CRA indicates that agreeing to purchase a new apartment for the purpose of headleasing it renders the purchaser a builder for GST purposes

S. (b)(ii) of the ETA definition of “builder” provides that, in the case of a corporation, that it is a builder of a residential complex where the person acquires an interest in the complex at a time when the complex is under construction or substantial renovation – but para. (h) of the definition excludes from a para. (b) builder a person whose only interest in the residential complex is a right to purchase any interest in the complex from a builder of the complex.

However, a corporation is a builder under para. (f) if inter alia it acquires the complex (before its occupancy by an individual) for the primary purpose of selling the complex (or parts thereof) or leasing the complex (or parts thereof) to persons other than to individuals who will use the complex (or parts thereof) for their personal use.

In response to a query as to the relationship between paras. (b) and (d) where a corporation acquired one or more pre-build residential complexes to be leased it to a person for personal use of individuals, CRA indicated that “a corporation that is a purchaser-landlord who acquires a right to purchase an apartment building that is under construction for the primary purpose of leasing the completed apartment building to another person under a head lease (or for the primary purpose of leasing the completed apartment units to tenants) would not be a paragraph (b) builder because of the exclusion in paragraph (h).” However, it would be a para. (d) builder if it was not acquiring its rights for the primary purpose of leasing the apartment units to tenants for their personal use, for example, if it acquired a right to purchase the apartment building (before any individual occupancy) for the primary purpose of leasing the apartment building to another person under a head lease.

Neal Armstrong. Summary of 25 March 2021 CBA Commodity Taxes Roundtable, Q.16 under ETA s. 123(1) – builder – para. (d).