GI-050 February Residential Care Facilities and the GST/HST Election to Adjust Net Tax for the Self-Supply of a Residential Complex.

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1 GST/HST Inf Sheet GI-050 February 2009 Residential Care Facilities and the GST/HST Electin t Adjust Net Tax fr the Self-Supply f a Residential Cmplex This inf sheet explains the new electin that can be filed using Frm GST119, GST/HST Electin t Adjust Net Tax fr the Self-Supply f a Residential Cmplex, as it relates t builder-peratrs f residential care facilities. It includes infrmatin n when a builder-peratr is eligible t file the electin and the effects f making the electin. This new electin ges hand in hand with ther changes related t the GST/HST new residential rental prperty (NRRP) rebate. Fr further infrmatin n these changes and the self-supply rules, refer t GST/HST Inf Sheet GI-045, Residential Care Facilities and Prpsed Changes in the 2008 Budget. Residential care facilities Fr the purpses f this inf sheet, a residential care facility includes any facility at which an individual intends t reside fr an indefinite perid and at which the individual receives additinal prperty and services tgether with a rm r suite. Such additinal prperty and services may include meals, husekeeping, laundry, security mnitring, nutritinal and nursing care services, scheduled transprtatin, scial, recreatinal, educatinal and religius services, persnal supervisin, persnal care, and assistance with the activities f daily living (e.g., bathing, dressing, grming, eating, ambulating). Residential care facilities include facilities that are generically described as care hmes, persnal care hmes, cngregate husing, assisted living residences, senirs' residences, retirement residences, nursing hmes and hmes fr the aged. Hwever, a residential care facility des nt include a facility, such as a hspital, described in either f paragraphs (a) r (b) f the definitin f "health care facility" in sectin 1 f Part II f Schedule V t the Excise Tax Act (the Act ). Self-supply If yu are a builder-peratr f a residential care facility, yu are generally cnsidered t have made a self-supply if yu build r substantially renvate the facility and yu give pssessin r use f a unit in the facility under a lease fr its lng-term residential use by an individual. In this case, yu are cnsidered t have sld the facility t yurself (i.e., yu have made a self-supply) and yu are required t include the GST/HST yu are cnsidered t have paid and cllected n this sale in yur net tax calculatin. Prir t February 27, 2008, the self-supply rules generally did nt apply t facilities, such as nursing hmes, that were prviding nursing/persnal care services and that als included the prvisin f a residential unit. As a result f legislative amendments, the self-supply rules nw apply t these facilities where the self-supply ccurs after February 26, Electin t adjust net tax fr the self-supply f a residential cmplex The new self-supply rules als apply t builder-peratrs that accunted fr the GST/HST n a self-supply that ccurred befre February 27, A builder-peratr that did nt accunt fr tax n a self-supply that ccurred befre February 27, 2008 may chse t self-supply by filing an electin t adjust its net tax fr any reprting perid that ends befre February 27, 2010, prvided the electin is filed with the return by the La versin française du présent dcument est intitulée Les établissements de sins pur bénéficiaires internes et le chix pur redresser la taxe nette lrs de la furniture à si-même d un immeuble d habitatin.

2 due date f the return fr the last reprting perid that ends befre February 27, A builder-peratr may want t file this electin, fr example, t claim an NRRP rebate which may nt have been available previusly, r t make a future sale f the facility exempt frm GST/HST. It is imprtant t nte that nce the electin is made, it cannt be revked. A builder-peratr f a residential care facility, r f an additin t a multiple unit residential care facility, is eligible t file the electin t adjust its net tax if the builder-peratr meets all f the eligibility criteria listed belw. Eligibility criteria Yu can make the electin t adjust yur net tax if yu are nt a c-perative husing crpratin and yu meet all f the fllwing cnditins: yu are a builder-peratr f a residential care facility r f an additin t a multiple unit residential care facility ; if the new self-supply rules had been in effect at all times, yu wuld have made a self-supply befre February 27, 2008, (refer t "Date f self-supply", belw, fr mre infrmatin); yu did nt accunt fr GST/HST n a self-supply f the facility r additin in a GST/HST return filed, r required t be filed, befre February 27, 2008; Nte: If yu accunted fr the GST/HST n a self-supply and we reversed the transactin when we made an assessment, yu have nt accunted fr the GST/HST and yu meet this cnditin. yu wuld have been eligible t claim an NRRP rebate fr the building and land if the new rules had applied at all times and if: the cnditin that yu must have reprted the tax n yur self-supply and remitted all net tax remittable fr that reprting perid did nt apply; the requirement that yu file the NRRP rebate applicatin by the applicable deadline did nt apply; and the fair market value f a residential unit in the facility was less than $450,000; yu did nt sell the facility r additin befre February 27, 2008; yu have nt made anther electin t adjust the net tax fr the self-supply f this facility r additin; and yu file this electin t adjust the net tax fr a reprting perid that ends befre February 27, 2010, tgether with the GST/HST return fr that reprting perid, n r befre the due date f that return. C. A builds a nursing hme n land it wns. Substantial cmpletin f the nursing hme ccurs n January 5, On February 15, 2008, C. A gives use f a residential unit in the nursing hme t Resident B under a lease, licence r similar arrangement. Resident B is the first individual t ccupy a unit in the nursing hme as their place f residence. C. A did nt accunt fr GST/HST n a self-supply f the facility. If the new self-supply rules had applied, C. A wuld have been entitled t claim an NRRP rebate. C. A did nt make an electin t adjust its net tax and has nt sld the nursing hme. C. A is eligible t make the electin t adjust its net tax. The electin must be made fr a reprting perid that ends befre February 27, 2010, and sent t us tgether with the GST/HST return fr that reprting perid n r befre the due date f that return. Charity C is the builder f a nursing hme n land it wns. Substantial cmpletin f the nursing hme ccurs n May 16, On June 4, 2008, Charity C gives use f a residential unit in the nursing hme t Resident D under a lease, licence r similar arrangement. Resident D is the first individual t ccupy a unit in the nursing hme as their place f residence. Charity C did nt accunt fr GST/HST n a self-supply f the facility, did nt make an electin t adjust its net tax, and has nt sld the nursing hme. Charity C is nt eligible t make the electin t adjust its net tax since it is entitled t claim the 50% public service bdy rebate fr charities. Nte: A persn wh is entitled t claim a public service bdy rebate r a GST/HST new husing rebate is nt entitled t claim an NRRP rebate. As a result, a persn eligible fr a public service bdy rebate that perates a residential care facility such as a nursing hme is nt entitled t make an electin t adjust its net tax. 2

3 Date f self-supply Generally, the day yu are cnsidered t have made a self-supply and t have paid GST/HST n the fair market value f the residential care facility r additin is the later f: (a) the day yu first give pssessin r use f a unit in the facility r additin under a lease, licence r similar arrangement t an individual as a place f residence; and (b) the day the cnstructin r substantial renvatin f the facility, r cnstructin f the additin, is substantially cmpleted. C. E builds a nursing hme n land it wns. Substantial cmpletin f the nursing hme ccurs n April 28, On April 30, 2008, C. E gives use f a residential unit in the nursing hme t Resident F under a lease, licence r similar arrangement. Resident F is the first individual t ccupy a unit in the nursing hme as their place f residence. C. E is cnsidered t have made a self-supply n April 30, In this case, the new self-supply rules apply and C. E is required t accunt fr the GST/HST, calculated n the fair market value f the nursing hme n April 30, Effect f electin If yu are eligible t d s and file this electin, yu are cnsidered t have: made a self-supply f the residential care facility r additin; claimed input tax credits (ITCs) fr the tax yu paid befre the date f the self-supply fr the cnstructin f the facility r additin and the purchase f the land; and claimed and received an NRRP rebate fr the facility r additin. When yu make the electin yu have t calculate the amunt by which yu will adjust yur net tax fr the reprting perid t which the electin applies. The amunt f yur net tax adjustment will include the GST/HST yu are cnsidered t have paid and cllected n the self-supply, the ITCs fr the GST/HST yu paid n yur cnstructin csts and t acquire the land upn which yu built the facility, and the NRRP rebate amunt. Nte: Yu can include the amunt f the NRRP rebate even if yu previusly filed an NRRP rebate applicatin and all r part f the rebate amunt claimed in that applicatin was denied. Calculating yur net tax adjustment T calculate yur net tax adjustment, fllw the calculatins n Frm GST119. Start by calculating the amunt f yur NRRP rebate by cmpleting Sectin E fr multiple units r Sectin F fr a single unit (including a residential cndminium unit r a duplex). Refer t Guide RC4231, GST/HST New Residential Prperty Rebate, fr infrmatin abut the NRRP rebate, r call us at Nte: If yu make this electin, d nt cmplete Frm GST524, GST/HST New Residential Rental Prperty Rebate Applicatin, r Frm GST525, Supplement t the New Residential Rental Prperty Rebate Applicatin C-p Unit r Multiple Units, t claim the NRRP rebate. The NRRP rebate amunt is included in the calculatin f yur net tax adjustment n Frm GST119. Cmpleting Sectin G net tax adjustment calculatin Once yu have calculated the NRRP rebate amunt, yu can cmplete Sectin G f Frm GST119 t determine the amunt f yur net tax adjustment. Start this calculatin by cmpleting line A. Line A Enter the GST/HST yu are cnsidered t have paid and cllected n the self-supply f the facility r additin. The amunt f GST/HST is calculated n the fair market value f the facility (i.e., the building and land) at the time f the self-supply (refer t Date f self-supply, abve). Be sure t use the rate f GST/HST that applied at the time f the self-supply. Fr example, if the self-supply ccurred n April 1, 2007, the GST rate that applied at that time was 6% and the HST rate was 14%. Nte: Fair market value is nrmally based n the value f the building, applicable land, and any ther structures that are reasnably necessary fr the use and enjyment f the facility as a place f residence fr individuals. D nt include any part f the facility that is nt part f the residential cmplex. 3

4 Fr example, d nt include areas within the facility that are leased t third parties, such as a barber r beauty saln. Fair market value generally means the highest price that can be btained in the real estate market between unrelated parties and shuld be cmparable t the values f similar husing in the lcal real estate market. It des nt include any GST/HST that may be payable n the fair market value r prvincial land transfer taxes. Yu may want t btain a prfessinal appraisal t supprt yur fair market valuatin as we may ask fr infrmatin t supprt yur valuatin. Line B Enter the amunt f the NRRP rebate that yu calculated in Sectin E r Sectin F. Line C Subtract the amunt n line B frm the amunt n line A. Line D Enter the ttal GST/HST yu paid n yur cnstructin csts and fr the purchase f the land befre the date f the self-supply fr which yu wuld be entitled t claim ITCs. If yu are a nt a GST/HST registrant, enter 0 and refer t Nn-registrants, belw, fr mre infrmatin. Lines 1, 2, 3 and E Fllw the instructins n Frm GST119 t cmplete these lines. These calculatins ensure that yu d nt claim ITCs fr amunts fr which yu have previusly received rebates r refunds. Fr mre infrmatin n these lines, cntact us at Line F Subtract the amunt n line E frm the amunt n line D. Line G Subtract the amunt n line F frm the amunt n line C. This is the amunt f yur net tax adjustment. 4 Registrants Enter the amunt f yur net tax adjustment n yur GST/HST return fr the reprting perid t which the electin applies. That reprting perid must end befre February 27, If yur net tax adjustment is a psitive amunt, enter it n line 104 f yur return. If the net tax adjustment is a negative amunt, enter it n line 107. Yu have t send us Frm GST119 tgether with yur GST/HST return fr that reprting perid n r befre the due date f that return. If yu are a registrant yu may be entitled t claim an ITC fr the GST/HST yu are cnsidered t have paid n the self-supply. Fr example, if yu make taxable supplies f meals t guests in the dining rm where yu als prvide meals t residents, yu may be entitled t claim an ITC fr the GST/HST yu are cnsidered t have paid n the self-supply t the extent that it relates t the prvisin f taxable meals, unless all r substantially all f the use f the dining rm is t prvide meals t residents. Fr purpses f the time limitatin perid fr claiming ITCs, if the tax paid n the self-supply f the residential care facility r additin gives rise t an ITC, it is deemed t be an ITC fr the reprting perid that includes February 26, This ITC may be claimed in the nrmal manner and included n line 106 f yur GST/HST return. Nn-registrants If yu are a nn-registrant, cmplete Frm GST119 t calculate the amunt f yur net tax adjustment. Enter the amunt f yur net tax adjustment n line 104 f Frm GST62, Gds and Services Tax/Harmnized Sales Tax Return (Nn-persnalized), fr the reprting perid t which the electin applies, and that ends befre February 27, As a nn-registrant, yur reprting perid is the calendar mnth. Yu have t file Frm GST62 by the last day f the mnth fllwing the mnth that is the reprting perid t which the electin applies. As a nn-registrant, yu cannt claim ITCs fr the tax yu paid n yur csts t cnstruct r substantially renvate the residential care facility r t cnstruct an additin t a multiple unit residential care facility. If yu are eligible t make this electin,

5 and d s, yu are cnsidered t have made a selfsupply by way f sale f the facility r additin. Yu may be entitled t claim a rebate under sectin 257 f the Act fr the GST/HST yu paid n yur csts related t the cnstructin r substantial renvatin f the facility r t the cnstructin f the additin, including GST/HST yu paid t acquire the land. In effect, this rebate ensures that GST/HST is paid n the facility r additin nly nce n its fair market value as a result f yur self-supply f the facility r additin that ccurs when the electin takes effect. If yu are entitled t claim a rebate fr the tax yu paid n yur csts t cnstruct r substantially renvate the residential care facility r t cnstruct an additin t a multiple unit residential care facility, cmplete Frm GST189, General Applicatin fr Rebate f GST/HST. Yu can claim the rebate by including the amunt f the rebate n line 111 f the same GST62 return n which yu reprt yur net tax adjustment. Send us the GST189 and GST62 tgether with Frm GST 119 by the due date fr yur GST62 return. Fr mre infrmatin n calculating yur rebate entitlement, refer t Guide RC4033, General Applicatin fr GST/HST Rebates. Subsequent sale If a builder-peratr makes an electin t adjust its net tax in respect f a residential care facility, a subsequent sale f the facility by the builder-peratr will generally be exempt. If a builder-peratr is entitled t file the electin but des nt d s, a subsequent sale f the residential care facility may be taxable. C. G builds a nursing hme n land it wns. Substantial cmpletin f the nursing hme ccurs n June 5, On July 15, 2007, C. G gives use f a residential unit in the nursing hme t Resident H under a lease, licence r similar arrangement. Resident H is the first individual t ccupy a unit in the nursing hme as their place f residence. C. G did nt accunt fr GST/HST n a self-supply f the facility. If the new self-supply rules had applied, C. G wuld have been entitled t claim an NRRP rebate. C. G plans t sell the nursing hme. If C. G was nt required t make a self-supply under the ld rules that applied n July 15, 2007 and C. G did nt make an electin t adjust its net tax, the sale f the nursing hme will be a taxable supply. If C. G makes the electin, files the electin frm as required, and accunts fr the net tax adjustment, the sale f the nursing hme will generally be exempt. This inf sheet des nt replace the law fund in the Excise Tax Act (the Act) and its regulatins. It is prvided fr yur reference. As it may nt cmpletely address yur particular peratin, yu may wish t refer t the Act r apprpriate regulatin, r cntact any CRA GST/HST Rulings Centre fr additinal infrmatin. These centres are listed in GST/HST Memrandum 1.2, Canada Revenue Agency GST/HST Rulings Centres. If yu wish t make a technical enquiry n the GST/HST by telephne, please call A ruling shuld be requested fr certainty in respect f any particular GST/HST matter. If yu are lcated in Quebec and wish t make a technical enquiry r request a ruling related t the GST/HST, please cntact Revenu Québec by calling Yu may als visit their Web site at t btain general infrmatin. All technical publicatins related t GST/HST are available n the CRA Web site at Reference in CRA publicatins is made t the harmnized sales tax (HST) that applies t prperty and services prvided in Nva Sctia, New Brunswick, and Newfundland and Labradr (the participating prvinces ) at a rate f 13%. The gds and services tax (GST) rate is 5%. 5

On April 1, 2013, the Harmonized Sales Tax (HST) was replaced by the federal Goods and Services Tax (GST) and the BC Provincial Sales Tax (PST).

On April 1, 2013, the Harmonized Sales Tax (HST) was replaced by the federal Goods and Services Tax (GST) and the BC Provincial Sales Tax (PST). HST t PST: Transitin Rules fr Real Prperty A printable versin f infrmatin fund nline at: www.bcrea.bc.ca/gvernment-relatins/hst-pst-resurces/pst-transitin-rules Last update: January 7, 2015 On April 1,