered owner of certain land (hereafter "the Land") that is legally described XXXXX. The Land is used, at least in part, as waste disposal grounds. The waste disposal grounds situated within The Land are described as a XXXXX.

2. XXXXX XXXXX allows a municipality to enter into agreements with a person, with an agency of the Government of XXXXX or the Government of Canada, or with another municipality, including a municipality in another province, to do with or on behalf of the municipality anything the municipality has the power to do within the municipality.

3. XXXXX provides that no person can operate a XXXXX (which includes a XXXXX waste disposal ground, which the Land includes) unless the person obtains a valid licence from the director for the development or is exempted under that Act or the regulations thereto from having to obtain a licence. XXXXX of that Act requires the director to either issue a licence, outlining the terms of the licence, or to refuse to issue a licence. XXXXX of that Act allows the Lieutenant Governor in Council to make regulations ancillary to the Act and those regulations have the force of law. XXXXX provides that no person is entitled to construct or operate a new XXXXX disposal ground (which is what we understand the disposal grounds in question to be) without first receiving an environmental licence in accordance with XXXXX.

4. The RM was issued a licence XXXXX under Licence No. XXXXX (hereafter the "Licence") in respect of the Land. XXXXX (hereafter M Ltd.) has not been issued a licence in respect of the Land and there is no evidence that the RM has assigned, or is entitled to assign, the rights the RM received under the Licence.

5. The RM and XXXXX had entered into an agreement XXXXX XXXXX. It is our understanding that that agreement has expired and a new agreement has been drawn up between the RM and M Ltd. The new agreement is set out in a document entitled, XXXXX (hereafter "the Agreement"). The Agreement you submitted has not been executed. The Agreement is between the RM and M Ltd.

6. Under the Agreement:

XXXXX

7. The RM is a "municipality" as defined in paragraph (a) of the definition of that term in subsection 123(1). The RM has not filed an election under section 211 in respect of the Land.

Rulings Requested

1. Is the RM making a taxable supply of the Land to M Ltd. under the Agreement?

2. Are the fees collected by M Ltd. from various users of the Land subject to the GST?

Rulings Given

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

1. There are two supplies being made under the Agreement - a supply of the Land made by the RM to M Ltd. and a supply of a service of operating the disposal grounds made by M Ltd. to the RM. The supply of the Land made by the RM to M Ltd. under the Agreement is exempt pursuant to section 25 of Part VI to Schedule V to the Excise Tax Act. The supply of services made by M Ltd. is a taxable supply.

2. The fees collected by M Ltd. from users of the Land are not subject to the GST. This supply of the right to deposit refuse at the Land is a supply made by the RM and is exempt under paragraph 20(i) of Part VI of Schedule V to the Excise Tax Act.

These rulings are subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by these rulings provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Explanation

Ruling 1

Under the Agreement, the supply of the Land made by the RM is inextricably linked to the provision by M Ltd. of a service of managing the Land on behalf of the RM. As such, under the Agreement, there is a supply made by the RM and at least one supply made by M Ltd.1 (Whether M Ltd is making a single supply or separate supplies under the Agreement has not been factually determined. However, such a determination is unnecessary for purposes of this ruling.)

With respect to the supply of Land made by the RM, section 25 of Part VI of Schedule V to the Act exempts most supplies of real property made by a public service body (which includes a municipality), other than the supplies set out in paragraphs (a) through (i) of that section. Subparagraph 25(f)(i) excludes from exemption a supply of real property made in the course of a business carried on by a municipality where the supply is made by way of lease and the period throughout which continuous possession or use of the property provided under the lease is for a period of less than one month. As this condition is not met (i.e. possession of the property is given to M Ltd. for a term of XXXXX years), the supply is not excluded from the exemption by that paragraph. Further, no other exclusions apply and accordingly, the RM's supply of the Land to M Ltd. is exempt.

Under the Agreement, M Ltd. is supplying one or more services to the RM of operating the waste disposal grounds situated on the Land. As set out in paragraphs 6(j) and (k) of the Statement of Facts, M Ltd is contractually required to carry out a number of activities in relation to the operation and management of the disposal grounds. These activities include the general operation of the disposal grounds, the receiving of residential and commercial garbage, the responsibility for costs of operating the facility, keeping the disposal grounds open for set hours and the hiring of any personnel to operate the grounds. There are no provisions to exempt the supply(ies) by M Ltd. and, as a GST/HST registrant, M Ltd. is required to collect from the RM the GST applicable to the supply(ies).

Ruling 2

As stated above, XXXXX provides that no person can operate a XXXXX development (which includes a XXXXX waste disposal ground, which the Land includes) unless the person obtains a valid licence from the director for the development or is exempted under that Act or the regulations thereto from having to obtain a licence. Further, XXXXX provides that no person is entitled to construct or operate a new XXXXX disposal ground (which is what we understand the disposal grounds in question to be) without first receiving an environmental licence in accordance with the XXXXX.

The RM has been issued the Licence by the Province XXXXX in respect of the Land. There is no evidence to indicate that the RM has assigned its rights under the Licence to M Ltd., nor is there any evidence that M Ltd. has been exempted under the XXXXX or the regulations thereto from having to obtain a licence. Further, there is nothing in the XXXXX or the regulations thereto to suggest that the RM is entitled to assign the rights and obligations it was granted under the Licence. As such, the supply of the right to deposit refuse at the Land is a supply made by the RM. This supply, made by a municipality, is exempt under paragraph 20(i) of Part VI of Schedule V to the Act. M Ltd. is not required to collect the GST on the fee collected from customers of the Land.

Should you have any further questions or require clarification pertaining to Ruling 1, please do not hesitate to contact me at (613) 954-4393. Should you have any further questions or require clarification pertaining to Ruling 2, please contact Elaine Bonnah at (613) 952-9590.

Yours truly,

Hugh Dorward
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

Please note that the following documents, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ces documents, bien qu'exacts au moment émis, peuvent ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transaction described below.

Statement of Facts

Our understanding of the facts is as follows:

•   XXXXX and XXXXX own two companies: XXXXX (Agent A) and XXXXX (Agent B) XXXXX owns XXXXX% of each company and XXXXX owns XXXXX% of each.

•   Agent A and Agent B are both licensed to carry on XXXXX the business of a life insurance agency.

•   There is no contract between Agent A and Agent B. Agent B performs the following for Agent A:

•   Preparation and producing of all insurance and investment proposals for clients.

•   Price comparisons, yield comparisons and unit price comparisons for clients.

•   Completion of all head office paperwork for insurance and segregated fund applications.

•   Ordering and follow-up of doctors' and specialists' reports required for medical underwriting.

•   Ordering and follow-up of all financial reports required for financial underwriting.

•   Daily update of all underwriting requirements.

•   Communication between head office and Agent A regarding the progress of all contracts not yet issued.

•   Completion of all paperwork for pensions, RRIFs, LIFs and RRSPs required by CCRA and banks and any and all financial institutions.

•   Fund transfers requested by client and follow-up with head office on any and all such money transfers.

•   Daily meeting with Agent A on status of all pending underwriting and investment policies.

•   XXXXX (the Insurer) has entered into a contract with Agent A to XXXXX[.]

•   Agent A is compensated by the Insurer. Compensation includes commission, bonuses and allowances subject to criteria set out in the contract.

•   Agent A compensates Agent B for the services provided to it.

Ruling Requested

Is the amount paid by Agent A to Agent B subject to GST?

Ruling Given

Based on the facts set out above, we rule that the amount paid by Agent A to Agent B is subject to GST.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act (ETA), or to our interpretative policy; and that you have fully described all necessary facts for which you requested a ruling.

Explanation

Generally, the supply of a financial service is exempt. Section 1 of Part VII of Schedule V to the ETA exempts from the GST/HST a supply of a financial service that does not fall under the zero-rating provisions in Part IX of Schedule VI [which pertains to services provided to a non-resident]. The term "financial service" is defined in subsection 123(1) of the ETA to generally mean services relating to transactions of money, financial instruments, deposit-taking accounts, etc., as well as certain services provided by insurance adjusters, tax discounters, agents, brokers and salespersons. Such financial services are exempt from the GST/HST regardless of whether they are supplied by financial institutions or by other persons.

An insurance policy is defined as a financial instrument in subsection 123(1) of the ETA.

Paragraph (l) of the definition of financial service found in subsection 123(1) of the ETA provides that a financial service includes "the agreeing to provide or the arranging for, a service referred to in any of paragraphs (a) to (i)." Paragraph (d) of the definition defines a financial service as "the issue, granting ... of a financial instrument". Therefore, the service of arranging for the issuance of an insurance policy will qualify as a financial service.

The term "arranging for" is not defined in the ETA. It is the position of the CCRA that this term refers generally to the activities of an intermediary (for example, an insurance broker) of bringing together in an active manner two or more parties for the provision of a financial service.

The term "arranging for" service should go beyond the activities of merely "referring" one party to another party (for the provision of a financial service). In general, the intermediary would be expected to expend time and effort to assist both parties whenever necessary for the eventual success of the provision of the financial service by one party to the other party. An "arranging for" service does not mean the service of "recommending", "advertising" or "marketing" alone.

Therefore, to qualify as an arranging for service, the provider of the service must be actively involved in bringing together the two parties for the provision of a financial service as described above. There must be a clear nexus between the activities of the intermediary and the supply of the financial service. Whether or not a service will qualify as a service of arranging for the provision of a mortgage is a question of fact. It will depend on the amount and the extent of the supplier's activities in providing the service.

As outlined in GST/HST policy statement P-239 - Meaning of the Term "Arranging for" as Provided in the Definition of "Financial Service", to qualify as a service of "arranging for" the supply of a financial service, each of the following elements should be present:

•   the intermediary will help either the supplier or the recipient or both, in the supply of a financial service;

•   the supplier and/or the recipient count on one or more intermediaries for assistance in the course of a supply of a financial service; and

•   the intermediary is directly involved in the process of the provision of a financial service and will, therefore, expend the time and effort necessary with the intent to effect a supply of a service described in paragraphs (a) to (i) of the definition of financial service.

Therefore, in determining if an intermediary's service qualifies as an "arranging for" service, it is necessary to consider all the facts surrounding the transaction, including the degree of involvement of the intermediary in the supply of the financial service, and where applicable, the normal activities of an intermediary in the industry.

In this case, Agent A is acting as the intermediary in arranging for the supply of the financial service from the supplier (the Insurer) to the recipient (the insured). Agent B's role is to provide administrative services to Agent A to enable Agent A to fulfill its responsibilities under its contract with the Insurer. Administrative services are not financial services. They are subject to tax under subsection 165(1) of the ETA.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the ETA, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

For your reference and assistance, enclosed is a copy of GST/HST Policy Statement P-239, Meaning of the Term "Arranging For" as Provided in the Definition of "Financial Service".

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9577.

Yours truly,

Marilena Guerra
Senior Rulings Officer
Financial Institutions Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

XXXXX
XXXXX
XXXXX

Please note that the following documents, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ces documents, bien qu'exacts au moment émis, peuvent ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX concerning the application ruling previously provided to you in respect of services provided by XXXXX (the Corporation). You have provided further clarification of the activities of the Corporation and you have requested a review of our letter XXXXX in which we ruled that the services provided by the Corporation are taxable services pursuant to subsection 165(1) of the Excise Tax Act (ETA).

We will repeat our understanding of the facts as stated in your letter XXXXX. They are as follows:

1. The Corporation is a corporation registered pursuant to the Excise Tax Act.

2. XXXXX (Agent) is a licensed insurance agency in certain provinces of Canada including XXXXX.

3. The XXXXX (Company) is a corporation authorized to write life insurance risks in all provinces of Canada.

4. The Corporation has a technology platform (the Platform) which permits the electronic collection of mortgage loan application and underwriting information.

5. Mortgage brokers use the Platform to complete mortgage loan applications.

6. The Corporation, the Company and the Agent have entered into an agreement to collaborate and arrange for the distribution of mortgage life group creditor insurance policies to mortgage brokers and certificates of group creditor insurance to qualified borrowers. (A copy of this agreement was previously provided.)

7. The Corporation's responsibilities are detailed in XXXXX the agreement as follows:

8. XXXXX

In consideration for the services provided, the Corporation is entitled to a monthly fee calculated in accordance with XXXXX the agreement.

Your Position

As outlined in your letter, it is your position that only a small portion of the fee received by the Corporation may be attributed to the right to use software and that the greater part of the fee is attributable to the exempt service of "arranging for" the issuance of an insurance policy and by virtue of section 139 of the ETA, the entire fee should be exempt.

You state that the Corporation is the entity that has both the distribution structure (i.e., the relationship with the mortgage brokers who are ultimately the group policy holders) and the delivery system (i.e., the Platform). Without the Corporation, the Company would not be able to offer the program. The Corporation is not simply providing a software platform to assist in the signing up of the mortgage brokers, it is actually providing the mortgage brokers who are being signed up. The Corporation has established a relationship with the mortgage brokers and controls access to them.

Our Comments

There are three parties to the agreement in question. They are the Company, the Agent and the Corporation. XXXXX[.]

XXXXX of the Agreement outline the Corporation's, the Agent's and the Company's obligations respectively. The Corporation's responsibilities are noted in the Statement of Facts above.

The main transaction is the issuing of a group insurance policy (the Life Policy) to the Policyholders, i.e., the mortgage brokers. The issuer is the Company. The mortgage brokers promote the Mortgage Protection Plan to eligible borrowers and those borrowers who are accepted by the Company receive a certificate of insurance. The Agent acts as an intermediary between the Company and the mortgage brokers in the placement of the Life Policies.

GST/HST policy statement P-239 - Meaning of the Term "Arranging for" as Provided in the Definition of "Financial Service" describes the elements that should be present for a service to qualify as a service of "arranging for" the supply of a financial service. The elements that should be present are:

•   the intermediary will help either the supplier or the recipient or both, in the supply of a financial service,

•   the supplier and/or recipient count on one or more intermediaries for assistance in the course of a supply of a financial service, and

•   the intermediary is directly involved in the process of the provision of a financial service and will therefore, expend the time and effort necessary with the intent to effect a supply of a service described in paragraphs (a) to (i) of the definition of financial service.

The policy also provides examples of what is and what is not considered "arranging for". It notes that a service acquired by an intermediary in providing an "arranging for" service will not in itself qualify as an "arranging for" service as it is only an input to the intermediary.

It is mortgage brokers and the Agent who use the Corporation's system and the Corporation's responsibilities as detailed in the agreement relate foremost to its relationship with the Agent. The Corporation's services as detailed in the agreement are provided to the Agent. Although the Corporation receives compensation from the Company, it does not directly provide any services to the Company.

Based on the above, we confirm our opinion that the services provided by the Corporation do not fall within paragraph (l) of the definition of financial service in subsection 123(1) of the ETA. The services provided by the Corporation are taxable services pursuant to subsection 165(1) of the ETA.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9577.

Yours truly,

Marilena Guerra
Financial Institutions Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

Please note that the following documents, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ces documents, bien qu'exacts au moment émis, peuvent ne pas représenter la position actuelle de l'Agence.

Dear XXXXX

This is in reply to your letter XXXXX and further to our telephone conversations XXXXX concerning the application of the Goods and Services Tax ("GST") to the subject sale. We apologize for the delay in responding.

All references are to the Excise Tax Act ("ETA") unless otherwise indicated.

Statement of Facts

1. The Unit is a residential condominium unit ("RCU").

2. XXXXX purchased the Unit XXXXX for use as his primary place of residence. The Unit had been previously occupied.

3. To finance the purchase of the Unit, XXXXX borrowed money from XXXXX (the "Creditor") to whom he granted a mortgage in respect of the Unit.

4. In XXXXX a fire destroyed the top XXXXX floor of the residential condominium complex (the "RCC") containing the Unit.

5. During the three weeks leading up to the fire, XXXXX had leased the Unit on a long-term basis to tenants who used it as a place of residence.

6. While the fire was confined to the XXXXX level of the RCC, the RCUs on the XXXXX levels were severely water-damaged. As a result, the residents of the XXXXX RCUs comprising the RCC were required to vacate the premises.

7. An insurance claim was commenced in respect of the RCC, which resulted in the rebuilding of the complex. The RCC was rebuilt by a contractor under the supervision of the insurance company.

8. The insurance claim covered the cost of the rebuilding process, which is estimated at approximately $XXXXX.

9. Although the exterior walls and foundation remained in place, we understand that the RCC was essentially stripped back to its frame and the following elements replaced: the roof, all drywall, insulation, floor coverings, cabinetry, lighting fixtures, appliances, some floors, a balcony, and some of the interior supporting walls separating the RCUs. We are further advised that some windows and doors on the top floor of the complex were replaced while the remaining windows and doors, as well as the elevator, remained.

10. The RCC remained vacant for approximately XXXXX until the rebuilding process was complete.

11. Before completion of the rebuilding process, XXXXX defaulted on his mortgage payments. To recover the outstanding amount of the mortgage, the Creditor, XXXXX commenced an action XXXXX to cause a judicial sale of the Unit.

12. The court directed the Creditor to conduct a sale of the Unit, subject to the court's approval. In the interim, XXXXX retained his ownership interest in the Unit and had the ability to redeem the Unit until the time of sale.

13. XXXXX declared personal bankruptcy XXXXX (the "Trustees") was named as trustee of the bankrupt. A receiver did not have authority in respect of the Unit.

14. XXXXX issued an occupancy permit relating to the RCC in XXXXX[.] The RCC now resembles its condition prior to the fire, albeit with much new material.

15. The sale of the Unit was approved by the court. XXXXX subsequently completed the sale XXXXX XXXXX remained the registered owner of the Unit until that time.

16. The court directed a part of the proceeds from the sale to the Creditor to extinguish the amount owing under the mortgage.

17. The Unit was not leased or otherwise occupied subsequent to the rebuilding process and prior to its sale.

18. None of XXXXX, the Trustees, nor the Creditor claimed input tax credits in respect of the Unit.

Ruling Requested

The sale of the Unit is exempt from the GST.

Ruling Given

The sale of the Unit is exempt from the GST.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the ETA or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Should you have any further questions or require clarification on the above or any other GST or Harmonized Sales Tax matter, please do not hesitate to contact me at (613) 952-8816.

Yours Truly

Paul Hawtin
Rulings Officer
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate