HRQ0000186
11690-1, 11690-16
Dear XXXXX
This is in response to your April 22, 1996 e-mail wherein you requested our review of the treatment of co-tenants when initially registering with Business Number. We apologize for the delay in responding.
The issue at hand is whether the registration of all co-tenants as partnerships for the purposes of registration is appropriate.
The definition of "co-tenancy", as found in Black's Law Dictionary (6th Edition) is "A tenancy by several distinct titles but by unity of possession, or any joint ownership or common interest with its grantor. The term is broad enough to comprise both tenancy in common and joint tenancy".
A 'tenancy' is defined by Black's Law Dictionary (6th Edition) as "... an interest in realty ... To constitute tenancy, tenant must acquire some definite control and possession of premises."
The definition of "joint tenancy", as found in Black's Law Dictionary (6th Edition) is "An estate in fee-simple...arising by purchase or grant to two or more persons. Joint tenants have one and the same interest...and held by one and the same undivided possession. The primary incident of joint tenancy is survivorship, by which the entire tenancy on the decease of any joint tenant remains to the survivors, and at length to the last survivor." It is common where real property is held in joint tenancy that such registration of land is done for estate planning purposes.
The Black's Law Dictionary (6th Edition) definition of "tenancy in common" is "A form of ownership whereby each tenant (i.e. owner) holds an undivided interest in property. Unlike a joint tenancy...the interest of a tenant in common does not terminate upon his or her death (i.e., there is no right of survivorship).
It is inappropriate to assume that all co-tenancies are partnerships. Automatic registration of all co-tenancy situations as partnerships implies that all co-tenants are partners in the commercial sense. Each situation must be dealt with on a case by case basis to determine whether a partnership exists or whether each co-tenant is a separate person for GST purposes and required to register. In some cases, one or more of the co-tenants may not be involved in any other commercial activity and may be considered to be a small supplier and not required to be registered, assuming that the supplies by the co-tenants are taxable. For example:
Where real property is held in co-tenancy, in equal shares, by three individuals and that property is leased, each individual would be viewed as making a separate supply of one third of the property. If one of the individuals has no other commercial activity and is not required to be registered for GST purposes, tax would not be charged on the supply. As a result, tax would only be charged on two thirds of the lease payment. Each of the other co-tenants, who are registered, must account for their interest in the co-tenancy on their returns.
In the example above, one of the co-tenants has no commercial activity other than the lease payments and is not required to be registered for GST. Alternatively, a co-tenancy situation may require a small supplier to be registered if the combined revenue of other commercial activities and the lease payments exceed the small supplier threshold. For example:
Real property is held by three individuals in co-tenancy, in equal shares, and the property is leased. Each individual is making a separate supply of one third of the property. One of the individuals whose revenues from its one-third share of the lease, together with revenues from other commercial activities, are sufficient to exceed the small supplier threshold. This individual is now required to register for GST purposes, and tax would be charged on the supply.
Your attention is directed to P-183 "Input Tax Credits on Farmland acquired in Joint Tenancy". While this document is not entirely on point, it is sufficient to demonstrate a joint tenancy situation which may be encountered and which would not fall within the parameters of a partnership.
Having reviewed definitions contained in Black's Law Dictionary and after careful consideration, the position taken by the Department is that unless a partnership situation exists, in situations of co-tenancy, each co-tenant involved in commercial activities relative to the property in question, upon application for registration, shall be registered as a separate person for GST purposes.
I trust these comments are of assistance to you. Should you have any questions, please call me at 954-2560.
Yours truly,
KerriAnne Boyd
Rulings & Interpretations Officer
General Operations Unit
General Operations and Border Issues Division
GST Rulings and Interpretations Directorate
Policy and Legislation Branch
| c.c.: |
Manager, General Operations Unit |
Subsections 123(1), 155)1), and 155(2)
P183 Input Tax Credits in Farmland Acquired in Joint Tenancy
P-109 Transfer of Farmland by a Farmer, Holding Sole Title to One or More Related Persons and Themselves as Joint Tenants
Q&A's :GST #2e.248. GST #4j.25, GST #8b.25, GST #2e.270 and GST #4a.134
1996 Headquarters Letters - Co-Tenant Registration
Blacks Law Dictionary
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