18 November 2005 GST/HST Ruling 62401 - Internet Sales to Indians

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

Dear XXXXX:

Thank you for your letter XXXXX submitted by fax to our GST/HST Rulings Centre XXXXX concerning the availability of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) new housing rebate. Your request was transferred to the Real Property Unit of the Excise and GST/HST Rulings Directorate for response.

All legislative references are to the Excise Tax Act (ETA) and the regulations therein, unless otherwise specified.

Statement of Facts

Based on the information provided in your letter XXXXX and our subsequent telephone conversation XXXXX, our understanding of the facts is as follows:

1. On XXXXX (the "Purchaser") entered into a contract of purchase and sale (the "Agreement["]) for the purchase of a townhouse, XXXXX (the "Property") in XXXXX for $XXXXX (exclusive of GST), to be constructed at XXXXX.

2. The completion date for the transaction was expected to be on or about XXXXX. The townhouse was to be the Purchaser's primary place residence. The purpose of the townhouse purchase was to downsize from the Purchaser's then current residence, which had become too much XXXXX to manage XXXXX.

3. The Agreement provides for the assignment of the Purchaser's interest in the contract only with the written consent of the Vendor. However, if the Purchaser's interest is assigned, the Purchaser is not relieved of the obligations under the Agreement and continues to remain liable to perform all obligations of the Purchaser under the Agreement.

4. The Purchaser passed away XXXXX before the completion of the townhouse, and before XXXXX could occupy the townhouse as XXXXX place of residence.

5. The Estate of XXXXX (the "Estate") assumed the liabilities and obligations of the Purchaser under the Agreement and completed the purchase transaction on XXXXX. The Estate paid GST to the builder on the purchase of the townhouse.

6. It is the intention of the Estate to sell the Property to a third party and divide the proceeds between the beneficiaries. No individual has or will occupy the Property as a place of residence or lodging before the Estate sells the Property.

7. The Executrix for the Estate has confirmed that the house has remained vacant and is currently listed for sale by the Estate.

Ruling Requested

You are requesting the following rulings:

1. The Estate will be eligible to claim a new housing rebate in respect of the Agreement for the purchase of the residential complex from the builder entered into by the deceased.

2. The sale of the residential complex by the Estate is exempt of GST/HST.

Ruling Given

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

1. The Estate is entitled to claim a GST/HST new housing rebate under section 254 of the ETA provided the Property, which is a single unit residential complex for GST/HST purposes, is first occupied as a place of residence by a relation ^[xvii]footnote 1 of the deceased, as required under clause 254(2)(g)(i)(A), or the Estate makes an exempt supply by way of sale of the complex, as required under subparagraph 254(2)(g)(ii)).

2. The sale of the residential complex by the Estate is an exempt supply of real property under section 2 of Part I of Schedule V to the ETA.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by this ruling provided that none of the above issues is 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

The term "residential complex" is defined in subsection 123(1) to include that part of a building containing a residential unit that is, or is intended to be, a separately owned property (e.g., a semi-detached house, rowhouse unit, residential condominium unit) together with certain related land, appurtenances and common areas.

Subsection 254(2) provides for a partial rebate of the GST/HST paid by an individual acquiring a new house from a builder for use as their primary place of residence. The conditions that must be met in order to be entitled to claim a new housing rebate are set out in paragraphs (a) to (g) of subsection 254(2).

Paragraph 254(2)(a) requires that the builder of a single unit residential complex make a taxable supply by way of sale of the complex to the particular individual. By way of Agreement XXXXX, the builder entered into a contract with the Purchaser for the taxable sale of a new single unit residential complex. As such, this condition is met.

Paragraph 254(2)(b) provides that at the time the particular individual becomes liable under the agreement of purchase and sale, the individual must be acquiring the complex as the primary place of residence of the particular individual or a relation. In this case, the Purchaser acquired the complex in order to downsize from XXXXX then current residence. It was XXXXX intention to reside in the complex as XXXXX primary place of residence. As a result, this condition is also met.

Paragraph 254(2)(c) requires that the total consideration payable for the supply of the complex is less than $450,000. In this case, the purchase price under the Agreement for the sale of the complex is $XXXXX. Therefore, this condition is met.

Paragraph 254(2)(d) requires that the particular individual has paid GST/HST in respect of the acquisition of the complex. Based on the information provided, the Estate paid the balance of the purchase price and GST to the builder on the date of closing XXXXX.

Paragraph 254(2)(e) provides that ownership of the complex is transferred to the particular individual after the construction is substantially completed. In addition, paragraph 254(2)(f) requires that after the construction is substantially complete, the complex is not occupied by any individual as a place of residence or lodging before possession is given to the particular individual under the purchase agreement. The information provided in this case indicates that on the date of closing, ownership of the complex was transferred to the Estate. The complex has remained unoccupied at all times.

Under subparagraph 254(2)(g)(i), the first individual to occupy the complex as a place of residence after construction is substantially complete must be the particular individual, or a relation of the particular individual. Alternatively, under subparagraph 254(2)(g)(ii), the particular individual may be eligible for the rebate if the particular individual makes an exempt sale of the complex and ownership is transferred to the recipient before the complex is occupied by any individual as a place of residence or lodging.

Subject to certain exceptions, section 267 provides that Part IX of the ETA applies as though the estate of a deceased individual were the individual and the individual had not died. While the ETA recognizes an individual, the estate of a deceased individual and the personal representative of the estate to be separate persons, section 267 provides that the estate of a deceased individual has the same attributes that the individual possessed. As a result, where the individual paid tax, the estate will be considered to have paid tax, and where the individual is entitled to claim a rebate, the estate will be entitled to claim a rebate.

Based on the above, the conditions in paragraphs 254(2)(a) to (f) are met. However, paragraph 254(2)(g) has not yet been met. As a result, the Estate will not be eligible for the GST/HST new housing rebate under subsection 254(2) until such time as the complex is occupied as required under subparagraph 254(2)(g)(i), or the Estate makes an exempt supply by way of sale of the complex as required under subparagraph 254(2)(g)(ii).

Section 2 of Part I of Schedule V to the ETA provides an exemption for the sale of a residential complex by a person who is not a builder of the complex, unless the person claimed an input tax credit in respect of the last acquisition by the person of the complex, or in respect of an improvement to the complex. XXXXX was not a builder of the complex as defined in subsection 123(1). Pursuant to section 267, the Estate is also not considered to be a builder of the complex. The Estate has not claimed any ITCs in respect of the complex. As a result, the sale of the complex by the Estate is an exempt supply under section 2 of Part I of Schedule V.

Under subsection 254(3), there is a two-year time limit for applying for the new housing rebate. A rebate shall not be paid unless the individual files an application for the rebate within two years after the day ownership of the complex is transferred to the individual. In this case, the Estate may submit a new housing rebate up until XXXXX, provided all the conditions under subsection 254(2) are met.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-9212.

Yours truly,

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

2005/11/14 — RITS 63323 — Juice Derived from XXXXX