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.
|
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5XXXXX
XXXXX
XXXXX
|
Case Number: 50291NCS Code: 11950-1October 18, 2006
|
|
Subject:
|
GST/HST RULING
XXXXX Retirement Residence
|
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 construction of the XXXXX Retirement Residence, XXXXX by XXXXX. We apologize for the delay in providing our response.
Following an audit and assessment of XXXXX, you have requested a ruling on XXXXX entitlement to a New Residential Rental Property (NRRP) rebate in respect of the construction of the XXXXX.
All legislative references are to the Excise Tax Act (ETA) and the regulations therein, unless otherwise specified.
Statement of Facts
Our understanding of the facts as outlined in your letter XXXXX, in the supplementary documents provided XXXXX, and in various telephone conversations is as follows:
1. XXXXX is in the business of building retirement residences for use by seniors as a place of residence. XXXXX is registered for GST/HST purposes.
2. XXXXX provides residential accommodation, meals and, if required, limited assistance with the activities of daily living as well as other services. The extent of services provided will vary depending upon the resident's needs. XXXXX objective is to provide a residence for seniors in an independent living environment.
3. An assessment of a prospective resident is made where there is concern as to the resident's ability to cope with the activities of daily living. Such an assessment may be made by a nurse at the XXXXX or, where the prospective resident was referred by a social worker of a hospital, by the social worker concerned.
4. Generally, upon admission, a resident is not expected to require assistance with activities of daily living (e.g., bathing, dressing, transportation to the dining room or other activity). However, where an assessment reveals that a prospective resident requires additional care or assistance with activities of daily living, XXXXX will recommend the purchase of a separate care package, at an additional cost. Evidence of additional care requirements may result in the non-acceptance of the prospective resident to the XXXXX.
XXXXX Retirement Residence, XXXXX
5. The XXXXX was acquired by XXXXX on XXXXX. The property consists of XXXXX residential towers. At the time of the purchase, XXXXX was operational, while XXXXX consisted of a concrete shell.
6. The construction agreement between XXXXX and XXXXX, indicates that work on the construction of the residential units in XXXXX was to commence XXXXX. The construction agreement identifies the XXXXX floors.
7. The appraisal report by XXXXX, indicates that the first resident moved into XXXXX on XXXXX, and that in XXXXX, XXXXX transferred ownership of the property to XXXXX.
8. XXXXX consists of studio suites, one-bedroom and two-bedroom apartments. While some of the studio suites include a kitchenette, others do not. Residents are required to furnish their own apartments.
9. The all-inclusive monthly rates [ii]footnote 1 are set out as follows:
Studio accommodation $XXXXX
One-bedroom $XXXXX
Two-bedroom $XXXXX
The monthly rate generally includes meals and snacks, medications administration (if required), housekeeping, and weekly laundering of linens.
10. Assisted living services are available where required. These include assistance with bathing, administration of medications, incontinence care, physiotherapy, foot care, and hairdresser and barber services.
11. A number of other services may be purchased for a separate charge. These may include an additional care package (e.g., for additional occupant), companion service and personal laundry services.
12. XXXXX is promoted as a residence offering an independent living program, an assisted living program, as well as a secured Alzheimer's area.
13. While the submission XXXXX states that the XXXXX was renovated to accommodate the delivery of long-term care services approximately XXXXX months after the suites were first leased, the construction agreement XXXXX indicates that the XXXXX was designated as XXXXX.
14. XXXXX a licence was issued to operate part of the residence XXXXX as a long-term care facility. XXXXX. Residents located on this floor require significant nursing and personal care services.
15. Lease XXXXX was provided as a sample lease agreement for accommodations on floors in XXXXX, other than the XXXXX. The lease document, which is the mandatory form of the XXXXX, consists of an XXXXX lease agreement (Lease) and a XXXXX schedule (Schedule). The Schedule is required to accompany the Lease and is to be used to identify those services offered to the lessee as a result of the lessee's personal condition, including services offered to elderly or handicapped persons.
16. The Schedule sets out the services the Landlord undertakes to provide and maintain. These services include laundry (bedding, clothing, dry cleaning), housekeeping, recreational and social activities, medications storage and administration, security, nursing and personal care, food services, and transportation. The services are categorized under three columns: Column 1 - services included in the rent for the dwelling as set out in the lease; Column 2 - services for which an additional amount is charged in accordance with the term provided for in the lease (e.g., month, week or other); Column 3 - other services the landlord undertakes to maintain (payable each time used).
17. Services provided to the residents on a regular basis are identified in column 1 of the Schedule, while column 2 lists those services, such as personal laundry, which are provided on an optional basis as required by the resident.
18. Lease XXXXX provides for a monthly rental of $XXXXX for a two-bedroom apartment for the period XXXXX. The services included in the rent for the dwelling are checked off in column 1 of the Schedule [iii]footnote 2. These include two meals daily (lunch and dinner). A meal credit of $XXXXX for lunch and $XXXXX for dinner is provided if the resident is away for one month or longer. There are no other services identified under column 2 or column 3.
Ruling Requested
You are requesting confirmation that XXXXX is eligible to claim an NRRP rebate as provided under section 256.2 in respect of the construction of XXXXX.
Ruling Given
Based on the facts set out above, the following rulings are provided:
1. The supply made by XXXXX, as set out under column one of the Schedule, to a resident of XXXXX, (other than to a resident of the XXXXX) is a single supply of a residential unit made by way of lease, licence or similar arrangement for the purpose of occupancy as a place of residence for continuous periods of at least one month, and is an exempt supply under section 6 of Part I of Schedule V to the ETA.
2. XXXXX is a builder for GST/HST purposes and is required to self-supply under subsection 191(3) at the time the first resident moved into XXXXX on the fair market value of the entire residential complex XXXXX, including that part of XXXXX consisting of the long-term care facility XXXXX.
3. Subject to the other requirements set out in subsection 256.2, XXXXX is eligible to claim an NRRP rebate in respect of that part of XXXXX which contains the residential units that are supplied by way of lease, licence or similar arrangement as described in Ruling #1 above.
4. XXXXX is not eligible to claim an NRRP rebate in respect of that part of the XXXXX, which is licensed to operate as a long-term care facility XXXXX.
These rulings are subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by these rulings provided 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
Residential Complex / Residential Unit
A residential complex is defined under paragraph 123(1)(a) to mean, in part, that part of a building in which one or more residential units are located. A residential unit is defined in subsection 123(1) to include, a suite or room in a residence for seniors, individuals with disability or other individuals, or that part thereof that is occupied by an individual as a place of residence or lodging.
That part of the building in which the residential units are located, together with that part of any common areas and appurtenances to the building and the land attributable to the building that is reasonably necessary for the use and enjoyment of the building as a place of residence for individuals, form a residential complex; more specifically, a multiple unit residential complex.
Based on the facts provided, the entire building, together with the land on which XXXXX is situated, form a residential complex. XXXXX is a builder of the complex for GST/HST purposes.
Characterization of Supply
Under subparagraph 256.2(3)(a)(ii), one of the requirements for an NRRP rebate is that the builder make an exempt supply of a residential unit under section 6 of Part I of Schedule V. In determining whether XXXXX is making a supply under section 6, it is necessary to consider whether XXXXX is making a single supply or multiple supplies, and subsequently to determine the nature of the supply or supplies being made by XXXXX. Policy Statement P-077R2, Single and Multiple Supplies sets out the administrative guidelines to determine whether a number of properties and/or services provided together are all part of a single supply or whether each constitutes a separate supply.
XXXXX Independent/Assisted Living
The facts indicate that XXXXX provides accommodations, care and services to residents who require various levels of care and supervision. A resident may select the services desired or required to suit their individual needs. The Lease sets out the monthly rate in respect of the accommodation and the services identified in column one of the Schedule. All of the property and services are interdependent and each element is an integral part of the whole supply made by XXXXX.
Ancillary property and services are those properties and services that may form an important part of a supply (e.g., administering or monitoring medication), but are nonetheless only elements of a supply that is predominantly that of a residential unit. Such property and services may include: meals, a laundry service for bed linens and towels; housekeeping services; entertainment and activities for the benefit of all residents including religious services, gardening, musical programs, exercise classes, bingo and shuffleboard; use of a recreation area and lounge rooms; a library at the facility; or any of the following services provided on a 24-hour per day basis: general building security, medic alert system monitoring, building patrol, security camera, monitoring, telephone and door reception and responding to general emergencies.
While the supply made by XXXXX to a resident of XXXXX (other than to a resident of XXXXX) consists of a residential unit and other ancillary property and services, the predominant element of the supply is that of a residential unit. The exemption in section 6 of Part I of Schedule V can apply to a supply that contains elements other than that of a residential complex or unit provided the predominant element of the supply is that of a residential complex or unit.
With respect to the supplies of other services listed in column 2 or 3 of the Schedule for which there is an additional fee charged, these supplies are separate from the supply of the residential complex or unit. The supply of any additional service listed under column 2 or 3 is not exempt under section 6 of Part I of Schedule V, and unless another exempting provision applies, is subject to tax.
As noted above, XXXXX is a builder of the residential complex. Where a builder of a multiple unit residential complex gives possession of a residential unit in the complex under a lease, licence or similar arrangement entered into for purpose of the occupancy of the unit by an individual as a place of residence, the self-supply provisions under subsection 191(3) apply. Under subsection 191(3), XXXXX is deemed to have made and received a taxable supply by way of sale of the residential complex, and is required to account for tax on the fair market value of the complex as a whole on the day possession of a residential unit is first given to a resident.
Accordingly, XXXXX meets the requirement under subparagraph 256.2(3)(a)(ii), and subject to the other conditions in section 256.2, XXXXX is entitled to claim an NRRP rebate with respect to all qualifying residential units in XXXXX.
As detailed below, the nature of the supply made to a resident of that part of XXXXX consisting of the long-term care facility is beyond the scope of a supply under section 6 of Part I of Schedule V. As such, the residential units provided to residents in that part of XXXXX consisting of the long-term care facility are not qualifying residential units for purposes of section 256.2.
XXXXX Long-term care facility
As set out in the statement of facts above, part of the XXXXX was constructed to accommodate XXXXX. In addition, the facts indicate that the XXXXX issued a permit to operate XXXXX long-term care facility beds in that part of the XXXXX identified on the permit as XXXXX. This part of the facility is devoted to individuals with limited mental or physical capacity to care for themselves.
The primary purpose of a long-term care facility is the provision of care services to persons in a facility setting who require significant nursing and personal care services on a regular basis, and whose needs cannot be met through in-home services. Such services are not ancillary to the provision of a residential unit, but are fundamental, in their own right, to the individual's reason for residing at the facility. The accommodation, care and services are interconnected, where each is an integral part of a composite whole. None of these elements can be viewed as satisfying the recipient's needs on its own, and neither can any one of these elements be considered to be a supply distinct and independent from the supply of the others. Under such circumstances, the supply cannot be viewed as being predominantly that of a residential unit for purposes of section 6 of Part I of Schedule V.
Given the extensive nature of nursing and personal care services required by residents of that part of XXXXX operated as a long-term care facility, it is our view that the primary purpose of such occupancy is to receive nursing and personal care services to meet the individual's social and health care needs because of their limited capacity. Accordingly, it is our view that in the context in which accommodation, meals, care and other services are supplied to individuals in that part of the residence licensed to operate as a long-term care facility, the supply is beyond the scope of a supply of accommodation under section 6 of Part I of Schedule V.
Given that one of the conditions, as set out in subparagraph 256.2(3)(a)(ii), is not satisfied, XXXXX is not eligible to claim an NRRP rebate with respect to that part of the facility constructed to operate as a long-term care facility.
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
2006/11/30 — RITS 62841R2 — Contracted Services to Care Facilities
Email this Content