9 January 2006 GST/HST Interpretation 55422 - ITC for tax on imported XXXXX

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 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies made by XXXXX (the "Corporation"), and the availability of the GST/HST New Residential Rental Property Rebate.

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 is as follows:

1. The Corporation, a GST registrant, owns land on which it constructed a XXXXX residential care facility known as XXXXX (the "Facility"), XXXXX. The construction of the Facility was completed on XXXXX. The Facility is not registered as a condominium.

2. The XXXXX units are comprised of studio, one bedroom and two bedroom suites for seniors. All suites include a 3-piece bathroom, individually controlled heating and cooling systems and are unfurnished. The building also contains several common areas including activity rooms, library lounge, dining room, laundry room, wellness centre and outdoor patios. XXXXX suites contain kitchenettes.

3. An individual who wishes to live at the Facility ("Resident") enters into a tenancy agreement with the Corporation for a one-year term. The agreement is covered by provincial landlord and tenant legislation. The Resident is given possession of a suite pursuant to the agreement. The Corporation first entered into tenancy agreements and gave possession of units in the Facility subsequent to the completion of the construction.

4. There is no formal assessment criteria for acceptance at the Facility. However, in order to verify that a prospective tenant does not require a greater level of service than is available, the prospective tenant is required to submit the results of an examination by their own physician to identify existing physical and mental conditions and are interviewed by a nurse at the Facility.

5. The Facility is not promoted as a residence where extensive personal care or nursing services are provided. Although the Facility has a registered nurse on staff, it does not provide hands-on nursing care to Residents. The Corporation reserves the right to terminate a tenancy agreement of any Resident who requires additional care beyond that provided under the residential packages (described below) offered by the Corporation.

6. The supply made by the Corporation under a tenancy agreement includes a suite, utilities, the use of the aforementioned common areas, landscaping and snow removal services, and the personal services described in the particular residential package chosen by the Resident. The Corporation offers two types of residential packages: XXXXX, for a single all-inclusive amount. Residents cannot rent a suite in the Facility without choosing one of the packages and cannot substitute or delete elements included in the package.

7. The XXXXX package includes the items delineated in XXXXX to the Tenancy Agreement (attached as Appendix 1 of your submission) and in the "XXXXX Information Package" (attached as Appendix 2), namely:

•   a specific suite and the property and services indicated in Fact 6,

•   call-bell monitoring (i.e., a personal emergency response system),

•   an on-site nurse manager and at least one nurse on duty 24 hours per day to respond to emergency situations,

•   activity programs tailored to the needs of the Residents,

•   weekly housekeeping services including a change of bed linens and towels, and

•   one dinner served daily that takes into consideration special dietary needs of the Residents.

8. The XXXXX package includes the items delineated in XXXXX to the Tenancy Agreement (attached as Appendix 1 of your submission) and in the "XXXXX Information Package" (attached as Appendix 2), namely:

•   a specific suite and the property and services indicated in Fact 6,

•   call-bell monitoring,

•   an on-site nurse manager and at least one nurse on duty 24 hours per day to respond to emergency situations,

•   activity programs tailored to the needs of the Residents,

•   administering medication to residents on an as-needed basis,

•   daily light housekeeping and weekly housekeeping services including a change of bed linens and towels,

•   assistance with bathing once a week, and

•   three meals daily (that take into consideration special dietary needs of the Residents) and meals delivered to a Resident's room when authorized by the nursing manager.

9. In addition to the above packages, Residents can separately purchase additional services on a fee for service basis. These services are described in XXXXX to the "XXXXX Information Package" (attached as Appendix 2 of your submission) as follows:

•   assistance with bath or extra bath - $XXXXX/bath,

•   personal laundry - $XXXXX/load,

•   more frequent or daily housekeeping - $XXXXX/month,

•   one extra full clean of a suite per week - $XXXXX/month,

•   extra assistance for dressing or other personal services - $XXXXX/hour,

•   escort services to and from the dining room - $XXXXX/month,

•   extra breakfast plan - $XXXXX/month,

•   extra lunch plan - $XXXXX/month, and

•   extra breakfast and lunch plan - $XXXXX/month.

Rulings Requested

1. The suites within the Facility are "residential units" and the Facility is a "multiple unit residential complex" as those terms are defined in subsection 123(1).

2. The Corporation is a "builder" of the Facility as defined in subsection 123(1).

3. The supplies made by the Corporation to the Residents are supplies by way of lease that are exempt under section 6 of Part I of Schedule V.

4. The Corporation was deemed under subsection 191(3) to have made and received a taxable supply by way of sale of the Facility.

5. The Corporation is entitled to the New Residential Rental Property Rebate in respect of the Facility pursuant to subsection 256.2.

Rulings Given

1. The suites within the Facility are "residential units". That part of the Facility 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 is a multiple unit residential complex as defined in subsection 123(1).

2. The Corporation is the "builder" of the Facility as defined in subsection 123(1).

3. A supply made by the Corporation to a Resident under the Tenancy Agreement for either the XXXXX package is a single supply of a residential unit made by way of lease that is exempt under section 6 of Part I of Schedule V. The supply of a residential unit in this case includes both the suite and the services provided under the Tenancy Agreement for the XXXXX packages. However, the supplies of the additional services described in XXXXX to the "XXXXX Information Package" are treated separately from the supply of a residential unit. The supplies of the additional services are not exempt under section 6 and, unless another exemption applies, are subject to tax.

4. The Corporation was deemed under paragraph 191(3)(d) to have made and received a taxable supply by way of sale of that part of the Facility that is a multiple unit residential complex on the later of the day construction was substantially complete and the day possession of a residential unit in the Facility was given to an individual for occupancy as a place of residence under a Tenancy Agreement. Accordingly, the Corporation is required to account for tax at that time, calculated on the fair market value, at that time, of that part of the Facility that is a multiple unit residential complex.

5. The Corporation is entitled to claim the New Residential Rental Property Rebate with respect to each qualifying residential unit in the Facility, provided that all of the criteria in section 256.2 are met.

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 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.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-8816.

Yours truly,

Paul Hawtin
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2006/01/19 — RITS 59545 — [Application of the GST to Non-resident Payroll Services]