19 August 2002 General Information Letter 32479 - GENERAL INFORMATION LETTER GST and Latecomers

Dear XXXXX:

Thank you for your letter of XXXXX, concerning the application of the GST/HST to "latecomer agreements". In your letter, you provide comments concerning ownership of the real property on which oversized infrastructures are to be installed to assist in our review of this issue.

As you may realize, this issue has been the subject of considerable discussion and review since your letter. After discussions with the Department of Finance and after careful consideration of the information provided in your letter and a number of other submissions on this topic, our position on the application of the GST/HST to municipal infrastructure activities and latecomer charges remains unchanged.

That is, a frontender's supply of lands dedicated to a municipality, including oversized infrastructures, is a taxable supply of real property to the municipality. The consideration for the real property is equal to latecomer fees collected by the municipality from subsequent developers that are then paid to the frontender.

If the municipality is a GST/HST registrant, it must self-assess and remit the tax payable pursuant to subsection 228(4) when the consideration for the supply is ascertainable - generally when the latecomer fees are payable by developers to the municipality.

The latecomer fees paid by subsequent developers are consideration for an exempt supply of permits issued by the municipality pursuant to paragraph 20(c) of Part VI of Schedule V to the Excise Tax Act (ETA).

The municipality is not entitled to claim ITCs for the GST/HST on the taxable acquisition of the lands and oversized infrastructures as their use or supply will be in the course of activities exempted under various provisions in Part VI of Schedule V to the ETA. It will be entitled to claim the 57.14% public service body rebate for municipalities.

We would like to mention that responsibility for this issue has been transferred to the Financial Institutions and Real Property Division of the Excise and GST/HST Rulings Directorate.

Yours truly,

Elaine Bonnah
Municipalities and Health Care Services Unit
Public Service Bodies & Government Division
Excise and GST/HST Rulings Directorate