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.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 124973
Business Number: [...]
June 7, 2011
Dear [Client]:
Subject:
GST/HST RULING
Entrance fees on golf club memberships
Thank you for your fax of May 17, 2010, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to entrance fees for memberships in [...] (the Club). We apologize for the delay in responding to your enquiry.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
Based on the information you provided and on the Club's Web site [...], we understand:
1. The Club is a [...] golf club located in [...] [City 1, Participating Province X]. You have provided a copy of [...] (the Application Form) and the Club's Bylaws.
2. An applicant for membership in the Club as a [...] Member is required to submit the completed Application Form, along with letters of reference [...] and a cheque for [...] the entrance fee.
3. By signing the Application Form, the applicant agrees to the following:
[...] if accepted [...] to abide by all the Bylaws and Regulations of the Club [...]
4. Section [...] of the Club's Bylaws indicates that "Any person [...] may apply to become a Member of the Club [...] Every Member is obligated to:
1. [...]
2. Observe all rules and regulations [...]
3. Pay the entrance fees and all dues [...]
4. [...]
5. Section [...] of the Club's Bylaws sets out the procedure for the election of a Member as follows: [...]
6. Section [...] of the Club's By-Laws indicates that the qualifications of a [...] Member are any person [...] whose application to become a [...] Member has been approved by [...]
The rights of a [...] Member are full use of the Club facilities and the rights to [...] play golf without restriction, subject to the rules and regulations [...].
7. Section [...] of the Club's By-Laws indicates that the qualifications of a [...] Member are any person [...] whose application to become a [...] Member has been approved by [...]
The rights of a [...] Member are full use of the Club facilities and the rights to [...] play golf subject to certain [...] restrictions, and subject to the rules and regulations [...].
8. Section [...] of the Club's By-Laws indicates that the qualifications of a [...] Member are any person [...] whose application has been approved by [...]. The rights of a [...] Member are all Clubhouse privileges and the right to play golf [...]
9. Section [...] of the Club's By-Laws indicates that a [...] Member will be placed on the Wait List [...]
10. Section [...] of the Club's By-Laws indicates that [...]
11. Section [...] of the Club's By-Laws indicates that the qualifications of a [...] Member are any person who [...] has been approved by [...]. The rights of a [...] Member are full use of the Club facilities [...]. Playing privileges of [...] Members will be determined by [...]
12. Section [...] of the Club's By-Laws indicates that the qualifications of a [...] Member are any person who has [...] been approved by [...]
13. Section [...] of the Club's By-Laws indicates that the qualifications of a [...] Member are any person who [...] has been approved by [...] The rights of a [...] Member are playing privileges [...] as determined by [...].
14. A different application form is completed for [...] Membership, a copy of which you provided.
15. By signing this form, the applicant indicates: [...]
16. Section [...] of the Club's Bylaws addresses entrance fees and annual dues: [...]
17. The Club's Web site indicates that entrance fees for [...] Membership are $[...] plus HST or, under the [...]-year installment plan, $[...] plus HST on application and [...] annual payments of $[...] plus HST. The entrance fees for [...] Membership are $[...] plus HST or, under the [...]-year installment plan, $[...] plus HST on application and [...] annual payments of $ [...] plus HST. The entrance fee for [...] Membership is $[...] plus HST. The entrance fee for [...] Membership is $[...] plus HST [...] or, under the [...]-year installment plan, $[...] plus HST per year. [...]
18. The Club's Web site also sets out the monthly dues for each membership classification; the monthly dues are higher for classifications with more golf privileges. [...].
19. Section [...] of the By-laws indicates that any Member may make application to [...] transfer to [...] any current membership classification. [...]
20. Section [...] of the Club's Bylaws addresses entrance fees and annual dues: [...]
21. Section [...] of the Club's Bylaws outlines the procedures concerning Member suspensions and expulsions. Section [...] states [...].
22. Section [...] of the Club Bylaws states [...]
23. Section [...] of the Club Bylaws applies to Members that resign their membership in the Club. [...]
24. Section [...] of the Club's Bylaws deals with Member's Accounts: [...]
25. You also provided [...] [information on membership rules]
Ruling Requested
You would like to know whether the GST or the HST applies to entrance fees for membership in the Club that were paid before July 1, 2010.
Ruling Given
Based on the facts set out above, we rule that any entrance fees that were paid before July 2010 are subject to the GST. For entrance fees paid by installment, any installments that became due before July 2010, or that were paid without having become due before July 2010, will be subject to GST. Any installments that become due on or after July 1, 2010, or that are paid on or after July 1, 2010 without having become due, will be subject to HST.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
A membership, as defined in subsection 123(1) of the ETA, includes a right granted by a particular person that entitles another person to services that are provided by, or to the use of facilities that are operated by, the particular person and that are not available, or are not available to the same extent or for the same fee or charge, to persons to whom such a right has not been granted, and also includes such a right that is conditional on the acquisition or ownership of a share, bond, debenture or other security.
Subsection 165(2) of the ETA requires every recipient of a taxable supply made in a participating province to pay the provincial part of the HST on the value of the consideration for the supply.
The transitional rules for the HST in [Participating Province X] are set out in the New Harmonized Value.added Tax System Regulations. Under these rules, the HST applies to any consideration that becomes due, or that is paid without having become due, on or after
May 1, 2010, for a supply of a membership in a club, organization or association to the extent that the consideration relates to any part of a membership period on or after July 1, 2010 (unless 90% or more of the membership period is before July 2010, or the membership is for the lifetime of an individual).
These rules do not apply to a supply of a right to acquire a membership in a club, an organization or an association. Instead, HST applies to the supply of a right to acquire a membership if the consideration for the supply becomes due, or is paid without having become due, on or after July 1, 2010.
Based on the information provided, the entrance fee charged by the Club is not consideration for a supply of a membership, lifetime or otherwise. Rather, the entrance fee is consideration for a right to acquire a membership, and therefore, the transitional rules for supplies of intangible personal property will apply. Any entrance fees that became due before July 2010, or were paid before July 2010 without having become due, are subject to GST.
For entrance fees that are paid by installment, any installments that became due before July 2010, or that were paid before July 2010 without having become due, are subject to GST. Any installments that become due on or after July 1, 2010, or that are paid on or after July 1, 2010 without having become due, are subject to HST.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-7909. 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,
Jacqueline Russell, CGA
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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