Federal Appeal


Tax

Goods and Services Tax

Supply

Services relating to operation of vacation homes in Canada were taxable supply

Registrant CI operated vacation homes in resorts in Canada, US and Mexico as part of vacation home ownership program. Members of registrant paid annual resort fee to registrant. Minister of National Revenue assessed registrant on basis that annual resort fee was subject to GST as consideration for taxable supply of intangible personal property. Tax Court judge dismissed registrant’s appeal and held that registrant was required to pay GST on all of annual resort fee paid by members. Judge held that annual resort fee was paid as consideration for service rendered by registrant to members. Judge held that registrant made single supply of services that related to real property outside of Canada in respect of US and Mexico vacation homes, real property in Canada in respect of Canadian vacation homes, and things other than real property such as operating costs. Judge held that, since single supply related at least partly to things other than real property, place of supply of service was deemed, under ss. 142(1)(g) and 142(2)(g) of Excise Tax Act, to be made in Canada. Registrant appealed. Appeal allowed. GST was exigible only on portion of resort fees paid to registrant on account of services it provided in relation to vacation homes in Canada. Judge erred in his application of ss. 142(1) and 142(2) of Act when he broke single supply into constituent elements to determine whether each element related to real property. Predominant element of supply was use of annual resort fee to fund operation of program, and because program operated vacation homes in Canada, US and Mexico, predominant element of supply was in relation to real property in and out of Canada. Supply was split up and treated as two supplies to recognize distinction between bundle of services that constituted program and reality that services were operated on property-by-property basis. Services relating to operation of vacation homes in Canada were taxable supply, while services relating to operation of vacation homes out of Canada were non-taxable supply. Registrant’s proposal, that resort fee should be allocated based on ratio of membership costs associated with operation of vacation homes in Canada to total membership costs for all resorts, fairly and reasonably reflected nature of taxable supply.

Club Intrawest v. Canada (2017), 2017 CarswellNat 3241, 2017 FCA 151, M. Nadon J.A., Eleanor R. Dawson J.A., and Johanne Gauthier J.A. (F.C.A.); reversed (2016), 2016 CarswellNat 2327, 2016 TCC 149, Steven K. D’Arcy J. (T.C.C. [General Procedure]).

 

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