THE GST AND REAL PROPERTY TRANSACTIONS

Transcription

1 THE GST AND REAL PROPERTY TRANSACTIONS TABLE OF CONTENTS Page I. INTRODUCTION 1 II. PURCHASE AND SALE OF REAL PROPERTY 1 A. DEFINITIONS 2 1. Builder 2 2. Real Property 3 3. Residential Complex 3 4. Multiple Unit Residential Complex 4 5. Sale 4 6. Supply 4 7. Substantial Renovation 4 8. Commercial Activity 5 B. RESIDENTIAL REAL PROPERTY 5 1. Sales of Used Residential Complexes 5 (a General Rule - Exempt 5 (b Certificates under Section Sales of New "Residential Complexes" 6 (a General Rule - Taxable 6 (b GST Rebates on New Homes 7 3. Condominium Fees and Co-operative Housing Fees 9 C. COMMERCIAL REAL PROPERTY 9 1. General Rule - Taxable 9 2. Subsection 221(2 - No Obligation to Collect GST 9 (a Purchaser/Registrant to Self-Assess 9 (b Sale 11 (c Time of Registration for the Purchaser 11 (d No "Due Diligence" Defence Failure to Collect the GST 14 D. OTHER DISPOSITIONS Placing Farm Property in JointTenancy Special Situations Involving Farm Land 17 (a Sale by Individual to Related Individual 17 (b Change of Use offarm Land - Commercial to Personal 17 (c Sale by Corporation to Shareholder Mixed Sales Sales of Personal Use Properties Adventure or Concern in the Nature of Trade Residential Trailer Parks 20 III. LEASES OF REAL PROPERTY 20 A. RESIDENTIAL LEASES 20

2 Page B. COMMERCIAL LEASES General Rules 21 (a Basic Rent 21 (b Additional Rent 21 (c Percentage Rent Tenant Inducements 22 (a Rent-Free Periods 23 (b Cash Payments 23 (c Improvements to Leased Premises Farm Leases 24. IV. SPECIAL SITUATIONS 24 A. CHANGE IN USE 24 B. SELF-SUPPLY RULES 25 C. CONSTRUCTION CONTRACTS Deposits Holdbacks 27 D. COMMISSIONS, LEGAL FEES AND OTHER DISBURSEMENTS 27 E. FORECLOSURES AND JUDICIAL SALES 28 F. MORTGAGES AND SECURITY INTERESTS 28 G. CEASING TO BE A REGISTRANT 28 V. CASE STUDY 29 VI. CONCLUSION 32 Schedule A - Certificate under Section Schedule B - Form GST 190E, "New Housing - Application for Rebate ofgoods and Services Tax" 34 Schedule C - Form GST 60, "Goods and Services Tax Return for Acquisition of Real Property" 36 Schedule D - Certificate ofpurchaser Under Subsection 221(2 37

3 THE GST AND REAL PROPERTY TRANSACTIONS I. INTRODUCTION Since the Goods and Services Tax (the "GST" came into effect on January 1, 1991, there have been numerous amendments to the Excise Tax Act (Canada(the "Act". The purpose of this paper is to update practitioners on changes to the GST legislation relating to real property. Conceptually, the GST is rather simple. For the most part, the tax is levied at the rate of 7% on the consideration paid or payable for goods and services. The GST becomes more difficult when dealing with real property because there are numerous exceptions to this general rule. This factor, together with the amendments made to the Act in S.C. 1993, c.. 27 (formerly Bill C-1l2, have served to make the legislation all the more complex as it relates to real property. n. PURCHASE AND SALE OF REAL PROPERTY.. Unless specifically exempted, the GST will be levied on all sales of real property. Where real property is concerned, the important exemptions deal with residential real property, personaluse land owned by individuals or trusts, and certain dispositions of farm land to related individuals. However, even when the GST is required to be charged, it does not necessarily follow that the vendor will have an obligation to collect GST on closing. Thus, when dealing with purchases and sales of real property, two important questions arise: 1. Firstly, is the sale subject GST? 2. Secondly, if it is, does the vendor have an obligation to collect GST on closing? To arrive at the answers to these questions, it is necessary to have an understanding of a few basic definitions.

4 -2- A. DEFINITIONS 1. Builder A "builder"l is defmed with reference to a "residential complex" or an addition to "multiple unit residential complex" and means a person who: 1. Has an interest in real property on which the complex is situated, and carries on the construction of a complex, an addition to the complex or a substantial renovation in respect of the complex; 2. Acquires an interest in the complex when it is under construction or the subject of a substantial renovation; 3. Makes a supply of a mobile home or floating home before it has been used or occupied by any individual as a place ofresidence; 4. Ac,quires an interest in a complex: (a In the case of a condominium complex or residential condominium unit, at a time when the complex is not registered as a condominium; or (b In any other case, before it has been occupied by an individual as a place of residence or lodging; for the primary purpose of selling the complex or an interest therein, or leasing it to persons (other than individuals who will not be using it in the course of a business or an adventure or concern in the nature oftrade. Excluded from the defmition of "builder" is a person who carries out construction or a substantial renovation for his or her own personal use. The concept of a '.'builder" is one who engages in the construction or substantial renovation as a business or "commercial activity". A person may also be deemed to be a builder where that person converts non-residential real property to a residential complex but does not engage in any construction or substantial 1. Excise Tax Act (Canada (the"act". ss. 123(1. definition of "builder". (Unless otherwise noted. all references to statutory provisions shall be references to the Act.

5 - 3 - renovation of the property. It should be noted, however, that a person will only be deemed to be a builder, in the case of an individual, where the individual does so in the course of a commercial activity. 2. Real Property "Real property" includes: 1. Immovable property and every lease thereof (in the Province ofquebec; and 2. All lands and every estate or interest in real property, whether legal or equitable (in all other places in Canada. For the purposes of the GST, the concept of real property goes further and also includes a mobile home, a floating home and any leasehold or proprietary interest therein Residential Complex A residential complex includes a detached and semi-detached house, row house units, an apartment, a residential condominium unit, a mobile home and a floating home. As well, it includes a summer cottage, a vacation home, a student residence, and a residence for elderly and infmn persons. 3 Where owner-occupied homes. are concerned, the deftnition "residential complex" requires that the home be used "primarily" as a place of residence of the individual, an individual related to the individual, or former spouse of the individual. For these purposes, the concept of "primarily" is normally interpreted by Revenue Canada to mean more than 50%. Even if you have an area in your home that qualiftes as an "office", provided that this area does not comprise more than 50% of the home, the home will still qualify as a "residential complex". A residential complex will not include a hotel, motel, inn, boarding house, lodging house or similar premises where "all or substantially all" of the residential units are leased or expected (1, definition of "real property". 5s. 123(1, definition of "residential unit" and "residential complex".

6 -4- to be leased for periods of less than 60 days. The phrase "all or substantially all" is interpreted by Revenue Canada to mean 90% or more Multiple Unit Residential Complex A "multiple unit residential complex"5 is a residential complex containing more than one residential unit. It does not include a condominium complex. s. Sale A "sale" includes any transfer of ownership of the property and a transfer of the possession of the property under an agreement to transfer ownership of the property Supply A "supply" means the provision of property or a service in any manner, including sale, transfer, barter, exchange, licence, rental, lease, gift or disposition. 7 Given that this definition appears to make a distinction between "sale" and "gift", it would appear that the definition of "sale" does not include a "gift". 7. Substantial Renovation A "substantial renovation"8 has relevance in terms of a residential complex. It means the renovation or alteration of a building to such an extent that all or substantially all of the building that existed immediately before the renovation or alteration (other than the foundation, external walls, the interior supporting walls, floors, roof and staircases has been removed or replaced and after the renovation or alteration the building is or forms part of a residential complex For a contrary view from the courts, see Wood v. M.N.R. 87 D.T.e. 312 (T.e.e., where the court held the term "all or substantially all" does not lend itself to a simple mathematical formula and that the Minister of National Revenue might be hardpressed to dispute a claim where the percentage was 89%,85%,80% or lower. Ss. 123(1, definition of "multiple unit residential complex". Ss. 123(1, definition of "sale". Ss. 123(1, definition of "supply". The description of a "supply" is subject to Sections 133 and 134. Ss. 123(1, definition of "substantial renovation".

7 -5-8. Commercial Activity The tenn "commercial activity"9 has been amended by the introduction of a new profit test for partnerships. Other than that, the revised wording of the definition results in a condensation and clarification of the previous definition. A commercial activity of a person means: 1. A business carried on by the person other than: (a a business carried on by an individual or partnership, all of the members of which are individuals, without a reasonable expectation ofprofit; or (b A business to the extent it involves the making of exempt supplies by the person; 2. An adventure or concern of the person in the nature of trade other than: (a an adventure or concern engaged in by an individual or a partnership, all of the members of which are individuals, without a reasonable expectation of profit; or (b an adventure or concern in the nature of trade to the extent it involves the making of exempt supplies by the person; and 3. The making of a supply (other than an exempt supply by a person of real property of the person, including anything done by the person in the course of or in connection with the making of the supply. B. RESIDENTIAL REAL PROPERTY 1. Sales of Used Residential Complexes (a General Rule - Exempt The sale of a used "residential complex" will generally be exempt from GST due to the fact that it constitutes an exempt supply. 10 Because an exempt supply is not a commercial activity, no GST need be levied Ss. 123(1, definition of "commercial activity". Ss. 123(1, definition of "exempt supply"; also see Schedule V, Pan I as it relates to real property.

8 -6- Generally, a residential complex will be considered "used" if from the time it was substantially completed it has either: 1. been sold (and no input tax credit has been claimed by the purchaser; or 2. has been occupied as a place of residence. It is this exemption that allows the sale of "used homes" (which most lawyers are familiar with to take place without GST consequences; (b Certificates under Section 194 When purchasing a residential complex, the purchaser should obtain a written certificate from the vendor stating that the property purchased qualifies as an exempt supply described in any of Sections 2-5.3, 8 and 9 of Part I of Schedule V. If this is done and it later turns out that the sale of the real property was taxable rather than exempt, then the vendor will be responsible for the payment of GST rather than the purchaser (except in circumstances where the purchaser knew or ought to have known that the supply was not exempt.l1 The use of the certificates in residential real property transactions is quite common. An example of such a certificate is found at Schedule "A" to this paper. 2. Sales of New "Residential Complexes" (a General Rule - Taxable When a new residential complex is constructed by a builder, its sale will be subject to GST. An exception to this is where a builder has constructed a residential complex for rental or uses it for his own residence, and has claimed input tax credits during the course of construction. In these circumstances the "self-supply" rules in s. 191 would require the builder to remit GST directly to the Federal Government based on the fair market value of the complex. Because the property would not be used in a commercial activity once construction has been completed, no input tax credit could be claimed. Thereafter, when the builder goes to sell the complex, no GST would have to be charged because the GST has been paid by the builder. 11. s. 194.

9 -7- (b GST Rebates on New Homes In order to off-set the impact of the GST on the price of new or substantially renovated single family housing, the Act provides for a rebate. The rebate applies to detached homes, semidetached homes, row houses, residential condominium units, mobile homes, floating homes and duplexes (hereinafter collectively referred to as a "complex". In order to be eligible for the rebate, the following conditions must be satisfied: A builder must sell the complex to an individual; 2. The individual must acquire the complex as a primary place of residence for that individual or a relation of that individual; 3. The total consideration for the complex must be less than $450,000;13 4. The GST must be paid before the rebate will be given; 5. Ownership of the complex must be transferred to the individual after construction or a substantial renovation is substantially completed;. 6. The complex must-not previously have been occupied by anyone as a place ofresidence or lodging, except in the case of a residential condominium unit where it may be occupied by an individual (or a relation of that individual who was a purchaser under an agreement of purchase and sale; and 7. The first occupant following substantial completion must be the individual or a relation of that individual. Nonnally, the GST would have to be paid in full before an application could be made for the rebate. However, it is possible for purchasers of new homes to assign their GST rebate to the builder and thereby reduce their up-front financing. 14 The fonn required to make the Ss.254(2..Given s. 138, where particular property or services are supplied along with and incidental to the provision of the residential complex, the cost of those incidental goods or services (which could include things such as built-in appliances will be considered as pan of the total consideration for the residential complex. 5s.254(4.

10 -8- application for the rebate is Form GST 190E, "New Housing - Application for Rebate of Goods and Services Tax". A copy of this form is found at Schedule "B" to this paper. The rebate is calculated as follows: Consideration for Property 0-$350,000 More than $350,000 but less than $450,000 $450,000 or more Value of Rebate Lesser of: (a 36% of GST paid; or (b $8,750 A x ($450,000 - total consideration $100,000 where "A" is the lesser of: (a $8,570; and (b 36% of GST paid. No rebate Rebates also exist in other situations: 1. A rebate is available where residential complexes are supplied to an individual under an agreement to sell the house and lease the land under an agreement providing for a minimum lease term of 20 years or a lease with an option to purchase. The rebate in these circumstances is determined with reference solely to the consideration paid for the house without any reference to the lease of the land A partial rebate exists where an individual purchases a share in a co-operative housing corporation for the purpose of using a residential unit of that corporation as a residence Where an individual builds or substantially renovates his or her primary place of residence or hires some other person for that purpose, a partial rebate of the GST paid is available. I7 For these purposes, where an individual purchases a new and unoccupied mobile home, he or she is deemed to have constructed a home and can 15.. i S S.255. S.256.

11 -9- claim the new housing rebate for owner-built homes (this would only be done where the individual had not submitted a rebate application under s.254 or s Finally, where a person acquires land and pays GST in connection with that purchase, a partial rebate of the GST paid is available where that person leases the land under certain exempt conditions due to the fact that the Lessee is acquiring the land for the purpose of making supplies of residential rental accommodation Condominium Fees and Co-operative Housing Fees Fees paid to a condominium corporation by the owner or tenant of a condominium are exempt from the GST provided that the fees relate to use and occupancy of the unit. 20 A parallel exemption exists for charges levied by a co-operative housing corporation in respect of occupancy of residential units managed or owned by the corporation. 21 C. COMMERCIAL REAL PROPERTY 1. General Rule - Taxable Real property that is used in a "commercial activity" is subject to GST when sold. The principal question that lawyers must deal with in connection with sales of commercial real property is whether or not the vendor is under an obligation to collect the GST from the purchaser. 2. Subsection 221(2 - No Obligation to Collect GST (a Purchaser/Registrant to Self-Assess Normally, the person making a taxable supply of goods or services is under an obligation, as an agent of Her Majesty in Right of Canada, to collect the GST.22 The supplier is deemed to S5. 256(2.1. S Schedule V. Part I. Para Schedule V. Part I. Para S5. 221(1.

12 - 10- hold the GST so collected in trust until remitted or withdrawn in accordance with the terms of the Act.2~ An exception to this general rule exists in certain circumstances when there is a sale of commercial real property. These exceptions are set out in subsection 221(2 which reads as follows: 221(2 A supplier (other than a prescribed supplier who makes a taxable supply of real property by way of sale is not required to collect tax under Division II payable by the recipient in respect of the supply where (a (b (c the supplier is a non-resident person or is a resident of Canada by reason only of subsection 132(2; the recipient is registered under Subdivision d and the supply is not a supply of a residential complex made to an individual; or the recipient is a prescribed recipient. Essentially, subsection 221(2 provides that a vendor of commercial real property need not collect GST in circumstances where: 1. the vendor is a non-resident; 2. there is a sale of commercial real property to a person who is registered fo~ the GST; 3. there is a sale of residential property to a person who is registered for the GST, other than an individual; or 4. there is a sale to a prescribed recipient. (At the present time, there are no "prescribed recipients" for the purposes of subsection 221(2. With the vendor not being required to collect GST, the purchaser is required to self-assess the GST and is liable to account for such GST liability directly to the federal government. However, if the real property is used in commercial activities, the purchaser can claim an offsetting input tax credit. The result is that the GST does not affect the purchase price of 23. Ss.222.

13 commercial real property.24 The Purchaser should ftle Form GST 60, "Goods and Services Tax Return for Acquisition of Real Property". A copy of this is found at Schedule "e". (b Sale Subsection 221(2 only applies in circumstances of a "sale". Questions have been raised whether or not capital leases or long-term leases with options to buy at the end of the lease period for nominal consideration constitute "sales" for GST purposes. 25 If so, any arrangements like these involving real property could result in the GST being payable at the time of transfer of possession under the agreement,26 Furthermore, the lessee/purchaser, if a registrant, could make use of subsection 221(2 in these circumstances by self-assessing on the GST exigible on all payments under the agreement, and off-set the GST by claiming input tax credits. (c Time of Registration for the Purchaser One of the things that is not clear is the point in time at which the purchaser of real property must be registered in order for this provision to be effective. Should the purchaser be registered at the time the GST is payable (which occurs on the earlier of the transfer of ownership or possession of the real property27, or must the purchaser be registered at the time of the supply (ie. when the agreement is entered into? Revenue Canada appears to have taken the position that the purchaser need only be registered at the time the GST is actually payable. Thus, even if at the time that the agreement is entered into, the purchaser is not registered for the GST, provided that the purchaser is registered at such time as possession or ownership is transferred to the purchaser, both parties should be able to take advantage of subsection 221( Ss. 228(4 and (6. Glenn Ernst "GST and Real Property Transactions" in Advanced GST: An Update - The New Rules ~ Commercial Transactions (Canadian Bar Association, 1993,5. Ss. 168(5. Ss. 168(5.

14 - 12- Notwithstanding Revenue Canada's interpretation, the strict wording in subsection 221(2 refers to a: "taxable sulmly of real property by way of sale...ftol": (b "the recipient...registered under Subdivision d..." (Emphasis added. The wording in subsection 221(2 focuses on registration at the time of the taxable supply. Section 133 states that where an agreement is entered into to provide a property or service, the entering into of the agreement is deemed to be a supply. When dealing with real property transactions, normally a written agreement is entered into before the passing of ownership or possession. Thus, the "supply" takes place at the time the agreement is entered into. Where an agreement is entered into at a time when the purchaser is not registered for the GST, technically it would appear that the requirements of subsection 221(2 are not met notwithstanding that the purchaser becomes registered for the GST before the earlier of possession or ownership of the real property being transferred to the purchaser. It should be noted that even if subsection 221(2 did not apply, so long as the purchaser became registered for the GST in the reporting period in which the GST in respect of the acquisition of the real property becomes payable or is paid, the purchaser would still be entitled to an input tax credit. Subsection 169(1, which sets out the general rule in connection with input tax credits, provides that an input tax credit may be claimed in connection with a property or service supplied to a person in connection with a commercial activity where that person becomes a registrant during a reporting period. (d No "Due Diligence" Defence There is no "due diligence defence" that the vendor can rely on should it turn out that the purchaser of the real property is not a registrant for GST purposes. Revenue Canada has suggested that the vendor obtain a certificate or an affidavit from the purchaser confirming that

15 the purchaser is registered or is a prescribed purchaser. 28 Notwithstanding any such certificate or affidavit, however, should it turn out that the purchaser does not meet the requirements of Subsection 221(2, the vendor will be liable to collect and remit GST exigible on the transaction.29 In order to protect a vendor in these circumstances, consideration should be given to the following: 1. At the very least, a certificate should be obtained wherein the purchaser states its GST registration number. 2. Revenue Canada could be contacted by the vendor or the solicitor for the vendor to ensure the registration status of the purchaser. It would appear that officials of Revenue Canada are permitted to provide personal information regarding registrants to the extent that it may be reasonably regarded as necessary for the purposes of determining any liability or obligation of any person under the Act, or as may reasonably be regarded as necessary for the purpose of administration or enforcement of the Act Finally, the vendor would be well advised to obtain an indemnity from the purchaser with respect to the GST and any other amounts for which the vendor may become liable (including penalties and interest if the vendor does not collect the GST from the purchaser on closing in reliance on the purchaser having met the requirements of Subsection 221(2. It is recommended that the vendor obtain from the purchaser, either in a certificate or in the agreement of purchase and sale, the information, consents and indemnities noted above. A sample certificate in this regard is attached as Schedule "D" to this paper "Goods and Services Tax Round Table" in 1990 Conference Report (Canadian Tax Foundation, 1991: Question 13 at Page 27:10. Ss.221(l}. Ss.295(5}. Toronto,

16 Failure to Collect the GST In some circumstances, the vendor may fail to collect the GST from a non-registrant purchaser when selling commercial real property. This may happen in a situation where, for example, an acreage property is being sold, and the acreage has been used partly as a residence, and partly in a farming activity. Situations have occurred where the vendor has engaged a real estate agent and the property has been sold under a "standard form" offer to purchase with no thought given to the GST. The purchase and sale may end up closing without any GST being paid. If Revenue Canada later reassesses, the vendor is going to have a problem if the purchaser is unwilling to voluntarily pay the GST. In these circumstances, the vendor may be forced to sue the purchaser under section 224. One of the pre-conditions to being able to sue for the GST under section 224 is compliance with Subsection 223(1. This states as follows: 223(1 Where a registrant makes a taxable supply, the registrant shall indicate to the recipient, either in prescribed manner or in the invoice or receipt issued to, or in an agreement in writing entered into 'with, the recipient in respect of the supply, (a (b The consideration paid or payable by the recipient for the supply and the tax payable in respect of the supply in a manner which clearly indicates the amount of the tax; or. That the amount paid or payable by the recipient for the supply includes the tax payable in respect of the supply. It should be noted that Subsection 223(1 only applies to a registrant making a taxable supply. Thus, if the vendor was someone other than a registrant, it would appear that nothing need be placed in any sale agreement or invoice giving an itemization of the sale price and the GST. In the case of Alberta Ltd. (operating under the name and style of 838 Developments v. Lori R. Mensaghi,31 a contractor built a house for the defendant. The contract was silent on the GST. The contractor had to sue the purchaser for the net GST (after giving effect of the New Housing GST Rebate. The court held that the contractor had not complied with 31. Alberta Provincial Court (Civil Division, June 11, C.C.H. Goods & Services Tax Reporter (1993: looseleaf, Volume I, Paragraph

17 Subsection 223(1 because it failed to delineate in the documentation supplied to the purchaser the amount of the GST. With respect, this may be a rather technical conclusion. There is nothing in Subsection 223(1 which appears to prevent an invoice for GST being given separate and apart from the contract. It should be kept in mind that the vendor is merely suing to recover the GST as an agent on behalfof Her Majesty in Right of Canada. The vendor, if a registrant, should be permitted to provide an invoice to the purchaser for the GST, even if this is done after the agreement is made. The problem of failing to collect GST on the sale of commercial real property might be considered in light of a situation where a vendor sells real property to the purchaser in circumstances where both the vendor and purchaser believe it is exempt from GST. If the vendor provides the purchaser with a certificate under Section 194 [discussed at II(B(I(b above], the vendor would be prohibited from suing the purchaser for the GST that arose from the sale of the real property. Section 194 would be redundant if the purchaser could simply raise Subsection 223(1 as a bar to the collection of GST where the purchase and sale agreement is silent on the issue of GST. In order to give Section 194 meaning, the mere fact that a contract is silent on GST and does not give an itemization between the sale price and GST cannot, it is submitted, be enough to violate Subsection 223(1. D. OTHER DISPOSITIONS 1. Placing Farm Property in Joint Tenancy It is not uncommon for a farmer to place farm land in the names of both he/she and his/her spouse as joint tenants. Frequently, this will be done in conjunction with estate planning for a farm family. As most lawyers are aware, real property held in joint tenancy does not form

18 - 16- part of a deceased's estate for probate purposes. As such, probate fees will not be levied on this property.32 Strictly speaking, the transfer of farm land from one spouse to both spouses in joint tenancy should result in a taxable disposition of farm land that attracts the GST. Notwithstanding this, however, Revenue Canada, Customs and Excise, has an administrative policy whereby the transfer of an interest in farm property from an individual who operates a farm into joint tenancy with one or more related persons will not have immediate GST consequences if all of the following conditions are met: 1. The related person (the "non-farming joint tenant" is not involved in the farming business independently on his or her own account or as a member of a partnership. 2. The non-farming joint tenant does not independently receive any proceeds from the farming business which are treated as income on his or her own account. 3. The non-farming joint tenant is not currently registered for GST purposes or required to register as a result of being involved in the farming business. (He/she may be registered for reasons unrelated to the farming business. 4. The consideration paid by 'the non-farming joint tenant for his or her joint tenancy interest is nil or a nominal amount such as a dollar. If these conditions are met, the non-farming joint tenant will not be required to pay GST on the transfer of the farm property into joint tenancy, nor will the non-farming joint tenant be required to register for the GST. It should be noted that this policy is applicable to farm land used in the business of farming by the owner immediately prior to the transfer. It is not applicable in cases where farm land is rented. This administrative policy has the effect of simplifying the transfer of farm property into joint tenancy. However, the policy is not supported by the wording of the Act. Furthermore, by following the policy, certain problems could arise in the future. For example, if the initial 32. Queen's Bench Rule 701 and Form 104: also see The Oueen's Bench Fees Amendment Regulations (No.3. O.C. 995/92, dated October 29, 1992, Para. 5.1(3(a.

19 - 17- transferor (who is the registrant should be the first one to die, what are the GST consequences to the surviving joint tenant? Will GST be payable at that point in time? 2. Special Situations Involving Farm Land There are a number of situations involving farm land where what would otherwise be taxable dispositions are specifically exempt from GST. (a Sale by Individual to Related Individual Farm land may be sold by an individual to a relation33 or a former spouse without incurring GSTwhere: 1. The farm land was used by the vendor in a commercial activity that is the business of farming; 2. The farm land was not used immediately before the transfer by the individual in a commercial activity other than the business of farming; and 3. The farm land is.acquired for personal use and enjoyment by the transferee or any individual related to the transferee. 34 (b Change of Use of Farm Land - Commercial to Personal Where there is a change of use of farm land from commercial use to personal use, notwithstanding that this would usually trigger a deemed taxable supply with a consequent payment of GST,35 where farm land is involved, no GST will be payable.36 (c Sale by Corporation to Shareholder Finally, farm land may be sold on a tax-free basis by a corporation to a shareholder (or a person related to the shareholder or former spouse of the shareholder in circumstances where: S.126. Schedule V, Part I, Para. 10. Ss. 190(2 or 207(1. Schedule V, Part I, Para. 11.

20 Allor substantially all of the property of the corporation was used in the business of farming immediately before the transfer; 2. The transferee is a shareholder of or related to the corporation; and 3. The transferee, and/or spouse or child of the transferee is actively engaged in the business of fanning of the corporation; and 4. Immediately after the transfer, the fann land is used for the personal use and enjoyment of the transferee or individual related thereto. Parallel provisions exist inconnection with partnerships and trusts Mixed Sales Often times, a particular property has been used by a person for both commercial purposes and exempt purposes. Examples include the following: 1. an apartment building, the main floor of which bas been leased out commercially (for example, to a drug store/phannacy with the rest of the building consisting of residential leases; or 2. fann land, a portion of which consists of the residential homestead, and the balance of which has been used in the commercial activity offarming. When property such as this is sold, reference should be made to Subsection 136(2. Each of the "exempt" and "commercial" portions are treated as separate properties. Only the portion of the property used commercially will attract the GST. 38 A reasonable allocation will be required to allocate the sale proceeds to the "exempt" as opposed to the "commercial" property sold. It is important that the allocation that is chosen is used consistently for GST and income tax purposes Schedule V, Part I, Para. 12. "Goods and Services Tax Round Table" in 1990 Conference Report, supra, Question 17, at Page 27:12. Also see Michael Atlas, "GSTand Residential Real Estate" in 1990 Conference Report, at 32:9.

21 Sales of Personal Use Properties As a general rule, any sale of personal-use real property made by an individual is exempt from the GST. 39 This exemption also extends to trusts all of the beneficiaries (other than contingent beneficiaries of which are individuals, and all the contingent beneficiaries of which, if any, are individuals or charities. For the purposes of this exemption, a reference to personal-use real property is a reference to things such as country properties, vacation farms, hobby farms and other non-business land. 5. Adventure or Concern in the Nature of Trade A question frequently arises in connection with the disposition of real property as to. whether the gain or loss resulting from the disposition is on account of income or capital. Ifthe gain is on account of capital, for income tax purposes only three-quarters of the gain must be included in income. If the gain is an income gain (ie. business income, the entire gain must be included in income. For income tax purposes, the word "business" is defmed in Subsection 248(1 of the Income Tax Act (Canada to include an "adventure or concern in the nature of trade". This phrase has been the subject of a great deal of litigation. In connection with the disposition of real estate, a gain on the disposition may be treated as business income even if the vendor is not regularly in the business of trading real estate. A Court will consider such factors as the length of time that the property is held, the intention of the vendor at the time that the property is acquired (ie. was the real property purchased fu order to re-sell it at a profit, or was it purchased to hold in order to earn rental income off it or use it in other business operations of the vendor, the nature of the fmancing of such property, and whether the disposition of the real estate is in any way related to any other business of the vendor.40 The issue as to whether or not the disposition of the real property is an "adventure or concern in the nature of trade" has relevance for GST purposes. If the person disposing of the real Schedule V. Part I, Para. 9. One of the leading cases in detennining whether a transaction is an "adventure or concern in the nature of trade" is M.N.R. v. James A. Taylor, 56 D.T.C (Exch. Ct.

22 - 20- property determines that the gain or loss on disposition will be a business gain or loss because it is an "adventure or concern in the nature of trade", that person may wish to make an election for GST purposes that the sale is taxable. The advantage of making such an election for GST purposes 41 will arise in a situation where the vendor had to pay GST when he or she initially acquired the real property. Any unclaimed portion of GST actually paid by the vendor on his/her original acquisition of the real property could be claimed on the disposition of the real property Residential Trailer Parks A supply of land comprising of a residential trailer park is exempt from GST where the transferor acquired the property in an exempt transaction, or was later required to pay GST to the government in connection with the property without being able to claim any input tax credits in circumstances where there was a conversion or change in use. 43 ill. LEASES OF REAL PROPERTY A. RESIDENTIAL LEASES A lease of a residential complex (for example, a house or a unit (for example, an apartment by an individual where it is occupied by that individual for a period of at least one month. is exempt from GST.44 Furthermore, short term accommodation where the rental charge does not exceed $20 for each day of occupancy is not subject to the GST.45 (Short term accommodations which do not meet this criteria, such as hotels and motels, are taxable. Most apartment leases and house rentals are exempt from GST. (Residential landlords are not Schedule V. Part I, Para. 9(b; also see Form GST 22: "Election to Treat the Tax Exempt Supply of Real Property by Way of Sale by an Individual or Trust as a Taxable Supply". If the owner is a non-registrant. s.257 permits the non-registrant to claim, at the time of sale. a rebate equai to the lesser of the total tax payable on the acquisition of the property and improvements made thereon, and the tax on the consideration received for the sale. H the owner is a registrant, s.193 allows an input tax credit to be claimed equal to lesser of the total tax payable on the acquisition of the property and improvements made thereon, and that tax on the consideration received for he sale. Schedule V. Part I, Para Schedule V. Part I. Para. 6(a. Schedule V. Part I, Para. 6(b.

23 ' entitled to recover the GST paid on purchases, repairs, improvements or expenses as they relate to residential complexes and residential units.46 Other lease situations which are exempt for GST purposes include the following: 1. A lease of a parking space for a period of at least one month where a lease of space is incidental to the lease of a residential premises in connection with a house, apartment, a site in a residential trailer park, residential condominium unit, or floating home; A lease of land for a period of one month or longer to the owner or lessee of a mobile home;48 and 3. The lease of a wharf or moorage facility to a person who is the owner, tenant or occupant ofa floating home. 49 B. COMMERCIAL LEASES 1. General Rules (a Basic Rent The supply of real property by way of a commercial lease is considered to be a taxable supply. As such, the rents will be subject to the GST. For these purposes, the rent on which the GST is calculated would include the "basic" rent which is paid by the tenant (for example, $8 per ft2. (b Additional Rent Tenants are often required to contribute, by way of additional rent, to the expenses incurred in connection with the property such as property taxes, heating, ventilation and air conditioning ("HVAC", utilities, janitorial services, snow removal and management. This "additional Because these residential leases are exempt supplies under Schedule v, Part I, they do not meet the definition of "commercial activity" in ss. 123(1. Therefore, no input tax credits may be claimed under s Schedule V, Part I, Para Schedule V, Part I, Para. 7. Schedule V, Part I, Para

24 - 22- rent", provided that it is payable pursuant to the terms of a lease, would be viewed as consideration under the lease and give rise to OST. In some circumstances, particularly where the tenant is not engaged in a "commercial activity" and therefore is not eligible for input tax credits on its rent (for example a doctor, the tenant may wish to have the lease drawn in such a way that certain items would not be considered "additional rent". For example, an amount charged by a municipal government for water is normally considered to be an exempt supply and does not give rise to OST. 50 If a tenant in these circumstances can arrange to have the payment made directly to the municipality, rather than to the landlord under the lease, then arguably the OST could be avoided on that expenditure. A similar consideration would exist for a tenant's obligation to obtain insurance. As insurance is a fmancial service and therefore an exempt supply,51 tenants will want to be able to make their own arrangements for insurance and not share in the cost of the landlord's policy. (c Percentage Rent. Any amount paid as "percentage rent" (which is usually calculated with reference to the gross revenues of the tenant from the leased premises will also be subject to OST. In some circumstances, "gross revenue" on which percentage rent is calculated is defmed in leases to include such things as sales taxes paid by tenant's customers. Should that happen, effectively you will have a situation where OST is paid on OST. 2. Tenant Inducements It is not uncommon in a commercial lease to have tenant inducements. These can take many forms including: 1. The reduction or elimination of rent; 2. Cash payments made by the landlord to the tenant; and Schedule V. Part VI. Paras. 22 and 23. Schedule V. Part VIT.

25 An allowance or reimbursement for costs incurred by the tenant with respect to the leased premises. 52 (a Rent-Free Periods It appears to be Revenue Canada's position that where the landlord provides a rent-free period to the tenant and the landlord and tenant operate at arm's length, the rent-free period is treated as a supply for nil consideration. Thus, there are no GST consequences.53 (b Cash Payments Where a cash inducement is paid by the landlord to the tenant, Revenue Canada appears to regard the payment as resulting from a situation where the tenant has made a taxable supply of a service to the landlord. That service is the agreement by the tenant to enter into a lease. The tenant, if a registrant, is required to collect the GST. The landlord, if a registrant, is subsequendy permitted to claim an input tax credit for any tax so paid or payable. (e Improvements to Leased Premises Where the landlord makes the improvements directly to the leased premises and contracts out the work, GST would be payable by the landlord on the contract price and an input tax credit would be able to be claimed. If instead, the landlord makes a payment to the tenant intended to reimburse or compensate the tenant for expenses that it incurred in carrying out improvements, the landlord would be considered to have received a taxable supply in which respect of which GST is payable. In drafting the lease agreement as it relates to a lease inducement, where money is to be paid by the landlord to the tenant by way of reimbursement for expenses incurred by the tenant, the wording should be clear as to whether the money paid is inclusive of GST, or whether GST is to be paid in addition to the amount so stated as being the lease inducement Tecbnicallnfonnation BulletinB-Q54 dated April IS. 1991, "Application of the Goods and Services Tax (GST to Lease Inducements". The situation may be different where the landlord and tenant do not deal at ann's length. See s. ISS.

26 Farm Leases Where fann land is leased out on a cash basis, GST will have to be charged on the rent. However, where there is a lease of fann land on a crop share basis, and the crop in question is IIzero-rated II54, no GST need be charged on the rent.55 IV. SPECIAL SITUATIONS A. CHANGE IN USE Real property may be acquired for one purpose (ie - commercial, and later be used for another purpose (ie - residential. The Act provides that where there is a change in use ofreal property from commercial to non-commercial use, there will be a Irecapture"56 of any input tax credits previously claimed in proportion to the change in use and a resulting liability to the federal government. Similarly, where the use of the real property changes from a noncommercial to a commercial use, a claim for input tax credits will be allowed to the extent of the change in use {provided that GST was previously paid in connection with the property57. Conceptually, this make sense in light of the fundamental policy regarding the GST as it relates to real property. quite complex. 58 However, the rules contained in the Act to implement all of this are When a person initially acquires real property, their claim for an input tax credit is governed by their IIintendedII use for that property.59 Provided that the intended use for the real property is exclusively in the course of commercial activities of the registrant, the entire amount ofthe GST paid or payable in connection with the property may be claimed as an input Schedule VI, Part IV, Para. 2. Essentially these are grains or crops ordinarily used as or to produce food for human consumption or feed for farm livestock or poultry, when supplied in aquantity larger than ordinarily sold or offered for sale to consumers. It would not include any grains or seed mixtures that are packaged, prepared or sold for use as feed for wild birds or as pet food. Schedule VI, Part IV, Para. 9. Also see GST Memoranda: , "Agriculture and Fishing" (February 19, 1992, Para. 28. ' Ss. 206(4 and (5. Ss. 206(2 and (3. Generally speaking, the rules are found in s Ss. 169(1. J

27 - 25- 'I tax credit. While the original input tax credit claim is based on intended use, the change-inuse rules will apply to actual use. Insignificant changes of less than 10% of total use of the property will not be treated as a change in use, unless it causes a cessation of commercial use or causes an individual to use capital property primarily for his or her personal use and enjoyment.60 Individuals are not entitled to claim any input tax credits where real property is acquired primarily for personal. use and enjoyment of the individual or a related individual. 61 Furthermore, no input tax credits may be claimed on any improvements to such real property. 62 Because of this more limiting factor, special rules are required for individuals where there is a change in use. 63 It should be noted that where an individual uses real property partly for commercial activities and partly for exempt activities (ie. non-commercial activities that do not relate to personal use and enjoyment, input tax credits could still be claimed to the extent ofthat use. Forexample, where a doctor owns a building and 60 percent of the building is used for that doctor's medical practice (ie. an exempt use and 40 percent is leased out to commercial tenants (ie. a.commercial use, the doctor c;ould claim input tax credits to the extent of the commercial use of the property (ie. 40 percent. B. SELF-SUPPLY RULES The self-supply rules 64 are designed to deal with situations where a builder constructs or substantially renovates a residential complex and subsequently rents it out or uses it for his or her own residence. These rules help ensure that the builder receives the same GST treatment as other persons who had purchased new or substantially renovated residential complexes for residential purposes S.I97. 5s.208(1. 5s.208(4. Generally see s. 207 and 208. Generally see s. 191.

28 - 26- Since the GST was enacted, there have been three significant amendments to the self-supply rules: 1. Firstly, the self-supply rules are extended to apply to situations where a builder sells a house and leases the related lands; 2. Secondly, a clarification has been introduced that pre-closing occupancy arrangements (ie - circumstances where occupancy is provided to the purchaser prior to the closing as part of the purchase and sale agreement do not trigger the self-supply rules; and 3. Thirdly, new subsection 191(10 has been added. This provides that where a builder leases a residential complex or an addition thereto, and the lessee is acquiring the complex to rent to an individual as the sub-lessee's place of residence, the builder is deemed to have given possession of the complex to the individual as a place of residence under the lease agreement. The result is that the self-supply rules will apply to the builder who will be acquired to account for GST on the fair market value of the complex. There is an exception to the self-supply rules where the residential complex or addition thereto is constructed or renovated by an inqividual builder and used primarily as a place of residence for that individual builder (or related individual or former spouse, and the individual builder has not claimed any input tax credits in respect of the acquisition or improvement to the complex. 65 As well, the self-supply rules will not apply in the following situations: 1. Where the builder constructs a residential complex (for example, a new house for sale and does not lease it out. 2. Where a builder constructs a building and leases it to commercial, as opposed to residential, tenants. 3. Where an individual, other than a builder, constructs a home for use by that individual as a place ofresidence for the individual and/or related persons. 65. ss. 191(5.

29 - 27- C. CONSTRUCTION CONTRACTS 1. Deposits Where there is a taxable supply, the general rule is that the GST is payable on the earlier of the day that consideration for the supply is paid and the day that consideration for supply is due. 66 Where, however, a deposit has been given in respect of the supply (whether that deposit is refundable or not, the consideration is not considered to have been paid in connection with that deposit until it is applied by the supplier as consideration for the supply Holdbacks Where holdbacks are maintained on a construction project pursuant to The Builders' Lien Act,68 or pursuant to an agreement in writing for the construction, renovation or alteration of a repair to any real property, the GST on that holdback is payable on the earlier of the day that it is paid and the day that it becomes payable. 69 D. COMMISSIONS, LEGAL FEES AND OTHER DISBURSEMENTS Given that the GST applies to services, the following expenses will be taxable on the purchase and sale ofproperty: 1. Legal fees. 2. Real estate commissions. 3. Many of the disbursements charges by a lawyer in handling a real property transaction such as photocopying, telephone and postage charges will be subject to GST if the legal service is taxable. However, where a law fmn incurs and -pays the Land Titles Registration costs in the name of or as agent for the client, no GST should have to be charged Ss. 168(1. Ss. 169(9. In the event of aforfeiture, s. 182 applies. S.S , c. B-7.1, as amended. Ss. 168(7. Schedule V, Part VI, Paragraph 20(a exempts the application of GST on the supply of aservice of registering any property or filing any document in any property registration system.

30 - 28- E. FORECLOSURES AND JUDICIAL SALES The general rule is that where there is a "seizure or repossession" resulting from a foreclosure or a judicial sale, no GST will be payable. 71 When the GST was ftrst proposed, one confusing situation that existed was what the GST consequences would be in circumstances where land was transferred to a creditor as part of a debt settlement. Technically, no seizure or repossession had taken place. Therefore it appeared that the normal rules in connection with. the transfer of real property would have applied. However, new Subsection 183(9 provides that where property is voluntarily transferred by one person to another for the purpose of satisfying in whole or in part a debt or obligation, the creditor is deemed to have acquired the property by way of seizure or repossession. Thus, no GST will apply. F. MORTGAGES AND SECURITY INTERESTS A supply of fmancial services is an exempt supply.72 "Financial services" include the payment or receipt of interest on mortgages and other debt securities. 73 As such, interest expense in relation to money borrowed for the acquisition of real property is not subject to GST. As well, when an owner of real property grants a mortgage in that property, no "supply" is deemed to have taken place. Furthermore, on the discharge of a mortgage or forgiveness of debt, the re-transfer of the property or any interest therein shall be deemed not to be a supply.74 Thus, the granting of a mortgage or its discharge will not be subject to GST. G. CEASING TO BE A REGISTRANT When a person ceases to be a registrant, they are required to account for GST on a deemed disposition of property in the last GST return to be f1led. This will ensure a recapture of GST credits previously claimed , S Schedule v, Part VII. Ss. 123(1, definitions of "financial service" and "financial instnlment". S.134. Ss. 171(3 deems the person to have ceased, immediately before ceasing to be a registrant, to use the property in commercial activities and to have sold the property to himself or herself for its fair market value and collected the applicable GST. Where capital property is concerned, the person is deemed to have ceased using that property in.

31 - 29- v. CASE STUDY Mrs. Davis has entered into an agreement to sell an acreage consisting of 25 acres to Mr. Jackson for the sum of $60,000. Mrs. Davis has been living on this property and uses approximately one acre of it for her house and surrounding yard area. The balance of the property (24 acres has been rented out to a neighboring farmer on a cash-rent basis. Mrs. Davis has reported the net income from the rental of this land on her tax return every year. Mr. Jackson is registered for the GST. A written agreement is entered into between Mrs. Davis and Mr. Jackson on a "standard form" offer to purchase prepared by a real estate agent. No mention has been made of nor has any thought been given to the GST. Mrs. Davis and Mr. Jackson have now been referred to your law firm by the real estate agent and you must complete the transaction ensuring that the GST is properly accounted for. Additional information that you should be aware of is as follows: 1. The real estate commission payable by Mrs. Davis is $4, Each of the purchaser and vendor will pay legal fees to your law firm in the amount of $195. The purchaser will be responsible for all land titles registration costs arising from the transfer of the land. The transaction in question is considered a "mixed" sale of a residential complex and commercial real property. By virtue of subsection 136(2, there are deemed to be two separate property sales: 1. One sale relates to the residential complex consisting of the home and surrounding yard area of one acre. This property has been occupied by Mrs. Davis as her principal residence. Its sale is exempt from GST. 2. A second sale is deemed to have taken place with respect to the balance of the farm land (24 acres which has been used in a commercial activity. This is a taxable sale. commercial activities immediately before de-registration, and the change in use roles will result in a "recapture" of input tax credits previously claimed.

32 - 30- It is necessary for the vendor and purchaser to come to an agreement on a reasonable allocation of the purchase price as between the residential complex and the farm land. In discussions with your clients, an agreement is reached to allocate $45,000 to the residential complex and $15,000 to the 24 acres of farm land. Having solved this initial problem, there are certain things that you as the lawyer must now deal with: 1. The sale of the residential complex is exempt from GST. Mr. Jackson, as the purchaser, will want to ensure that he receives from Mrs. Davis a certificate under section 194 regarding the ex,empt status of this property. By having this certificate, Mr. Jackson will have some protection should Revenue Canada later reassess this transaction on the basis that the sale of the house and surrounding 1 acre are not exempt from GST. In the event of such a reassessment, provided that Mr. Jackson did not know and could not reasonably have known that the sale of this property.was not exempt from GST, Mrs. Davis will be responsible for the GST on this property and any related interest and penalties. She will have no recourse against Mr. Jackson. 2. The sale of the remaining 24 acres of farm land is taxable. However, because Mr. Jackson is a GST registrant; Mrs. Davis is not under an obligation to collect the GST from Mr. Jackson. Mrs. Davis should obtain from Mr. Jackson a certificate for the purposes of subsection 221(2 [see Schedule "D" to this paper] and the lawyer should contact Revenue Canada to satisfy himself or herself of Mr. Jackson's GST registration. As well, it will be necessary for Mr. Jackson to me Form GST 60 with Revenue Canada, Customs and Excise, and account for this transaction in his next regular GST return. Mr. Jackson will have a liability for GST that must be paid to the federal government in the amount of $1,050 (ie. 7% of $15,000. However, provided that Mr. Jackson is going to use this land in a commercial activity, he can claim an offsetting input tax credit in the amount of $1,050. The result is that he will not have to payout any money for GST as it relates to the purchase price of the farm land.

33 Assuming that there is no adjustment for property taxes, the statement of adjustments for Mrs. Davis will look like this: VENDOR'S STATEMENT OF ADJUSTMENTS DAVIS TO JACKSON Sale Price $60, Less: Real Estate Commission Legal Fees GST(l Balance to Vendor $ 4, , $60, $60, (1 GST calculated as follows: Real Estate Commission Legal Fees GST(7% $4, , $ The statement of adjustments for Mr. Jackson will look like this: PURCHASER'S STATEMENT OF ADJUSTMENTS DAVIS TO JACKSON Sale Price Legal Fees Land Titles Registration Cost(l GST(2 $60, ,(( 13,65 Balance Required from Purchaser $60, $ ~60, (1 Provided that they are incurred in the name of Mr. Jackson, or by the law frrm as agent for Mr. Jackson, there should be no GST on the Land Titles registration costs. (2 GST calculated as follows: Legal Fees GST(7%

34 - 32- It should be noted that if the facts were a little different such that: 1. Mrs. Davis had used the farm land in the business offarming; 2. Mr. Jackson was acquiring all of the farm land for his personal use and enjoyment; and 3. Mrs. Davis and Mr. Jackson were related; the entire sale (including the 24 acres of farm land would be exempt from GST by virtue of Schedule V, Part I, Paragraph 10. VI. CONCLUSION Since January 1, 1991, lawyers have had to deal with the GST on a day-to-day basis. For lawyers who primarily do "solicitor" work, it is necessary to have an understanding of the GST as it relates to real property transactions. Only by keeping up with changes to the Act and the administrative practices of Revenue Canada can lawyers competently advise their clients in this area. Beaty Beaubier September 10, 199~ \word\office\gst-real.doc,

35 TO: RE: SCHEDULE "A" GST EXEMPTION VENDOR'S CERTIFICATE (the "Purchaser" (the "Lands" The undersigned Vendor(s does hereby covenant, represent, certify and warrant (jointly and severally, if more than one to the Purchaser that: 1. The Vendor is the owner of the Lands. 2. That the above mentioned sale of the Lands by the Vendor to the Purchaser is an exempt supply described in one of Sections 2-5.3, 8 & 9 of Part I of Schedule V to the Excise Tax Act (Canada. 3. This document constitutes a written certificate for the purposes of the Section 194 of the Excise Tax Act (Canada. Dated at day of, in the Province of Saskatchewan, this, A.D. 199_. SIGNED, SEALED & DELIVERED in the presence of: Signature of Vendor (seal Witness Print Name of Vendor Signature of Vendor PriDt Name of Vendor (seal

36 Revenue Canada Customs and Excise Revenu Canada Douanes et Accise NEW HOUSING APPLICATION FOR REBATE OF GOODS AND SERVICES TAX '~"{ use.~ indiyidu81s who purchase MW or IUbstantialIy renovaied housing, or who build MW housing or Jl'l&"'!aIly renovat xisting housing, or who purchase 8 share 01 the capital stock in 8 co-operative housing,...rporation in respect of 8single residential unlt,for use as 8 prim8iy place 01 residence lor themselves or 8 relation, and who qualifylor 8 r.~te under sections 254, 255 or 2S6 01 the Excise Tax Act SCHEDULE "B" PROTECTED when completed Personal infonnatlon provided on this form is protected under the provisions of the Privacy Act and is maintained in Personal Information Bank RCCJP PlJ.09O Mail to: GST Interim Processing Centre Ollawa, Ontario K1A 1J6 For more details and definitions of terms used In this application, refer to Form Completion Guide Cette formule est disponible en FRANCAIS Please print or type A - CLAIMANT IDENTIFICATION (Rebate to be claimed by one individual only Claimant's Last Name First Name and Initial(s I Address of Property (Number, Street and Apt. No. or P.O. Box No. or A.R. No. City Province Postal Code Telephone No. I I ( Mailing Address (Number, Street and Apt. No. or P.O. Box No. or A.R. No. (If different from above City Province Postal Code Telephone No. I ( Language Preference Preference Iinguistique Anglais Frangais or date of substantial completion I renovation Legal Description of Property (Lot, Concession, Plan, Range, Parcel, Section, etc. T ~ o English o French Date ownership of property was transferred to purchaser ~ ~ B - TYPE OF APPLICATION Check only one of the following. 10 The rebate claimed is for GST paid on housing purchased from a builder who has paid or credited the rebate to the purchaser. (Calculate the rebate in Part I of Section D. 2 0 The rebate claimed is for GST paid on housing purchased from a builder who is not paying or crediting the rebate to the purchaser. (Calculate the rebate in Part I of Section D The rebate claimed is in respect of the purchase of a share of the capital stock of a co-operative housing corporation. (Calculate the rebate in Part III of Section D. 4 0 The rebate claimed is for GST paid in respect of housing constructed or substantially renovated by the claimant. (Calculate the rebate in either Part I of Section D or Part II of Section D. Builder's Legal Name Address GST Account No. City lince The rebate was paid or ~ D credited to the claimant Yes Signature of Builder or Authorized Official If yes, provide the period of the GST Retum on which an adjustment was taken (Line 107: ITC Ad'ustments. Name (Print Postal Code Telephone No. ( IY,M,DIIY,M.D/ From~ To L-L-.l-L.J..-LJ Date

37 .;, CALCULATION OF REBATE (Complete only Part I, Part II or PART III T I Housing Rebate Where GST Was Paid On the Land That Forms Part of the Residential Complex or Unit (For use by claimants who checked box 1, 2 or 4 in Section B Total GST Paid I Payable on the Residential Complex or Unit or with respect to the Construction or Subtantial Renovation A $ Purchase Price I Fair Market Value (does not include GST B $ A:$ X 36% (maximum $8,750 C $ I I 1 If 8 is $350,000 or less, claim C or 2 If B is greater than $350,000, claim ($450,000 - B: $ XC:S =$ $100,000 (If""al"" ] enter zero. "1$ LJ Rebate Amount Claimed PART \I Housing Rebate Where GST Was Not Paid On the ':Bnd That Forms Part of the Residential Complex (For use by claimants who checked box 4 in Section B. Total GST Paid With Respect to the Construction Materials and Contracting Services 0 $ Fair Market Value (does not include GST E $ D:$ X 10% (maximum $1,720 F $ I I I 1 If E is $350,000 or less, claim F or 2 If E is greater than $350,000, claim ($450,OOO-E:$ X F:S =$ _ $100,000 (If negative enter zero. J ~---.,~I$ LJ Rebate Amount Claimed PART III Housing Rebate Where a Share of the Capital Stock of a Co-operative Housing Corporation Was Purchased (For use by claimants who checked box 3 in Section B Total Amount Paid for the Share of Capital S.tock G $ G:$ X 2.34% (maximum $8,750 H $ I I 1 If G is $374,500 or less, claim H or 2 If G is greater than $374,500, claim ($481,500-G:$ X H: S = $ _ $107,000. J--"'~I$ LJ (If negative enter zero. Rebate Amount Claimed E - CERTIACAnON It is hereby certified that: Signature of Claimant 1 The information given in this application is true, correct and complete in every respect to the best of my knowledge; 2 The amount claimed has not been previously claimed; 3 In addition to any documents submitted herewith, any other books and records are available for inspection; and 4 The rebate claimed is with respect to housing that: (i was newly constructed or substantially renovated, and the construction or renovation of which was substantially complete at the time of possession; and (ii at the time of possession, was for my use, or the use of a relation of mine, as a primary place of residence. FOR DEPARTMENTAL USE ONLY D Input Code D This form is prescribed by the Minister of National Revenue under the Exci~e Tax Act. Canada ' '

38 - 36- SCHEDULE "c" 1+1 Revenue Canada Customs. Excise and Taxation Revenu Canada. Accise. Douanes etlmpot 0001 PROTECTED when completed PROTEGE une fols rempll GOODS AND SERVICES TAX RETURN FOR ACQUISITION OF REAL PROPERTY TAXE SUR LES PRODUITS ET SERVICES - DECLARATION VISANT L'ACQUISITION D'IMMEUBLES Prescribed by the Minister of Nationa: Revenue under subsection 228 (4 of the Excise Tax Act Prescr~e par Ie rninistre du Revenu natior.al en venu du paragraphe 228 (4 de Ia Loi sur Ia taxe d'accise THIS RETURN IS FOR USE BY A PERSON WHO IS REQUIRED TO CETTE DECLARATION DOlT ETRE REMPLIE PAR TOUTE PERSONNE DECLARE AND PAY TAX ON THE ACQUISITION OF TAXABLE REAL QUI EST TENUE DE DECLARER ET DE PAYER LA TAXE SUR PROPERTY. L'ACQUISITION D'UN IMMEUBLE TAXABLE. TO COMPLETE THIS FORM, PLEASE REFER TO THE INSTRUCTIONS ON THE BACK. IF ADDITIONAL INFORMATION IS REQUIRED, REFER TO MEMORANDUM POUR REMPLIR CETTE FORMULE VEUILLEZ LIRE LES INSTRUCTIONS AU VERSO ET LE MEMORANDUM SI NECESSAIRE. IF YOU NEED ASSISTANCE, CONTACT YOUR LOCAL REVENUE SI VOUS AVEZ BESOIN D'AIDE, COMMUNIQUEZ AVEC VOTRE CANADA EXCISEIGST DISTRICT OFFICE. BUREAU LOCAL DE REVENU CANADA, ACCISE - TPS. Name of Individual or Entity / Nom du particulier ou de I'entite Acquis~ion Date / Dale d'acquis~ion GST Account Number Y~A D/J Numero de compte TPS I I I I I I I I I I I I I I I I I I I I I I I I I I ~ I I Trading Name if Dillerenl From Above / Nom de la raison sociale s'i1 dilli!le de I'entite ou du nom Due Date / Dale d'echeance Y/A M D/J I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I, I I I I I I Mailing Address (No., Street and Apt. Number / Adresse postale (n', rue, app. I I I I I r I I I I I I I I I I I I I I I t I I I I I I I I I I I I I I I I I I I I City/Ville I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I Province I I Postal Code / Code postal I I I I I I I I I I I I I I I r I I r I I I I I I I I I I I t I I I I I I I I Name of the Person We May COnlact Concerning Your Return INom de ia ~,sonr.e avec qui nous pouvons communiquer concernanl votre declaralion Telephone No./ N' de telephone I I I I I I I I I I I r I I I I I I I I I I I I I I I I t ( I I I I - I I I I l'iption and Address of Property / Description et adresse de I'immeuble I I I r I r r I I I I I I I I I I I I I I I I I I I I I I I I I I I t I I r I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I' I I I I I I I I I I I I I I Vendor's Name and Address / Nom et adresse du vendeur I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I ITota, Taxable Acquisition Total d' acquisition taxable 201 /payment Enclosed Paiement inclus 1 I I I I I I I I I I I I I, I I LJ I I I I LJ ~ MUL TlPL Y BY/ MUL TlPLIEZ PAR.07 Ollsel the tax due to the exlent of my refund enlitlemenl on my regular GST return for the period ITax Due Taxe due B I, I I I oending: Y/A I M I D/J I I I I I Veuillez compenser la taxe due par Ie montant du I I I I ~ You are not required to remit a balance of less than remboursement de TPS vise dans ma declaration Vous n'{i1es pas lenu de payer un montant inferieur ij 1.00 S pour la periode qui vient de prendre fin: CE~nFJCAT'ON I DECLARAnON.:."~.:.. ~~:.:..?;..-:..., '_...\. ~!i;;,...,..:,. _J':~ '... ~. { -. "- ".. ':.: ~.I... '," :-.,..... '.~ -. ~,.,.. '..'...'. I cenify that the information given in lhis relurn is lrue. correct and co::'lp:e:e in every respect and that I am Je declare que les renseignements fournis sont exacts el complets sous tous les rappons et que j'ai authorized 10 sign on beha" of the person filing this return. I'autorisation de signer au nom de Ia personne qui produ~ III presente declaralion. Name/Nom Title/Tilre Signature Date.. IT IS A SERIOUS OFFENCE TO MAKE A FALSE RETURN LA PRODUCTION D'UNE FAUSSE DECLARATION EST UNE INFRACTION GRAVE \ t-~.,;jnal information provided on this form is protected under the provisions of Les renselgnements personnels fournis dans celie formule sont proteges en the Privacy Act and is maintained In Persona/Information Bank RCC/P-PU 065 vertu de la Loi sur la protection des renseignements personnels et sont conserves dans Ie Repertoire de renseignements personnels RND/P PU 065 Part 1 DETACH AND FORWARD TO PROCESSING CENTRE Partie 1 - DETACHEZ ET FAITES PARVENIR AU CENTRE DE TRAITEMENT PROVISOIRE ~ ~11.1,,~n~(l~

39 - 37- CERTIFICATE GIVEN BY PURCHASER PURCHASING COMMERCIAL REAL ESTATE To the Vendor: The undersigned does hereby certify, covenant, represent and warrant to the Vendor that: (a The undersigned is purchasing from the Vendor the following Land, namely: (b (c (d The undersigned is a Registrant for the purposes of the Goods and Services Tax under the Excise Tax Act (Canada, and has Registration Number. This information and certificate is given for the purpose of -ad"t'v... is... in-g-t::'th-e-;r-v endor of this registration and relieving the Vendor of the responsibility of collecting the GST by virtue of Paragraph 221(2(b of the Excise Tax Act (Canada; The Vendor and/or the solicitors of the Vendor, namely, Priel, Stevenson, Hood & Thornton be and are hereby irrevocably authorized and permitted to contact Revenue Canada to confirm such GST registration, and Revenue Canada and its various agents and representatives are hereby authorized to provide information to the Vendor and/or the solicitors for the Vendor, namely Priel, Stevenson, Hood & Thornton, confirming the status of the undersigned's registration for the purposes ofthe goods and services tax under the Excise Tax Act (Canada. In the event that Her Majesty The Queen In Right of Canada or any agent or department thereof shall reassess the Vendor and/or undersigned in connection with this transaction, and part of such reassessment shall be to the effect that the Vendor should have collected the goods and services tax from the undersigned and the exception for the responsibility of collecting the goods and services tax under Subsection 221(2 of the Excise Tax Act (Canada does not apply, the undersigned shall indemnify and save harmless the Vendor for all costs, expenses and charges of every and any nature whatsoever arising from, incidental to or related to such assessment or reassessment including but not limited to any legal fees and disbursements incurred by the Vendor (on a solicitor and client basis as well as any sums that may be payable by the Vendor under the Excise Tax Act (Canada including but not limited to goods and services tax, interest and/or penalties. Dated this day of Saskatchewan. SIGNED, SEALED AND DELIVERED in the presence of:, A.D. 1993, at Saskatoon, in the Province of