Words and Phrases - "construction"
Excavations Marchand et Fils Inc. v. Agence du revenu du Québec, 2025 QCCQ 378
The taxpayer (“EMF”), which was a construction company engaged in large civil engineering projects such as roads, bridges and natural gas networks, contracted with Hydro-Quebec (“HQ”) for the furnishing, installation and operation of an on-site portable concrete-producing facility for the provision of the concrete in the installation of a large hydro-electric dam at a remote location. Trudel JCQ found that such contract should be characterized as for the manufacturing of goods (the concrete) for sale, rather than as a contract of service, given that the predominant intention was to provide for the supply of cement to Hydro-Quebec.
In further finding that the exclusion from a manufacturing operation for “construction” did not apply, he stated (at para. 75, TaxInterpretations translation):
The Court finds the following from the relevant evidence:
- EMF used the ice machine and silos exclusively for the operation of the portable concrete plant and they were therefore of no use to the company's other business lines;
- The concrete produced was sold almost entirely to third parties, primarily to HQ as part of the Romaine 3 and 4 hydroelectric power plant construction projects;
- With a few exceptions, EMF did not use the concrete produced in its other construction business lines;
- The portable plant was moved according to customer needs;
- With rare exceptions, the employees who operated the concrete plant had specific skills and were generally not assigned to the company's other operations;
- The company maintained separate accounting records to determine the respective revenues and expenses of its construction activities and those of its concrete manufacturing and sales.
Accordingly, an ice maker and silos used in the operation qualified as Class 29 property that was qualified property for Quebec investment tax credit purposes.
17 June 2002 Internal T.I. 2001-0111717 F - BFT ET CONSTRUCTION MAISON EN USINE
In finding that a fabricator of manufactured homes was engaged in a manufacturing and processing given that the exclusion for “construction” did not apply, the Directorate referred inter alia to its “position that construction activities generally take place on a construction site and that manufacturing activities are generally carried out off a construction site” and noted that “Aco has a lot of factory equipment that a building contractor does not have” and that “[m]ost of its work is done off-site.”
GST/HST Technical Information Bulletin B-087 “GST/HST new residential rental property rebate” November 2001
Coming into force
The new residential rental property rebate applies to construction, substantial renovations, conversions or additions to rental properties that were started after February 27, 2000. Generally, construction is considered to begin at the time the excavation work relating to the residential complex begins.
7 April 2022 CBA Roundtable, Q.7
The definition of “builder” in s. 123(1) includes a person who carries on the “construction” of a “residential complex,” which is defined to include that part of a building which is a residential condominium unit, thereby potentially triggering self-assessment under s. 191.
An individual with an interest in a multiple unit residential complex (“MURC”) converts the MURC into condominium units (intended for residential rental), so that the legal ownership of the units is changed and there are physical alterations to the MURC units (but without substantial renovation of the MURC).
a) Does conversion of a MURC into condominium units without substantial renovation constitute “construction” of a residential complex, namely, residential condominium units?
b) Does the answer depend on whether the conversion changes the number of units, e.g., converting a 4-unit MURC into a 5-unit condominium complex?
c) If this constitutes construction of a residential complex, would 5, or only the 1 additional unit, be considered to be constructed?
d) If there is construction of a residential complex, is there an exemption from self-assessment under s. 191(1) upon residential rental?
a) CRA indicated that “construction” is “the creation of something new, and can be distinguished from repair, improvement, recombining or rearranging of something that already exists.”
After indicating that under the definition of the term, “only intention is required for there to be a residential condominium unit,” CRA stated that [w]here there is an intention to create residential condominium units in a building, the CRA would determine separately whether each residential condominium unit was constructed or substantially renovated for purposes of subsection 191(1) of the ETA, rather than whether the MURC as a whole was constructed or substantially renovated for purposes of subsection 191(3) of the ETA.
b) CRA stated:
Whether the conversion of a MURC into residential condominium units constitutes “construction” or a substantial renovation of a residential condominium unit does not depend on whether there is a change in the number of units, but rather on the work performed on a particular residential condominium unit in the condominium complex. … A substantial renovation is generally considered to have taken place where all or substantially all of the interior of a residential condominium unit has been removed or replaced and, upon completion, the renovated or altered unit is, or forms part of, a residential complex.
c) CRA stated:
Where a conversion occurs, the number of units the person is considered to have constructed or substantially renovated is a question of fact that depends on the work performed on each individual unit.
d) CRA indicated that the only exemptions from the self-assessment rule in s. 191(1) were those in ss. 191(5) to (7).
Pavages Vaudreuil Ltée v. Agence du revenu du Québec, 2021 QCCQ 3890
In addition to being involved in construction (maintenance of roads, streets and bridges), the taxpayer (“PVL”) owned several natural gravel quarries and sand pits and processed sand, river gravel, crushed stone and earth.
PVL purchased three pieces of equipment (a wheel loader, compact excavator, and hydraulic thumb) and used them exclusively for the handling of materials already gathered by a cable shovel in connection with the washing, sorting and crushing of the various products intended either for sale (as to about 73% of the products) or for use by PVL (as to the balance).
In order for the purchases to have generated an investment tax credit for Quebec purposes, they were required inter alia to qualify as Class 29 property, i.e., property acquired by it to be used primarily in the manufacturing or processing of goods for sale. Under Reg. 130R12(c) and (e) (the Quebec equivalent of ITA Regs. 1104(9)(c) and (e)), “manufacturing or processing” was deemed to exclude “construction” and “extracting minerals from a mineral resource.” After finding that the para. (e) exclusion did not apply, and in now also finding that the para. (c) exclusion also did not apply because PVL’s construction and processing operations were distinct, Bourgeois JCQ noted that the operations’ respective customers differed, the processing occurred at sites distinct from the situs of the construction projects, only 26.67% of the processed product was used in the construction operation and, indeed, the two operations could have been operated independently of each other, and there was separate accounting. The appeal was allowed.
5 February 2013 External T.I. 2012-0465591E5 F - Form T5018
A landscaping company carries out different types of construction under some landscaping contracts such as excavation and rock fill, the installation of unistone or concrete sidewalks and the construction of small terraces or flower boxes. The invoice does not provide a breakdown of the price between the different types of work. Does its income come primarily from construction activity for the purpose of the T5018 slip filing requirement? CRA responded:
[T]he term "construction" in its ordinary meaning and …[Reg.] 238(1) … are broad enough to include most of the projects that could be qualified as landscaping. For example, some projects could be considered as the installation or improvement of a structure on the surface or sub-surface, the surface being the land or property.
A construction activity could include a task required to complete that construction activity or achieve the result of that construction activity, even though that task might not be a construction activity in itself if it were the only task performed in the framework of a landscaping project. As a result, it may not be appropriate to analyze revenues and separate them according to the tasks performed.
1096288 Ontario Limited v. Canada, 2010 FCA 332
The appellant moved existing homes onto lots after putting in foundations, hooked the homes into services and sold the lots. In affirming the finding of Paris J that the appellant was engaged in the “construction or substantial renovation” of residential complexes and, thus, was a builder, Evans JA referenced (at para. 3) the meaning accorded by Paris J to “construction” of “the act of forming something by putting together parts,” and stated (at para. 4):
Counsel says that unless there has been a change to the frame of a residence there has been no “construction” of it. We disagree. The term “construction” in its ordinary sense is not this narrow, but can include, as the Judge found, forming the residential complex by putting the house and the land together.
9 November 2016 External T.I. 2014-0537121E5 F - Overseas employment tax credit
Do marine dredging activities (i.e., the excavation of sediments from the seabed to allow or facilitate marine traffic) qualify as part of a construction project under s. 122.3(1)(b)(i)(B)? CRA responded:
[D]redging to allow shipping traffic through the creation of channels could constitute a construction project within the meaning of clause 122.3(1)(b)(i)(B).
There is nothing to exclude the possibility that maintenance or expansion of existing channels may also represent a construction project… .
[T]herefore… channel maintenance or widening may also be a construction project… .
22 November 2011 External T.I. 2011-0404021E5 F - Revenu des entrepreneurs
CRA takes the position that renovation of buildings or work on water supply and sewage systems is not a "construction activity" under IT-92R2, and, therefore, the completion method is not available for such contracts. Where only some of the contracts performed by contractors are covered by IT-92R2, they may use the completion method described in para. 12 of IT-92R2 only in respect of the construction contracts.