In a decision rendered on October 25, 20131, the Tax
Court of Canada (the "Court"), in the person of Justice
Robert J. Hogan, clarified whether a supplier of a promise to
purchase land, as well as the related deposit, made a single or
multiple supplies within the meaning of the Excise Tax Act
(the "ETA") for GST/HST purposes.
The appellant, Casa Blanca Homes Ltd. ("Casa Blanca"),
entered into promises to purchase vacant lots of land from a
developer. It paid a non-refundable deposit to the developer, which
deposit would be forfeited and treated as liquidated damages if it
failed to execute the purchase.
Casa Blanca later sold its rights under certain of these
promises to purchase to third parties (the "Assignees")
by way of assignment agreements. Under these agreements, the
Assignees paid Casa Blanca two distinct amounts: a fee for the
assignment (the "Assignment Fee"), and an amount equal to
the non-refundable deposit Casa Blanca had paid to the developer
(the "Deposit Recovery").
Casa Blanca collected GST from the Assignees on the Assignment
Fee only. The Canada Revenue Agency ("CRA") then
reassessed Casa Blanca on the basis that it should have collected
GST on the amount of the Deposit Recovery as well. CRA took the
position that Casa Blanca had made a single supply of an interest
in real property, the consideration for which included both the
Assignment Fee and the Deposit Recovery.
Justice Hogan held that Casa Blanca had made two distinct
supplies. The first supply was the supply of the rights under the
promise to purchase, the consideration for which was the Assignment
Fee and which was taxable as the supply of an interest in real
property. The second supply was the supply of the rights in respect
of the deposit, which was not taxable considering the deposit was a
"financial instrument" under the ETA.
Single v. Multiple Supply
In finding that there had been two supplies, Justice Hogan
applied the approach laid out by the Tax Court of Canada in
O.A. Brown Ltd. v. Canada2 and affirmed by the
Supreme Court of Canada in Calgary (City) v.
Canada3. The test to determine whether a given
transaction comprises a single supply or multiple supplies is to
ask whether the ostensibly separate supply was an integral part of
the other supply, such that in reality there was only one supply.
To answer this question, Justice Hogan referred to certain factors,
such as the degree of interconnection and interdependence of the
supplies and whether each supply could be purchased individually
and still be useful.
Applying these factors, Justice Hogan concluded that there had
been two separate supplies. He observed that the transaction could
have been structured differently: Casa Blanca could have sold the
rights under the promise to purchase to the Assignees and the
Assignees could then have paid a deposit to the developer, who
would then have refunded Casa Blanca's original deposit.
Accordingly, the two elements of the transaction were "not so
interconnected as to indicate a single
Having reached this conclusion, Justice Hogan then determined
that the supply of the rights in respect of the deposit was not
taxable. The deposit conferred the right to have the deposited
money used in three ways: it could be applied against the purchase
price in the eventual sale, used as liquidated damages in the event
that the Assignees decided not to go through with the sale or
refunded in the event that the developer did not complete the
construction on time. Justice Hogan regarded this last use as being
an implied term of the promises to purchase, despite the fact that
they explicitly stated that the deposits were non-refundable.
Having so found, he held that the supply of the deposit was a
supply of a debt security, and therefore an exempt supply of a
financial instrument. In the alternative, he held that the deposit
was a beneficial interest in money, and that since money does not
qualify as either a property or a service, the transfer of the
deposit would not even constitute a supply.
1. Casa Blanca Homes Ltd. v. The Queen, 2013 TCC
2.  G.S.T.C. 40.
3. 2012 SCC 20.
4. Supra note 1 at para. 19.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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