GST/HST Rulings and Interpretations Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Road
Vanier, Ontario
XXXXX K1A 0L5
XXXXX
|
File: 11870-114-25
XXXXX Case: HQR0000709
|
Subject:
|
GST/HST INTERPRETATION
GST/HST New Housing Rebates
|
Dear XXXXX
We are writing in response to a letter from XXXXX of your office dated May 23, 1997 with attachments. The attachments to XXXXX letter contained a draft response to a query sent to him by XXXXX of Revenue Canada's Audit Branch respecting multiple GST/HST new housing rebate applications for side by side strata lots with no party wall separating the units.
Facts
Our understanding of the facts is based upon XXXXX draft letter to XXXXX and upon a letter with attachments dated January 27, 1997 sent to XXXXX by XXXXX the solicitor for the rebate applicants in this matter.
1. A builder constructed a condominium project in XXXXX that consisted of six buildings. Each building consisted of XXXXX[.] The condominium plans filed with the Land Titles Office show a division line between each lot in the building.
2. In XXXXX buildings the developer did not construct a party wall to separate the strata lots from each other.
3. Each unit is separately titled and has a separate municipal address. The owners of the units in each building tend to all be related to each other or to be close friends.
4. Despite the existence of separate municipal addresses, there is usually only one telephone number for each building and only one hydro account. The purchase agreements for two of the units provide that each unit was to have its own appliances which would indicate the existence of separate kitchens. However, the buildings in fact only have one kitchen. The security system has also been modified so that the two security control panels operate as one system.
5. The purchase price for each strata lot is approximately XXXXX[.]
6. Separate GST/HST new housing rebate applications have been filed in respect of each unit.
Interpretation Requested
We have been asked to consider whether each purchaser is eligible for a separate GST/HST new housing rebate in respect of the acquisition of one of the strata lots in the building, to be calculated on the value of each strata lot individually, or whether, only one rebate is available for the building as a whole, to be calculated on the total value of the entire building.
Interpretation Given
Based on the information provided we conclude that a separate rebate application should be allowed with respect to each strata lot in the building. The calculation for each rebate should be based on the cost of the strata lot that was acquired by the applicant without reference to the purchase price of the abutting strata lot.
Analysis
Paragraph 254(2)(a)
Provided that all the other conditions in subsection 254(2) are met, paragraph 254(2)(a) provides a rebate whenever the builder makes a sale of a residential condominium unit ie. a strata lot to a particular individual. The wording of the paragraph attaches a rebate to each strata lot rather than to the house as a whole.
Section 123: The Bounded Space Argument
The argument, contained in XXXXX letter that each strata lot must be a physically bounded space may be a plausible approach to limiting the number of rebates that are paid in this case, but it cannot be considered because it is not applicable in similar cases. For example, it would not apply in cases where a common wall exists at the time that the sale is made, but is removed as soon as the two transactions have closed. It would also be inapplicable if instead of a wall there is a door in which case a physical boundary is present, but the occupants of the residence continue to enjoy unrestricted access to both strata lots.
Paragraph 254(2)(b)
The draft letter states that:
the applicant owner's strata lot cannot be regarded as his primary place of residence without regard to the individual owner's complete and simultaneous access to the other strata in the same building for use as his or her place of residence.
This approach is problematic for two reasons:
First it has the effect of depriving the purchaser of a primary place of residence. If the first strata lot cannot be considered as a primary place of residence because there is simultaneous access to the second strata lot and by extension, if the second strata lot is not a primary place of residence because there is simultaneous access to the first strata lot, the purchaser is left without a primary residence at all even though his use of the strata lots may satisfy a primary residence test.
More fundamentally there is nothing in paragraph 254(2)(b) or in any of Revenue Canada's administrative policies that limit the size of a primary residence to a single strata lot. In this case, each strata lot forms part of a primary residence and since the rebate is payable whenever a builder sells an strata lot rather than when a builder sells a primary residence, there is no legislative provision that would exclude the payment of two rebates.
Paragraph 254(2)(c)
This paragraph requires that the rebate be paid if the total consideration for a strata lot is less than $450 000. The closing words for subsection 254(2) go on to provide that where the consideration is less than $350 000, the rebate shall be equal to 36% of the GST paid. In our case each strata lot costs less than $350 000, therefore the applicant would be entitled to a rebate of 36% of the GST paid on each strata lot. In other words, the rebate calculations for each strata lot should be done independently and without reference to the purchase price paid for any other strata lot.
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-4393.
Yours truly,
Michael Ezri
A/Rulings Officer
Real Property Unit
Financial Institutions and Real Property Division
GST/HST Rulings and Interpretations Directorate
c.c.: |
Peter Cairns
Rebates-VECR
13th Floor, 171 Slater Street
Ottawa Ontario |
Legislative References: |
ETA s. 123, 254, 262;
Interpretation Act s. 33(2). |
NCS Subject Code(s): |
I-1, 118702, 18870-5 |