Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 246307
[Dear Client]:
Subject: GST/HST interpretation
Acquisition of real property by […][the Department]
Thank you for your email correspondence of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the acquisition of real property by […][the Department]. We apologize for the delay in this response.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
We understand:
1. [The Department] is involved in various real property acquisitions and disposals.
2. […], you provided general examples of real property transactions that are typical of the operations of [the Department].
3. […](Footnote 1) […][references a section of an act noting that the Department is an agent of His Majesty in right of Canada.]
4. [The Department] is listed as a departmental corporation in Schedule II to the Financial Administration Act (FAA)(Footnote 2).
INTERPRETATION REQUESTED
You would like to know how the GST/HST applies to the acquisition of real property by [the Department].
As discussed […], the application of the GST/HST to a supply of real property is fact-specific and unique. It was agreed that, in the absence of requisite facts to determine the tax status of a specific real property transaction entered into by [the Department], we would provide a general explanation of the relevant ETA provisions and how the legislation applies where the federal government (for example, [the Department]) is a party to a real property transaction.
INTERPRETATION GIVEN
Supplies of real property
A supply of real property that is situated in Canada is generally taxable unless the supply is exempt. Part I of Schedule V sets out exempting provisions that may apply to a supply of real property; no tax is charged or paid on an exempt supply.
The tax status of a supply by way of sale (sale) of real property is determined based on factors such as the identity of the supplier (for example, an individual or a corporation), the nature of the property and how the supplier used the property during its ownership of the property. Typically, the supplier of real property is the party that possesses the requisite information to make such a determination. For a sale of real property, it is not the identity of the purchaser nor the purpose for which the property is acquired that will determine the tax status of the property.
A person who makes a taxable supply is generally required to collect the tax payable by the recipient in respect of the supply. An exception to this general rule may apply where a person makes a taxable sale of real property. Specifically, paragraph 221(2)(b) provides that the supplier will not generally collect the tax on a taxable sale of real property where the purchaser is registered for the GST/HST. In such a case, the GST/HST registered purchaser generally has the obligation to report to the Canada Revenue Agency (CRA) the tax that is payable on the acquisition of the real property; this is often referred to as a self-assessment.
Federal Government GST/HST Registrant
Pursuant to paragraph 122(a) of the ETA, the federal government, including all departments, is fully bound both as a supplier and a recipient of property and services for purposes of the GST/HST.
The federal government GST/HST registrant is made up of all the departments as defined in the FAA, which includes, in part, those departmental corporations named in Schedule II to the FAA. As [the Department] is listed as a departmental corporation therein, it falls within the definition of “department”; and, consequently is part of the federal government GST/HST registrant.
[…]
As a […] branch of the federal government GST/HST registrant, [the Department] is responsible for paying the GST/HST on its purchases of taxable supplies and for collecting and remitting the GST/HST on taxable supplies of property and services.
The exception to the self-assessment rule in paragraph 221(2)(b) applies such that the supplier of real property will not collect the GST/HST on the taxable sale of real property where [the Department] is the purchaser. However, […] branches, including [the Department], do not self-assess tax nor adhere to any of the change of use-rules in the ETA which result in self-assessment of the GST/HST.
It is of note that the exception for the collection and payment of GST/HST applies only to the sale of real property. Where [the Department] acquires real property by way of lease, licence or similar arrangement and the supply is a taxable supply, the supplier (if registered for the GST/HST) will collect the applicable tax from [the Department].
[…].
DISCLAIMER
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
CONTACT
If you require clarification with respect to the acquisition of real property by [the Department], please call me directly at 780-504-3442. For further enquiries with regard to the federal government registrant, please contact Melissa Drapeau, Manager of the Government Sectors and Indigenous Affairs Unit, at 343-549-4445. Should you have general questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at:
1-800-959-8287 or by fax to 1-418-566-0319.
Sincerely,
Johanne Cairo
Senior Rulings Officer
Real Property Unit 1
Financial Institutions and Real Property Division
GST/HST Rulings Directorate
FOOTNOTES
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