XXXXX
Dear Mr. XXXXX:
Thank you for your submissions of May 3, 1994, concerning certain arrangements entered into by the XXXXX.
It is your view that the arrangements, whereby the XXXXX and the XXXXX provide rights to XXXXX to use real property, should be considered a supply by way of lease and not by way of licence. Consequently, the construction costs incurred by XXXXX in respect of the improvement of the property would be eligible for full input tax credits as opposed to being based on the proportionate use of the property in commercial activities.
As a result of a meeting you had with Stan Farber on May 16, 1994, we undertook to review our position relating to the arrangements in question upon receiving additional information from you. This additional information was provided on June 16, 1994.
I am pleased to advise you that the Department has now completed its review of the matter. Based on the clarifications provided by you with respect to particular wording in the agreements, and given the unique nature of the particular arrangements in question, the arrangements in question would be considered a lease of the property. Further, the improvements constructed on the property by XXXXX would be considered capital property thereby entitling XXXXX to full input tax credits in respect of such construction costs in accordance with section 209 of the Excise Tax Act.
Please note, however, that as set out in the letter of August 26, 1993, to XXXXX, it is still the Department's view that there is a supply of the right to use real property being made to XXXXX, whether by way of lease, licence or similar arrangement. It is our view that the supplier of the property under the lease in question should therefore reasonably attribute an amount to the supply of the lease of the property to XXXXX (including any other rights given to XXXXX under the agreement, such as concession rights, parking, etc.) for the full period of such lease that relates to the value of the supplies made by XXXXX in exchange for such rights under the lease. This value would not, however, exceed the rental value of similar premises and rights for the same period with the same conditions. The excess amount would be considered an amount incurred by XXXXX on its own behalf that does not reasonably relate to the lease of the property.
We trust that this should resolve the matter. A copy of this letter is also being forwarded to Mr. XXXXX for his information. Should there be any further questions on this matter, please do not hesitate to contact me or Stan Farber at (613) 954-3772.
Yours truly,
J.A. Venne
Director
Tax Policy - Special Sectors
Policy and Legislation
| c.c.: |
XXXXX
Stan Farber
Joanne Houlahan
XXXXX |
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