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, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 84781
Dear [Client]:
Subject: GST/HST INTERPRETATION
Continued eligibility for municipal designation
This is in response to a letter submitted by your representative dated [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to […] ([…][Organization A]). This also refers to telephone conversations that you have had with our office. More specifically, the request was to confirm that the long-term residential accommodation supplied by [Organization A] qualifies as municipal services for purposes of the municipal designation. We apologize for the delay in responding.
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island (effective April 1, 2013) and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.
Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
We understand the following:
1. [Organization A] owns and operates a [#] unit co-operative housing project in […][City 1, Province 1].
2. [Organization A] was designated as a municipality in respect of residential units in a housing project that are supplied on a rent-geared-to-income (“RGI”) basis. The designation was effective [mm/dd/yyyy].
3. The housing development was built with funding from the […] ([…][Crown Corporation]). […]
4. […].
5. The agreement with [the] [Crown Corporation] states that lower income tenants are charged rent at […]% of household income. Higher income tenants are charged a surcharge on the rent and that surcharge is used to fund the subsidy provided to the lower income tenants.
6. Incoming tenants must be below an income limit established on a yearly basis by the [Crown Corporation]. […].
7. You have also stated that currently more than […] of the units are receiving the rental subsidy.
INTERPRETATION REQUESTED
You would like to know if [Organization A] continues to be eligible for municipal designation.
INTERPRETATION GIVEN
Once designated as a municipality, an organization is able to claim the municipal public service body rebate (PSB rebate) for GST/HST paid or payable on its purchases or on expenses incurred to provide the RGI housing. This rebate is available only to the extent that the property or services acquired are intended for consumption, use or supply in the course of the activities for which the organization has been designated.
An organization designated as a municipality will be eligible to claim the PSB rebate if it continues to meet all of the four eligibility criteria listed below:
1. the organization is a charity, a cooperative housing corporation, a non-profit organization or a public institution;
2. the organization supplies long-term residential accommodation within a program to provide housing to low to moderate-income households;
3. more than 10% of the housing units in a particular housing project are provided on a RGI basis; and
4. the organization receives funding from a government or municipality to assist it in providing the accommodation within a program to provide housing to low to moderate-income households.
Eligible Organization
For purposes of the municipal designation "cooperative housing corporation" means a corporation that was incorporated, by or under a law of Canada or a province providing for the establishment of the corporation or respecting the establishment of cooperative corporations, for the purpose of making supplies by way of lease, licence or similar arrangement of residential units to its members for the purpose of their occupancy as places of residence for individuals where
1. the statute by or under which it was incorporated, its charter, articles of association or by-laws or its contracts with its members require that the activities of the corporation be engaged in at or near cost after providing for reasonable reserves and hold forth the prospect that surplus funds arising from those activities will be distributed among its members in proportion to patronage,
2. none of its members (except other cooperative corporations) have more than one vote in the conduct of the affairs of the corporation, and
3. at least 90% of its members are individuals or other cooperative corporations and at least 90% of its shares are held by such persons.
Our records indicate that [Organization A] was incorporated […] on [mm/dd/yyyy]. This demonstrates that [Organization A] meets the first criterion listed above.
Long-term Residential Accommodation
To be eligible for designation as a municipality, an organization must supply long-term residential accommodation within a program to provide housing to low to moderate-income households.
The CRA considers the supply of long-term residential accommodation to mean the rental of self-contained housing units for periods of one month or more. A self-contained housing unit is considered to be private living quarters which include cooking facilities and a bathroom.
A supply of accommodation is not considered to be eligible accommodation if it includes, or must be supplied with other elements such as meals, health care services, personal care services, laundry services, or housecleaning as such supplies are considered to be provided in a program that is broader than a program to provide housing to low to moderate-income households. This would be the case whether the other elements are supplied directly by the housing provider or by a third party.
We understand that the units supplied by [Organization A] are rented for periods longer than one month and that there are no other elements such as personal care supplied to the tenants. The agreement between [Organization A] and [the] [Crown Corporation] which stipulates that rent for lower income households will be […] demonstrates that the accommodation is provided within a program to provide housing to low to moderate income households.
More than 10% of the Units Supplied
The organization must demonstrate that rent for the RGI units is calculated in relation to the tenant household's income and/or that there is an income-based test for occupancy in a RGI unit. More than 10% of the housing units in a particular housing project must be provided on a RGI basis for the organization to be designated.
[…]
Government Funding
In order to remain designated as a municipality, an organization must receive government funding to subsidize the provision of RGI housing to individual tenants. Government funding may be provided by a municipality, by a province or territory, or by the federal government. Acceptable types of funding include on-going subsidies that make up the difference between the organization's costs to operate the housing units and the RGI paid by the tenants to the organization, and capital funding.
The funding received must be linked to the organization's provision of RGI housing within a program to provide housing to low to moderate-income households. An example of capital funding would be where an organization is required to provide RGI housing for twelve years pursuant to the funding agreement. If the organization does not respect this condition, it will be required to repay the capital funding to the funding organization. Such funding would be considered to be linked to the provision of RGI housing.
If an ongoing government subsidy in respect of the provision of RGI housing ceases, the housing provider no longer meets the government funding criterion. For example, this may be the case where the term of an operating agreement expires and is not renewed, or where the funding ceases because the housing provider no longer meets the necessary terms and conditions for funding.
Where an organization receives capital funding, it will cease to meet the government funding criterion when the requirement to provide funded RGI housing ceases. For example, an organization receives capital funding and is required to provide RGI housing for 15 years. After the 15 years, the organization will no longer meet the criterion to be designated as the housing will not be considered to be funded by a government or a municipality.
[…]. As noted above, when the government funding of an organization ends that organization will no longer meet the government funding criterion and will no longer be making eligible supplies of long-term accommodations for purposes of the rebate.
For more information on the eligibility criteria for the municipal designation, see our publication GI-124 entitled “Municipal Designation of Organizations Providing Rent Geared to Income Housing” at http://www.cra-arc.gc.ca/E/pub/gi/gi-124/README.html.
[Organization A] was designated as a municipality in respect of its residential units in a housing project that are supplied to tenants on a rent-geared-to-income basis. [Organization A] will be eligible to claim the PSB rebate in respect of its designated activities as long as it continues to meet the four eligibility criteria discussed above.
[Organization A] should advise of any changes that may affect its status as a municipality. This would include when [Organization A] […] is no longer receiving government funding. When [Organization A] no longer qualifies for designation as a municipality, it will no longer be entitled to a municipal rebate regardless of whether its designation as a municipality has been revoked.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4395. 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,
Art Blommesteijn
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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