GST/HST – Can Developer Separate Development Fees from Consideration for Home?

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GST/HST – Can Developer Separate Development Fees from Consideration for Home?

GF Partnership v. Her Majesty the Queen, 2014/04/03 – SCC Case Number 35668

The SCC dismissed the application for leave to appeal from the Federal Court of Appeal decision in GF Partnership v The Queen, 2013 FCA 260, dismissing the Appeal of the taxpayer from the decision of the Tax Court of Canada in GF Partnership v The Queen, 2013 TCC 53

The SCC provided the following summary:

Taxation – Goods and services tax – Rebates – Developer modifying sale agreements intended to make purchasers liable for development fees in order to reduce GST payable on sale of new homes – Whether Mattamy could segregate development charges from value of consideration for new homes and national economic consequences to home builder, home purchaser and Canada Revenue Agency – Whether Duke of Westminster principle applies to these consumer transactions – Whether Mattamy was entitled to have contract interpreted in Tax Court, based on the proper principles of contract interpretation – Whether tax law recognizes agency with respect to the collection of GST/HST when non-taxable payments are made by one contracting party on behalf of another – Excise Tax Act, R.S.C. 1985, c. E-15

The applicant, GF Partnership (“Mattamy”), is a real estate developer that builds residential subdivisions.  In 2001, it changed its standard form purchase and sale agreements to provide that the development charges for properties, not subject to GST, were separated from the purchase price for the homes themselves.  The purchase price was inclusive of GST.  Mattamy calculated and remitted GST on the purchase price excluding development charges and retained the balance of the purchase price.  The Minister reassessed Mattamy for GST owing on the entire purchase price. Mattamy appealed the reassessment.

The TCC upheld the Minister’s assessment and the FCA did not find any errors in the TCC decision.

– Sas Ansari, JD LLM PhD (exp)

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