REAL ESTATE CHAPTER THREE G.S.T. AND REAL ESTATE PRACTICE Materials prepared by Alison Butler, Barrister & Solicitor, Port Williams, Nova Scotia for Continuing Legal Education, April 20, 1991.
TABLE OF CONTENTS I. LIABILI'lY FOR GST ON REAL PROPER'lY TRANSACTIONS 3 2. SALES OF RESIDENTIAL REAL PROPER'lY 5 a) Definition of Residential Complex 5 b) Sales of New Residential Housing 6 c) Sales of Used Residential Housing 7 d) Sales of Residential Apartment Complexes 8 e) Renovations 9 f) Self Supply 10 3. Sales of Personal Use Property...................................... 11 4. Sales of Farmland... 5. Leases of Residential Property... 12 13 6. Sales of Commercial Property a) Mixed Use Property b) Change of Use c) Sale of all or Substantially all of the Assets of a business 7. Leases of Commercial Property... 8. Sales of Property by MUSH... 14 14 15 16 17 17 APPEND IX 1................................................... 19 APPENDIX II... 22 APPENDIX III... '.'... 23 APPEND IX IV.................................................. 24 APPENDIX V... 28 APPEND IX VI.................................................... 29
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INTRODUcnON These materials assume that the reader has a basic understanding of how the GST impacts on ordinary commercial transactions. The focus hereafter will be on how the GST affects property transactions. References to the "Act" are references to the Excise Tax Act. Fortunately several factors have combined to give lawyers some lead time to become familiar with the new GST regime. While they were getting systems in place to handle the collection of GST on legal fees and disbursements a recession has depressed the number of property transactions which closed during the first few months of 1991. Most of those transactions involved used residential property which is exempt from GST. This time of reflection is nearing an end and the number of questions will increase substantially over the coming months. I. LIABILI'IY FOR GST ON REAL PROPER'IY TRANSAcnONS As in any ordinary commercial transaction the general rule is that the recipient of real property must pay the GST and the vendor of real property must collect and remit the GST.l If all property transactions were, without exception, subject to the GST the rule would pose little or no difficulty for lawyers who would show the GST on all closing statements and turn proceeds over to vendor who would remit to the Receiver General 1 Excise Tax Act, Bill C-62, section 221(1) 3
directly. Unfortunately the general rule is inapplicable to the bulk of real property transactions and special rules are legion. As lawyers we will have to analyze each situation with care to confirm to our clients whether or not GST will have to be remitted and if so which party to the transaction should bear the burden of doing it. There is nothing specific in the Excise Tax Act itself that makes lawyers personally liable for payment of the GST if it is not remitted at the time of closing. Nevertheless we will be expected to advise our clients as to their liability and we, with the trust funds in our accounts, may be in the best position to write the cheque to the Receiver General 2 Appendix I to this paper summarizes the inquiries which must be made to determine if GST is payable. There are a number of circumstances where the vendor of property is not required to collect and remit GST: 3 1. Non-resident vendors are not required to remit and tax owing must be remitted by the purchaser along with the requisite form. The procedure parallels the Income Tax treatment of non-resident vendors. 2. Sales of non-residential property to GST registrants. 3. Sales of real property to prescribed recipients. Lawyers must take care not to hold themselves out as agents for the purposes of the GST. 2. A vendor who is a registrant should remit the GST paid by a purchaser directly in his regular return. In circumstances where the vendor is not a registrant it may be the lawyer should remit directly. 3. Excise Tax Act, Bill C-62, section 221(2) 4
If they can be regarded as having made a taxable supply on behalf of a vendor the liability of that vendor to remit GST becomes the agent's liability". If an agency relationship were established the lawyer could become personally liable for GST which was not remitted in respect of a real property transfer. Lawyers should clarify the solicitor-client relationship at the outset in order to avoid any possibility that they would be regarded as agents within the meaning of section 177. In short the legal liability of a solicitor in respect of GST on real property transactions is an issue which has yet to be considered in any depth by Revenue Canada and answers have not been forthcoming. I have not found a specific provision in the Act which would enable Revenue Canada to place a lien on property transferred to a purchaser as a result of failure of the vendor to remit GST. One official confirmed to me that provided the purchaser had paid the tax to the vendor the property that was the supply could not be subject to any collection procedure. The liability to remit remains with the vendor. It is my opinion it is prudent for lawyers to obtain certificates (for examples see Appendix IV) from their clients or to add appropriate representations to Matrimonial Property affidavits so that the GST status of a transaction can easily be ascertained by subsequent purchasers.(see Appendix V) Since the general principle is that all supplies are subject to tax, the reasons for exemption ought to be stated by the parties in a manner that makes the information readily available. Several samples of certificates are attached as appendices to this paper. J 4. Excise Tax Act, Bill C-62, section 177 5
2. SALES OF RESIDENTIAL REAL PROPERlY a) Definition of Residential Complex The term "residential complex" is defined by section 123 and includes the following: - detached homes; - semi-detached homes - rowhouse units - mobile homes; - condominiums; - multi-unit apartment buildings; - non-profit and private nursing homes; facilities primarily used as a student residence at a university college or school; - group homes for the mentally or physically handicapped. - land and common areas associated with any of the above buildings. The tax exempt status of each of the above mentioned buildings is determined first by whether it is new or used and second by its use or intended use. Land and common areas will also be included in the definition. The amount of land to be included will be a question of fact. However, It may be important to distinguish between land that is part of a residential complex and land that is personal use property. If a building is used primarily as a residence its exempt status will continue until such time as it is no longer used as such. If a commercial activity has been carried on in the house it will not be considered a residential complex. A minor commercial use such as a bed and breakfast operation will not affect its exempt status. 6
b) Sales of New Residential Housing Purchasers will be required to pay GST in respect of new homes, condominiums, residential rental units. A GST rebate will reduce the effective rate from 7% to 4.5% on homes (single family dwellings) costing less than $350,000. The rebate declines to 0 between $350,000 and $450,000 and is 7% in respect of amounts in excess of $450,()()()"5. The primary responsibility for collecting GST and for obtaining the rebate rests with the supplier 6 Purchasers of finished new homes should not have to concern themselves with the mechanics of paying GST other than to ensure when entering into an agreement of purchase and sale, that they are receiving the benefit of the lower effective rate of GST. It is apparent to me that there is considerable room for negotiation in establishing the final GST included price between developer and purchaser some attention by lawyers on both sides of a transaction, should be given to representations made in contractors' agreements. Since contractors will bear the liability if a rebate was paid when it should not have been they may well wish to pass on to the purchaser the obligation to apply if they have any doubt about the use to which the property will be put? A rebate application may be made up to four years after closing. 8 Purchasers who buy land on which they intend to build a new home should determine S.Excise Tax Act, Bill C-62, section 254 6. Excise Tax Act, Bill C-62, section 221(1) 7. Excise Tax Act, Bill C-62, section 254(6) / 8 Excise Tax Act, Bill C-62, section 254(3) 7
whether it would be to their advantage to pay GST in respect of that land. The rebate available to new home buyers is substantially less if GST has not been paid in respect of the lot. See Appendix II c) Sales of Used Residential Housing The sale of used residential housing is exempt. 9 Determining whether a particular property is used residential housing may not be as straightforward as it seems. If GST was paid upon purchase or in respect of later renovations and an input tax credit claimed by the vendor GST may be payable. Purchasers should receive warranties from vendors that the property has been used primarily as a residence from the time of purchase. The profession is undecided as to the form such warranties should take. One suggestion is that they be added as a fifth clause in the Matrimonial property affidavit. It is this writer's contention that neither a vendor nor a purchaser should be asked to swear to or certify a legal conclusion i.e. that a particular transaction is exempt from GST. Rather, the individual should swear to the facts that support that conclusion. (see Appendix IV) Since the property transferred is not itself subject to a lien for the GST owing in respect of the transfer there is no legal rationale for recording the factual underpinning for the GST in the deed. Nevertheless it is a reasonably convenient and simple way of dealing with the issue on transactions involving used residential property. Warranties should be included in all agreements of purchase and sale. Although the real estate industry has been somewhat slow to respond to the need to address the issue in every 9. Excise Tax Act, Bill C-62, Schedule V section 9 8
transaction a general policy has now developed. lo If you manage to see an agreement of purchase and sale before signing you will have a rare opportunity to resolve the complex questions to determine the burden of GST. (See Appendices ill and VI) d) Sales of Residential Apartment Complexes Apartment buildings containing residential rental units in existence prior to 1991 are exempt from GSTupon sale. Purchasers must be sensitive to several factors which could affect the exemption: If the vendor is not registered it is likely that the building can be considered 100% residential. If a vendor owns several buildings some of which are co=ercial he will be registered and the purchaser should have a warranty regarding the exempt status of the building. Many buildings have mixed uses and the proportion of residential property to co=ercial property must be clearly established. The agreement of purchase and sale should therefore have attached a reasonably detailed description of the use of the building on a square footage basis and the vendor should warrant the percentage of the building used as residential units and co=on areas for residents. Parallel warranties should be obtained from the vendor on closing. Perhaps the most convenient form for such warranties is a certificate signed pursuant to section 194 of the Excise Tax Act. (See Appendices) If a tenant is using one or more residential units to operate a business then GST will be payable by the purchaser and should be collected by the vendor. l.agents add the following words after the purchase price in agreements: "PLUS ALL APPliCABLE TAXES INCLUDING TIlE GOODS AND SERVICES TAX" 9
GST on equipment such as appliances may have to be paid. If a renovation has been undertaken by the owner input tax credits may have been obtained in respect of these costs and GST may be owing in respect of the added value of the renovation. Care should be taken by lawyers to communicate to their clients where appropriate, the obligation upon real property owners under the Act, to "self-assess". The major circumstances under which the obligation arises are where renovations are carried out and where the use of the property changes. It is this writer's contention that the level of compliance with the self assessing requirement will be low and lawyers should take the opportunity to inform clients of their potential liability for GST at the time they purchase the property. e) Renovations The term "substantial renovation" is defined in section 123 of the Act and means renovation or alteration of substantially all the building except the foundation, roof,fioors, staircases, exterior walls and interior support walls. 11 An owner who does the work himself to his own home for his personal use will pay GST only on the materials and to the extent he obtains services of contractors. Professional renovators who purchase homes, "substantially" renovate them and resell will be required to charge GST to purchasers of such homes and will be eligible for input tax credits on the purchase of goods and services used in the business. Non-substantial 11. Excise Tax Act, Bill C-62, section 123 10
renovations falling outside the definition will not be subject to this rule. 12 Used housing which has been acquired, renovated, and resold will be exempt and such renovators will have to absorb the GST. f) Self Supply In order to ensure that consistent treatment among all owners of residential real property is achieved, do-it-yourselfers who build or substantially renovate houses for resale will have to pay extra GST on the value added to the property by non-gst costsl 3 The device used by the legislation is to deem the builder to have both made and received the taxable supply at the time of substantial completion or the time possession is given to the purchaser. It is unlikely that individual small scale builders will be aware to their obligation to self-assess GST and inquiry ought to be made and a certificate obtained. The GST is calculated on the fair market value of the property at the time. Although he has the benefit of input tax credits he must pay the GST promptly. An individual builder who has paid GST on all his materials and uses the residential complex primarily as his residence following substantial completion will not be required to comply with this. rule. 14 The 12. Excise Tax Act, Bill C-62, section 192. Such renovators are treated as having both made and received a supply of real property for consideration equal to the total of all amounts that would have been included in determining the adjusted cost base to the person of the complex for Income Tax purposes. See also Self -supply. 13 Excise Tax Act, Bill C-62, section 191 14 Excise Tax Act, Bill C-62, section 191(5) 11
construction of a student residence by a school, university or college or of residences for employees on remote work sites are also excepted from the self-supply rule. 15 3. Sales of Personal Use Property A wide variety of properties in Nova Scotia can be characterized as personal use properties. Vacant land which has not hitherto been used for farming or some other commercial activity should not attract GST. Vendors in these types of transactions are generally not registered. Even if they are, unless the property is used primarily in the vendor's business or is sold in the course of a business these transactions are exempt provided the vendor is an individual (i.e. a natural person).16 A vendor who has claimed input tax credits in respect of the land may wish to take advantage of the election mechanism. 17 He will then be able to claim input tax credits in ) respect of the various costs of disposing of the property (real estate commissions and legal fees for example). An election also clarifies the property's status as taxable. H the purchaser is a registrant and can claim input tax credits he will be indifferent about paying the tax. As indicated earlier a purchaser buying vacant land for the purpose of building a 15 Excise Tax Act, Bill C-62, section 191(6) & (7) 16 Excise Tax Act Bill C-62 passed April 10, 1990 Schedule V section 9 17 Douglas Ewens, Riyaz Dattu & Blair Dwyer GST and the Real Estate Marketplace in Canadian Bar Association National CLE Program Advanced GST, October, 1990 at page 28 12
new home would be well advised to calculate his anticipated rebate on his new home to ascertained whether payment of GST on the land would be to his advantage. See Appendix 1. Vendor corporations, partnerships and non-qualifying trusts will not be exempt from GST in respect of the sale of vacant land. 18 The number of factual requirements needed to justify the exemption dictates either that the vendor's solicitor provide an opinion or that the vendor execute an affidavit setting out the factual detail l9. Registration of the affidavit attached to the deed would establish the factual background conclusively. As suggested earlier it may be feasible to include the necessary warranties in clause 5 of the Matrimonial Property affidavit. See Appendix 3) An alternative would be to have the vendor sign a certificate (See Appendices 4-6) 4. Sales of Farmland Arms length sales of farmland are subject to GST and the purchaser will be entitled to an input tax credit. A transfer of farm land to a relative for personal use and enjoyment is exempt. 2O If the land is to be used by the transferee in his farming operation it would be subject to GST. A farmer selling all or substantially all the property used in the farming business may jointly elect not to pay GST21. These three rules and their interrelation must 18. Ibid. at page 29 19. See Appendix A 20 Excise Tax Act Bill C-62 passed April 10, 1990 Schedule V Sections 10-12 21. Excise Tax Act, Bill C-62, section 167 13
be kept in mind when farm property is involved. The general exemption for used residential property may not apply to a farm home which is an integral part of the farm operation. The question of what is farmland must also be analyzed. Property not used for any purpose may be treated as exempt under Section 9 of Schedule lli. However, wooded land which has some commercial potential for stumpage or Christmas tree development may be subject to GST. Care should be taken to ascertain the facts and have the vendor certify them. The status of the property is generally determined by reference to the vendor's circumstances even though the purchaser is called upon to pay.22 5. Leases of Residential Property Residential rents are exempt from GST. Landlords will have to absorb GST they pay for goods and services required to make residential rental accommodation available to tenants. Services--heat, power, cleaning--which are included in rent will also be exempt from GST and landlords will not be able to claim input tax credits in respect of them. Tenants who pay for these services themselves will pay the GST. Landlords will gradually, as it is possible, subject to the Rent Review Act and the Residential Tenancies Act, attempt to recoup the extra expenses through rental increases. Cost cutting techniques for landlords involve the use of employees (whose salaries are not subject to GST) rather than independent contractors and self supply of services. 22. Excise Tax Act, Bill C-62, section 194 14
6. Sales of Commercial Property This subject will be dealt with in more detail in Robert Arkin's paper. The general rule that GST must be charged and collected by the vendor on all sales of commercial property is not as simple or universally applicable as might at first appear. A vendor who incorrectly states, or certifies in writing to a recipient that a transaction was exempt from GST, will be considered to have collected the tax and will be liable to remit the tax, unless the recipient knew or should have known that tax was payable. 23 Small suppliers are not exempt from GST in respect of real property.24 a) Mixed Use Property The use or intended use of property at the time of transfer is of central importance in determining the applicability of GST. Where property has a mixed use in the hands of the vendor careful analysis must be undertaken. If a property is primarily for personal use- more than 50% of its area--the purchaser will not be permitted to take an input tax credit 25 Generally a vendor will be indifferent as to whether the purchaser pays GST. If the vendor has obtained an input tax credit he will expect to collect tax from the purchaser. Attention should be given by the purchaser's solicitor to the allocation between personal, 23. Excise Tax Act, Bill C-62, section 194 and Explanatory notes issued February 20, 1990 24. Excise Tax Act, Bill C-62, section 166 25 Excise Tax Act, Bill C-62, section 208(1) 15
exempt and commercial use. The income tax considerations must also be kept in mind because the interests of the vendor and purchaser are opposite under the Income Tax Act as opposed to the Excise Tax Act. These matters ought to be the subject of negotiation between the vendor and purchaser and should be included in the agreement of Purchase and sale. They should not be left to chance. b) Change of Use H the use of a property is changed from commercial to residential without change of ownership, GST will have to be paid by the owner.26 The enforcement of this provision will not be easy. Therefore warranties by the vendor on closing, that GST has been paid will become very important.. Similarly if the use of a property changes from residential to commercial the purchaser ) would be entitled to claim a tax credit provided he has paid the tax. In this case it will be necessary for a non-registrant vendor to submit a return along with the tax owed27. The purchaser will require reasonable assurance that the tax has been remitted and may wish to have his solicitor remit it directly to the Receiver General. 26. Excise Tax Act, Bill C-62, section 206 27. Excise Tax Act, Bill C-62, section 226 16
EXAMPLE: A property came into existence after 1990. It was used for a period in a commercial activity. An input tax credit was taken in respect of the property. Later it was converted to a residence by the existing owner. That owner failed to pay GST. The property is sold as a used residence. Consequence: The vendor is liable for GST and should warrant to the purchaser that it has been or will be paid. The Act provides that insignificant changes in use will not result in a deemed disposition or acquisition of the property. The threshold is 10% of the total use. However, if the change of use is from primarily one purpose to primarily another purpose a 10% change would not be considered insignificant. 28 c) Sale of all or Substantially all of the Assets of a business In circumstances where a registrant is transferring all or substantially all of the;: assets of his business to another registrant the supplier and the recipient may file a joint election in the proper form such that no tax will be payable 29 The recipient shall thereby be deemed to have acquired the property for use exclusively in commercial activities. A personal 28. Excise Tax Act, Bill C-62, section 197 29 Excise Tax Act, Bill C-62, section 167(1) 17
representative of a deceased individual may make use of a similar joint election. 3O 7. Leases or Commercial Property GST is payable on all lease payments and landlords are entitled to input tax credits in respect of all GST paid out in connection with commercial space. Although the obligation to pay GST arises by operation of law it would be prudent also to include the obligation in leases so that landlords may take collection remedies against lessees as if there had been a default on lease payments. When rent is found to be uncollectible and is written off the landlord may then take an input tax credit equal to 7/107ths of the amount written off. Additional rents to cover services such as electricity, snow removal, garbage removal should not be calculated to include the GST because the landlords will obtain credit for any GST they pay to provide those services. It should be amended to reflect that GST will not be paid by lessees in respect of these services. Lease agreements which provide for percentage rents based on sales may have to be amended to recognize that the base for calculating sales has declined as of January 1, 1991 due to the removal of the Federal sales tax. 30. Excise Tax Act, Bill C-62, section 167(2) 18
8. Sales of Property by MUSH (municipalities, universities, schools and hospitals) The acronym MUSH also includes non-profit organizations and charities. Sales of real property by Mush organizations are exempt from GST as being non-co=ercial. 31 However, sales of property which are analogous to transactions involving co=ercial vendors will attract GST. 32 MUSH organizations may elect to have a transaction treated as a taxable supply.33 An election could be important particularly for properties whose use is divided between co=ercial and public sector activities. 31 Excise Tax Act Bill C-62 passed April 10, 1990 Schedule V Part VI section 25 32. Taxable transactions include: sales of vacant land, sales of new residential housing, sale or rental of real property used in co=ercial activities by the MUSH entity, short term leases of co=ercial property; short term acco=odations (except charities and hospitals)./ 33. Excise Tax Act, Bill C-62, section 211 19
APPENDIX 1 INOUIRY TO DETERMINE ENTITLEMENT TO AN EXEMPTION A SCHEDULE V PART 1 SECTION 2 SCHEDULE V PART 1 1. Is property a used residential complex? If NO, GO TO 1a IF YES, GO TO #2 1a. Is property a new residential complex? If NO, GO to B If YES, GST is payable 2. Is vendor the builder? If NO, GO to #3 If YES, GO to D 3. Has the residential complex been used primarily for residential purposes? If YES, GO to #4 If NO, GST IS PAY ABLE. DETERMINE PROPORTION OF USE 4. Has vendor claimed an input tax credit in respect of the property? If YES, GST IS PAYABLE If NO, GO to #5 5. Vendor should not have to collect GST and purchaser should not have to pay. B. SCHEDULE V PART I SECTION 9 Land without Buildings 6. Is the subject of the transaction real property other than residential or farmland? If YES, GO to #7 If NO, GO to C 7. Is the vendor an individual or a trust with individual beneficiaries? If YES, GO to #8 If NO, GO to E 8. Is the property used primarily in the vendor's business? [sec. 9(b )(i)] If YES, GST must be Paid Go to E and F If NO, GO to #9 9. Has the vendor filed an election in the course of an adventure or concern in the nature of trade that is not a business? [sec. 9(b)(ii)] If NO, Go to 10 If YES, GST must be paid GO TO E and F 20
10. Has the owner changed the use of the property resulting in a deemed sale? [sec.9(c)] If YES, GST must be paid Go to E and F If NO, GO to #11 11. Is the property a residential complex? [sec. 9( d)] If YES, GO toa If NO, the property is GST exempt. C. SCHEDULE V PART 1 SECTIONS 10 and 12 FARMLAND 12. Is the property farmland? If YES, GO to 13 If NO, GO to D 13. Is the vendor an individual? If YES, go to 14 IF NO GO to 13a 13a. If vendor is a corporation, Partnership or trust is purchaser an individual who is actively engaged in the business of the vendor? [sec. 12 (a)(ii),(iii) If Yes, GO to 14 If No, GO to 14a 14. Is the purchaser related to the vendor? If YES, GO to 15. IF NO, GST is payable GO TO E and F 14a. Is purchaser related to an individual who is actively engaged in business of vendor? (Spouse, former spouse, child or children) 15. Has the vendor used the property in the farming business and not in any other commercial activity? If YES, GO to 16 If NO, GST is payable GO TO F 16. Will the purchaser use the property for personal use and enjoyment of himself or a related person? If YES, no GST is payable (But refer to potential rebate loss) If NO, GST is payable GO TO F D. SCHEDULE V PART I SECTIONS 3, 4 and 5 17 Has the vendor, an individual related to the vendor, former spouse used the complex or addition primarily as a residence and not for any other purpose after construction or substantial renovation? If YES, GO to 18 IF NO, GO to 17a 21
17a Is the unit a multiple unit residential complex built by the vendor? If YES, GO to 18 If NO, GO to 17b 17b Is the property a single unit Residential complex or condominium built by the vendor? If YES, go to 18 IF NO, identify property category 18. Has vendor claimed an input tax credit for the purchase of or improvement to the Complex or addition? IF YES, GST is payable? GO TO F IF NO, GO to 19. 19. Has vendor paid GST under self-supply rules (s. 191)? IF YES transaction is exempt from GST If NO, GST is payable, GO TO F E. ELECTIONS I. Are all or substantially all of the assets being sold by the vendor If YES, GO to II If NO, GST is payable II. Have the vendor and the purchaser elected jointly in prescribed form to have the transaction exempt from GST? IF YES, transaction is exempt from GST If No GST is payable F. WHO REMITS THE TAX? 20. Is vendor a resident of Canada? If yes, GO to 21 If no, purchaser must remit tax 21. Is vendor a resident only because of having a permanent establishment? If no, GO to 22 IF Yes, purchaser must remit Tax 22. Is purchaser a registrant? IF NO, GO to 22a IF YES, GO to 23 22a. Is purchaser a "prescribed recipient"? If YES, purchaser pays tax If NO, GO to 23 22
23. Is property a residential complex sold to an individual? IF YES, vendor remits tax IF NO, purchaser remits tax 23
APPENDIX II GSI REBATE ON NEW CQNSTRllCIlON COMPARISON OF REBATE BASED ON GST OR NOT GST ON LOT PURCHASE :OST OF CONSTN GST ON FULL GST LIMITED DlFFERE MINGST CONSTN REBATE G S T NCE GST EXEMPT 36% REBATEI ON LOT LOT COST MAX $8750 0% FULL-LTD MAX $1720 ; 50,000 3,500 1,260 350 910 13,000 60,000 4,200 1,512 420 1,092 15,600 70,000 4,900 1,764 490 1,274 18,200 80,000 5,600 2,016 560 1,456 20,800 90,000 6,300 2,268 630 1,638 23,400 100,000 7,000 2,520 700 1,820 26,000 110,000 7,700 2,772 770 2,002 28,600 120,000 8,400 3,024 840 2,184 31,200 130,000 9,100 3,276 910 2,366 33,800 140,000 9,800 3,528 980 2,548 36,400 150,000 10,500 3,780 1,050 2,730 39,000 160,000 11,200 4,032 1,120 2,912 41,600 170,000 11,900 4,284 1,190 3,094 44,200 180,000 12,600 4,536 1,260 3,276 46,800 190,000 13,300 4,788 1,330 3,458 49,400 no,ooo 14,700 5,292 1,470 3,822 54,600!20,000 15,400 5,544 1,540 4,004 57,200 l30,000 16,100 5796 1,610 4,186 59,800!40,000 16,800 6,048 1,680 4,368 62,400!50,000 17500 6,300 1,720 4,580 65,429 260,000 18,200 6,552 1,720 4,832 69,029 $350,000 24,500 8,750 1,720 7,030 100,429 24
APPENDIX III GOODSANDSER~CESTAX AGREEMENT OF PURCHASE AND SALE RESIDENTIAL HOUSING SAMPLE CLAUSE - GST REBATE The Vendor rep'resents and warrants that the house on the property will be substantially completed before the Clos\ng and that as of the Closing it wil never have been occuj)ied by anyone as their place of residence. The Purchaser rel?resents and warrants that the PurchaSer IS acquiring the house for use as the primary resiaence of the Purchaser or a relation of the Purchaser. The Purchaser acknowledges that GST is payable in addition to the purchase ppce and the Purchaser agrees to assign to the Vendor any right to receive any rebate oftist or Federal Sales Tax (FST) that the Purchaser may be entitled to receive as a result of acquiring the property. The Purchaser agrees to submit to the Vendor on the Closing all forms duly executed and all information as required under the Excise Tax Act to enable the Vendor to receive the GST and FST rebates to which the Purchase would otherwise be entitled. The Vendor agrees to credit the Purchaser with the full amount of all such rebates of GST an~ FST ag1l!flst the balance due on Closing upon receipt of all completed documentation as required. 25
APPENDIX IV SELECIED CERTIFICATES CERTIFICATE USED RESIDENTIAL PROPERTY GST EXEMPT STATUS SCHEDULE V PART I SECTION 2 TO: The Purchasers FROM: The Vendors RE: The Property 1. Since the later of December 31, 1990 and the date on which we acquired the residential complex which is the subject of this transaction: a. We are not the builders of any residential complex (owner-occupied single family home, mobile home, semi-detached home, condominium or multi-unit apartment building) on the property. b. We are not the builders of any addition to any multiple unit residential complex on the Property. c. We have not claimed any Input Tax Credit in respect of the acquisition of or improvement to any residential complex on the Property. d. The Property and all residential complexes on it have been used primarily as a place of residence for individuals. I. We certify the above statements are correct knowing that we the Vendor(s) and not the Purchaser(s) will be responsible for any "GST' payable as a result of any misstatement made by us in this certificate. We signed this certificate on,199_. courtesy or and apologies to Garth Gordon 26
CERTIFICATE MADE PURSUANT TO SECTION 194 OF TIlE EXCISE TAX ACT LAND SOLD BY INDIVIDUAL(S) GST EXEMPT STATUS SCHEDULE V PART I SECTION 9 To: From: Property:., the "Purchaser(s)"., the "Vendor(s)"., the "Property" We, the Vendors in this transaction certify the following to the Purchasers: 1. We are individuals or a trust of which all of the beneficiaries are individuals. II. ID. IV. We are not using the Property primarily as a capital property in a business operated by us. We are not selling this Property in the course of any business operated by us. If we are selling this Property in the course of an adventure or concern in the nature of trade that is not a business (for example, a hobby farm) we have not and will not file an election to make this sale GST taxable. V. This is not a transaction to which the "change of use rules" in either s. 206 or 207 of the Act apply - a change of use by us, the Vendors, of capital real property partly or completely from commercial to non-commercial use of the Property or vice vena. Such a change in use of the property by you, the Purchaser, may result in GST payable by you. VI. VII. There is no residential complex (owner-occupied single family home, mobile home, semi-detached home, condominium or multi-unit apartment building) on the Property. The Property is not farm land. We certify the above statements are correct knowing that we the Vendor(s) and not the Purchaser(s) will be responsible for any "GST' payable as a result of any misstatement made by us in this certificate. We signed this certificate on -', 199_. courtesy Garth Gordon 27
CERTIFICATE FOR TRUSTEE GST EXEMPT STATUS Schedule V Part I section 2 made pursuant to Section 194 of the Excise Tax Act TO: The Purchasers From: The Vendors RE: The Property I/we certify 2. mat I am a trustee of a trust of the Property, all the beneficiaries of which are individuals. 3. mat the Property was not used primarily in the course of a business within the meaning of the Goods and Services Tax provisions, Part IX, of the Excise Tax Act (Canada). 4. mat the sale of the Property is not made in the course of a business within the meaning of the Goods and Services Tax provisions, Part Ix, of the Excise Tax Act (Canada). 5. mat the sale of the Propeznr is not made in the course of an adventure or concern in the nature of trade that is not a tiusiness where an election has be made for the sale to be taxable within the meaning of the Goods and Services Tax provisions, Part IX, of the Excise Tax Act (Canada). 6. mat the sale of the ProI?erty is not a sale of real pnmerty under the change of use rules in either Section 206 or 207 of Part IX, of the Excise Tax Act (Canada). Dated at this day of, 1991 signed recommended by New Brunswick Bar 28
CERTIFICATE MADE PURSUANT TO SECTION 194 OF 1lIE EXCISE TAX ACT land SOLD BY INDIVIDUAL(S) GST EXEMPT STATUS SCHEDULE V PART I SECTION 9 TO: * The Purchasers FROM: * The Vendors RE: * The property I1We * of, County of, Province of Nova Scotia DO HE'REih' C~"E""R"'I""IF"'--}'~: ----...: ----- 1. THAT I am/ we are the vendor(s) of the prollerty. 2. THAT during the time I/we have owned the Property from to the present. it has been use(1 primarily as residential housi~ withm the meamng of the Goods and Services Tax provisions of the Excise Tax Act(Canada). 3.THAT the Property is not new residential housing within the meaning of the Goods and Services Tax Provisions of the Excise Tax Act. 4.THAT no substantial renovation to the PrQPerty has takenj>lace within the meanij:!g of the Goods and Services Tax provisions of the Excise Tax Act (Canada) during the time l/we have owned the Property. 4. THAT no substantial renovation to the Property has taken place within the meaning of the Goods and Services Tax provisions of the Excise Tax Ac (Canada) since January 1, 1991. S.THAT I/we have not claimed any input tax credit with resl?ect to the acguisition of or capital improvement to the ProI1erty Wlthin the meaning of the Goods ana Services Tax provision of the Excise Tax Act (Canada. DATED at, this day of 1991. courtesy New Brunswick Bar / 29
APPENDIX V GOODSANDSER~CESTAX REPRESENTATIONS TO SUPPORT ENTI1LEMENT TO EXEMPTIONS ADD CLAUSE 5 TO AFFIDA~ OF STATUS: 5. THAT the sale of the property described in the fo~in& deed is an exempt supply of property for the pu!'poses of Part IX of the Excise Tax Act. CxJurk:Sy of _ POwdI 5. THAT the propel1y described in Schedule "A" hereto has been occupied by us primarily as a residence and was in existence prior to 1991. couriciiy of ASH 5.THAT the property described in Schedule "A" hereto is vacant land and has been not used by us for any purpose other than personal use and enjoyment. 6.THAT we are not Registrants under Part IX of the Excise Tax Act. Note: I regard these as deficient in several ways: a) They deviate from the language used in the Act. b) They do not address all ot t1ie circumstances that should be considered in eacli case. c) They contain legal conclusions of which clients generally have little knowledge. d) The Act contemplates certificates which do not have to be registered. 30
1. Is vendor a registrant? 2. Registration number of vendor? APPENDIX VI CHECKLIST FOR GST EXEMYTIONS VENDORS 3. Is the vendor an individual or a corporation? 4. If vendor is not an individual is it a public sector body? 5. Purpose for which property has been used: a) Primarily as a residence b) More than 50% in a commercial activity c) Personal use: cottage or vacant land d) Has the use of the property changed while owned by the e) farmland? f} Mixed use: allocation must be made. 6. Is vendor a Canadian resident? CHECKLIST FOR EXEMPTIONS PURCHASERS 1. Is purchaser a registrant? 2. Registration number of purchaser. 3. Is purchaser an individual or a corporation? 4. If purchaser is not an individual is it a public sector body? 4. Intended use of Property by purchaser: a) Primarily as a residence b) More than 50% in a commercial activity c) Personal use: cottage or vacant land d) Intended use by the purchaser--change from that of vendor? e) farmland? f} Mixed use: allocation must be made. NOTE: This checklist elicit sufficient information to complete the decision tree in Appendix I. / 31