GST Implications Relating to the Movement of a Building that Previously Formed Part of a Residential Complex
Please note that the following Policy Statement, although correct at the time of issue, may not have been updated to reflect any subsequent legislative changes.
GST/HST Policy Statement P-154
Date of Issue
September 6, 1994
Subject
The GST implications relating to the movement of a building that previously formed part of a residential complex.
Legislative Reference(s)
Subsection 123(1) of the Excise Tax Act - definitions of "real property", "residential complex", and "substantial renovation"; other provisions of the Excise Tax Act which affect input tax credits, new housing rebates, and self-supply rules with respect to a residential complex; exemptions under Part I of Schedule V to the Excise Tax Act.
National Coding System File Number(s)
11870-5
Effective Date
January 1, 1991
Text
This policy statement discusses the GST implications relating to the initial purchase of a house forming part of a residential complex that is to be relocated and subsequently supplied. In addition, this paper discusses whether a GST new housing rebate may be claimed by individuals who purchase such houses or move their own houses for personal purposes. This policy paper does not apply to mobile homes or floating homes since land is not required to be supplied with such homes to be considered a supply of a residential complex.
A. GST Status of Initial Purchase of a House for Removal and Relocation
The sale of a residential building (other than a mobile home or a floating home), without the land, that is being moved to a new location is not considered to be the sale of a "residential complex". In all provinces except Quebec, the house is also not considered to be "real property", but rather tangible personal property, unless the house is being relocated within the same legal description in which it was previously situated.
Where a house is being relocated to a new legal description, the exempting provisions in Part I of Schedule V to the Act relating to the sale of a residential complex, or of real property in provinces other than Quebec, do not apply since the house would be considered tangible personal property. The sale may, however, be exempt if section 5.1 of Part I of Schedule V to the Act applies, or, in all provinces except Quebec, not subject to GST if the saleis made by a non-registrant. In the province of Quebec, and in any province where the house is relocated within the same legal description in which it was previously situated, the supply is not a supply of a residential complex but may be that of real property and, therefore, may be exempt under section 5.1 or section 9 of Part I of Schedule V to the Act.
As tangible personal property, in all provinces except Quebec, a registered purchaser whose commercial activity is that of acquiring such houses for relocation and resupply may be entitled to claim input tax credits if GST is applicable and the requirements for claiming input tax credits have been met. Where GST does not apply to the acquisition of the house, a notional input tax credit equal to 7/107 of the amount paid for the house may be available pursuant to the provisions of section 176 of the Act.
Since a supply of a house in the province of Quebec, or in any province where the house is relocated in the same legal description in which it was previously situated, is the supply of "real property" and not of tangible personal property, the provisions of section 176 of the Act will not apply in such case in respect of the acquisition of the house. Input tax credits will be available, however, to the extent that GST was paid on the acquisition of the house in the course of a commercial activity.
B. GST Status of Supplies of Relocated Houses
Where a house (other than a mobile home or floating home) is severed from the land and moved from the underlying real property (i.e. relocated to a new legal description), the relocation of the house on to the new lot will be considered by the Department to be the construction of a residential complex for purposes of the Act. Consequently, the GST provisions (i.e. taxable supply, self-supply, rebates, and exemptions) will apply to subsequent supplies of such a complex as if such a complex were the supply of a newly constructed residential complex.
Where GST applies to the sale of the relocated house, an individual purchaser will be entitled to claim a GST new housing rebate if all of the criteria of the appropriate rebate provision are met. Similarly, an individual who relocates his or her existing house by moving it to a new legal description will be entitled to claim a GST new housing rebate under section 256 of the Act in respect of the GST paid on the acquisition of the land and the GST costs related to relocating the house to the extent that such costs are considered improvements to the land and all of the other criteria of that section are met. This rebate will be available whether or not the existing house was substantially renovated. If, however, the house is moved within the same legal description, the GST new housing rebate under section 256 would only be available if the house was substantially renovated or a major addition is constructed to the house which is considered to be the construction of a residential complex. (The issue of whether an existing single unit residential complex is substantially renovated is consideredin Policy Statement P-155. The issue of whether the construction of an addition to an existing single unit residential complex is considered to be the construction of a single unit residential complex is discussed in Policy Statement P-153.)
SAMPLE RULINGS
Example #1
Facts
1. ABC Builders Ltd. acquires a house, in Ontario, without the land for the purpose of moving the house to a new lot, and subsequently selling the house at that location.
2. The house was acquired from a non-registered individual who has been using it as his or her place of residence.
3. ABC Builders Ltd. is registered for purposes of the GST.
4. The house is not a mobile home.
5. After the house has been relocated, ABC Buildings Ltd. enters into an agreement to sell the house to Mr. Roy.
Ruling(s) Requested
1. Is the acquisition of the used house by ABC Builders Ltd. subject to the GST?
2. If not subject to GST, can a notional input tax credit be claimed by ABC Builders Ltd. under section 176 of the Act?
3. Are full input tax credits (ITCs) available to ABC Builders Ltd. in respect of other costs?
4. What is the tax status of the subsequent sale of the house by ABC Builders Ltd. to Mr. Roy?
5. If the subsequent sale of the house to Mr. Roy is taxable, will a GST new housing rebate be available to Mr. Roy?
Ruling(s) Provided
1. The acquisition of the house, without the land, by ABC Builders Ltd. is not subject to the GST as the supply is the sale of tangible personal property made by a non-registrant outside the course of a business.
2. ABC Builders Ltd. may claim a notional input tax credit in respect of the purchase of the house, without the land, from the non-registered individual in accordance with section 176 of the Act.
3. ABC Builders Ltd. is entitled to full ITCs in respect of GST incurred with respect to the sale of the relocated house on the new lot, including the acquisition of the land, costs of removal and relocation, and other costs associated with the taxable sale.
4. The sale of the house on the new lot by ABC Builders Ltd. to Mr. Roy is subject to the GST.
5. Mr. Roy, as the purchaser of the relocated house, may be entitled to a GST new housing rebate under section 254 or section 254.1 of the Act, as the case may be, provided the criteria therein are satisfied.
Example #2
Facts
1. ABC Construction Inc. acquires a house, in Quebec, without the land for the purpose of moving the house to a new lot, and subsequently selling the house at that location.
2. ABC Construction Inc. acquires a house from a non-registered individual in Quebec who has been using the house as his or her place of residence.
3. ABC Construction Inc. is registered for purposes of the GST.
4. The house is not a mobile home.
5. After the house is relocated, ABC Construction Inc. enters into an agreement to sell the house to Mr. Roy.
Ruling(s) Provided
1. Is the acquisition of the used house by ABC Construction Inc. subject to the GST?
2. If the acquisition is not subject to GST, can a notional input tax credit be claimed by ABC Construction Inc. under section 176 of the Act?
3. Are full ITCs available to ABC Construction Inc. in respect of other costs?
4. What is the tax status of the subsequent sale of the house by ABC Construction Inc. to Mr. Roy?
5. If the subsequent sale of the house to Mr. Roy is taxable, will a GST new housing rebate be available to Mr. Roy?
Ruling(s) Given
1. The acquisition of the house, without the land, by ABC Construction Inc. from an individual who was using the house as his or her place of residence is exempt from GST under section 9 of Part I of Schedule V to the Act.
2. ABC Construction Inc. may not claim a notional input tax credit under section 176 of the Act. Notional input tax credits apply only to supplies of tangible personal property.
3. ABC Construction Inc. is entitled to full ITCs in respect of GST incurred with respect to the sale of the relocated house on the new lot, including the acquisition of the new land, costs of removal and relocation of the house, and other costs associated with the subsequent taxable sale.
4. The sale of the house on the new lot by ABC Construction Inc. to Mr. Roy is subject to the GST.
5. Mr. Roy, as the purchaser of the relocated house, may be entitled to a GST new housing rebate under section 254 or 254.1 of the Act, as the case may be, provided all of the criteria therein are satisfied.
Example #3
Facts
1. Mr. Jones moves his house from the foundation on its existing lot to a new foundation on the same lot.
2. The entire lot is considered to be reasonably necessary for the use and enjoyment of the building as a place of residence.
3. Mr. Jones will also add a garage to the complex and replace several windows. The existing house is not being substantially renovated.
4. The house is not a mobile home.
Ruling Requested
Is Mr. Jones entitled to the GST new housing rebate in relation to costs incurred in moving the house, constructing the new foundation, building the garage, and replacing the windows?
Ruling Provided
Mr. Jones is not entitled to a GST new housing rebate in respect of costs related to the removal and relocation of the house, construction of a new foundation, garage and windows since the house is being moved within the same lot in which it was previously situated and the house has not been substantially renovated.
Example #4
Facts
1. Due to recent construction directly across the street from his house, resulting in the creation of a large subdivision, Mr. Jones now wishes to move his house to a new lot elsewhere in the community.
2. Mr. Jones' residence is not a mobile home.
3. Mr. Jones will be the first person to occupy the house and he will be using it as his primary place of residence.
4. The fair market value of the house and lot, after relocation, will be less than $350,000.
Ruling Requested
Is Mr. Jones entitled to the GST new housing rebate in respect of the GST paid on costs incurred for the acquisition of the new lot and relocating the house to the new location (including removal costs, replacement costs, new foundation, hook-ups, etc.)?
Ruling Provided
Mr. Jones is entitled to a GST new housing rebate under section 256 of the Act in respect of the GST paid on costs incurred for the land and relocating the house to the extent that such costs are considered improvements to the land. This would include removal costs, replacement costs, the construction of a new foundation and other costs that form part of the adjusted cost base of the residential complex to the purchaser.
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