Subsection 211(1) - Election for Real Property of a Public Service Body
Administrative Policy
4 April 2011 Headquarters Letter Case No. 113955
a university which is the registered and beneficial owner of three contiguous parcels of land (A, B and C) reconfigures its ownership so that it is the owner of parcel AB consisting of all of (former) parcels A and B plus a portion of (former) parcel C, and parcel C1 representing the balance.
Such reconfiguration would cause parcels A, B and C to cease to exist for ETA purposes so that fresh s. 211 elections would be required.
RC4082 "GST/HST Information for Charities," 6 December 2021, p. 24
Meaning of "real property" for purposes of s. 211 election (p. 24)
For purposes of this election, real property generally means the entire estate or interest in the real property (including a leasehold interest) held by the charity and that is contained within a single legal description (which includes the land and all structure and other improvements that are fixtures to the land).
Example where s. 211 election made at time of acquisition (p. 25)
Example
You are a charity that is registered for the GST/HST and you have filed the election not to use the net tax calculation for charities. You buy a four-story non-residential building (including the land) and you paid the HST on your purchase. You will supply all of the space in the building by way of exempt leases.
Since the entire building will be used for exempt activities, you cannot claim an ITC to recover the HST you paid on your purchase. However, if you file Form GST26 and make the election effective on the day you acquire the building, you will charge the HST on the rent you charge to your tenants and you will generally be entitled to claim an ITC for the HST you paid on your purchase of the building.
Since you filed the election not to use the net tax calculation for charities, you will also generally be entitled to claim ITCs for the HST paid or payable on utilities and maintenance that relate to the building.
Example where s. 211 election made 3 years after real property acquisition (p. 26)
You are a charity that is a GST/HST registrant and you have filed the election not to use the net tax calculation for charities.
In 2013, you bought a building, including the land, in Manitoba for $300,000 plus $15,000 GST. At that time, 70% of the building was used in your exempt activities and you supplied the remaining 30% of the building by way of lease, therefore, you also used the remaining part of the building in an exempt activity. Since the property was not for use more than 50% in your commercial activities, you could not claim an ITC. However, you were able to claim the PSB rebate of 50% of the GST paid ($15,000 × 50% = $7,500).
You filed the election to treat the exempt leases as taxable using an effective date of July 2, 2016. This means that you are now using the property 30% in your commercial activities. The fair market value of the property on July 2, 2016 is $310,000. You have not made any improvements to the property.
You are considered to have made a taxable sale of the property on July 1, 2016, and to have collected the GST on the sale equal to the basic tax content of the property on July 2, 2016. You are also considered to have repurchased the property and to have paid the GST on that purchase on July 2, 2016.
You calculate the amount of the GST that you are considered to have collected and that you have to report on your GST/HST return as follows:
Basic tax content = (A - B) × C
= ($15,000 – $7,500) × $310,000/$300,000
= ($15,000 - $7,500) × 1 (the maximum)
= $7,500
You report $7,500 in your line 105 calculation if you are filing your return electronically or on line 103 if you are filing a paper GST/HST return, for the reporting period during which the election was made.
You calculate your ITC for the tax you are considered to have paid on the repurchase of the property when the election takes effect, which is based on the basic tax content of the property, as follows:
ITC = $7,500 × 30% (use in commercial activities)
= $2,250
In addition, since you are considered to have made a taxable sale of the property, you can claim an ITC for $7,500 (which is equal to the basic tax content of the property) to recover the GST that you paid, or that was payable, on your last acquisition of the property that you could not previously recover where all of the other conditions for claiming an ITC are met.
Therefore, the total ITC you are entitled to claim as a result of making the election is $9,750 ($2,250 + $7,500) where all of the other conditions for claiming an ITC are met.
Since you filed the election to not use the net tax calculation for charities, you may also be entitled to claim ITCs to recover the GST paid or payable on operating expenses (such as utilities and maintenance) that relate to the property, to the extent that they are for use in your commercial activities.
Subsection 211(2)
Administrative Policy
8 March 2018 CBA Commodity Tax Roundtable, Q.16
In the course of discussing whether a charity can register for GST/HST purposes based on an intention to subsequently make a s. 211 election, CRA stated:
We would like to clarify that:
- The election under section 211 is applied on a property-by-property basis (that is, the election applies to the entire legal description and not just to a portion of the real property).
- The deeming rules in paragraphs 211(2)(a) and (b) do not apply where the charity:
- acquires the real property on the day the election takes effect; or
- becomes a registrant on the day the election takes effect.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 141.1 - Subsection 141.1(3) - Paragraph 141.1(3)(a) | registration made on basis of s. 141.1(3)(a) requires clear intention to engage in commercial activity | 153 |
Subsection 211(5)
Paragraph 211(5)(a)
Forms
GST26 Election or Revocation of an Election by a Public Service Body to Have an Exempt Supply of Real Property Treated as a Taxable Supply
Effect of deemed supply under s. 211(1)
If the election becomes effective after the day you acquire the real property
… If you bought the real property and the election becomes effective after the day you bought it, you are considered to have made a taxable sale of the property just before the effective date of the election and to have repurchased the property on the effective date of the election. You are also deemed to have paid and collected GST/HST on the deemed sale equal to the basic tax content of the property on the effective date of the election. In this case, the following rules apply:
• Because you are considered to have made a taxable sale of the real property, you can claim an ITC equal to the basic tax content of the property just before the election took effect. This means that you can now claim an ITC for all or part of the GST/HST that you paid, or that was payable, on your last acquisition of the property (for example, when you originally bought, or last self-assessed on, the property), and on any improvements you made to it, that you could not previously recover.
• You have to report the tax you are considered to have collected on your deemed sale on your GST/HST return for the reporting period in which the deemed sale occurred.
• You can claim an ITC for the GST/HST you are considered to have paid on your deemed purchase to the extent that you use the real property in your commercial activities. This is because the primary use rule that you would normally use to determine your ITCs for a purchase of real property does not apply …
Paragraph 211(5)(c)
Administrative Policy
May 2019 CPA Alberta CRA Roundtable, GST Session – Q.3
A charity may be operating as if a s. 211 election has long since been filed for a property, but the CRA internal system does not show a s. 211 election and with staff changes and passage of time, the charity is not in a position to demonstrate its filing. Will CRA administratively allow s. 211 elections to be “late-filed” in such circumstances? CRA responded:
The ETA does not provide the Minister with discretion to accept a late-filed section 211 election. Consequently, where the filing requirements as specified in paragraph 211(5)(c) are not met, the CRA will generally not accept a late filed election. However, if a charity has been charging the GST/HST on supplies of real property that would otherwise be exempt and has been accounting for that tax and claiming any ITCs it may be eligible to claim in its net tax calculations and remittances as if the election had been filed in accordance with subsection 211(5), the CRA may accept a late filed-election, effective as of the date the charity began charging the tax, if the charity was eligible to file the election on that date.
28 February 2019 CBA Roundtable, Q.1
HQR0001067 (February 9, 1999) and Q.24 at the February 26, 2009 CBA Roundtable meeting both indicated that if a public service body has been charging GST/HST on supplies of real property that would otherwise be exempt, and has been accounting for that tax and claiming input tax credits (ITCs) in its net tax calculations and remittances as if the s. 211 election had been filed on time, then the CRA will normally accept a late-filed section 211 election. Is this still the policy? CRA responded
As indicated in … 37442 (July 30, 2002) a decision on whether to accept a backdated effective date for a section 211 election falls within the purview of the Domestic Compliance Programs Branch … [which] will only consider the backdating of a section 211 election in exceptional circumstances. Exceptional circumstances include, but are not limited to, situations where a PSB has obtained inaccurate written information from the CRA. The acceptance of a late-filed section 211 election will be determined on a case-by-case basis.