Canada: To Tax Or Not to Tax, The Supply Is The Question: Case Comment – Casa Blanca Homes Ltd. v. R

Last Updated: March 12 2014
Article by Jamie M. Wilks and Roberto Andreacchi

Co-author: Liezl Behm, Student-at-Law

The Decision

In Casa Blanca Homes Ltd. v. R.,1 Canada Revenue Agency ("CRA") assessed a GST registrant, Casa Blanca Homes Ltd. ("Casa Blanca"), for not charging, collecting, reporting and accounting for GST on certain deposits (the "Deposits") transferred by Casa Blanca to other parties (the "Assignees"). The Assignees acquired the Deposits as a result of the assignment by Casa Blanca to the Assignees of Casa Blanca's interests in the purchase of real property (vacant lots).

The Tax Court of Canada found that the Deposits transferred to the Assignees were not part of the consideration for the taxable supplies of the real property from Casa Blanca to the Assignees. As the result of each assignment by Casa Blanca to an Assignee, there were two supplies:

  1. a taxable supply of real property from Casa Blanca to the Assignee (i.e., the taxable supply of a right to purchase real property, a vacant lot); and
  2. an exempt supply of a financial service of transferring a beneficial interest in the Deposit (a "debt security" and, therefore, a "financial instrument").

As consideration for the taxable supply, the assignment fee (the "Assignment Fee") paid by Casa Blanca to the Assignee attracts GST. Casa Blanca had appropriately charged, collected, reported and accounted for GST on the Assignment Fees.

However, the transfers of the beneficial interests in the Deposits to the Assignees were exempt from GST. Accordingly, the Tax Court allowed the appeal and overturned the GST assessment issued against Casa Blanca by CRA.

The Facts

Casa Blanca entered into numerous purchase agreements ("Agreements") with a property developer (the "Developer"). Under each of these Agreements, on paying a non-refundable Deposit to the Developer, Casa Blanca acquired the right, and assumed the obligation, to purchase a vacant lot in future. Each Deposit constituted security with respect to Casa Blanca's obligation to complete the purchase of the lot, failing which it would be forfeited to the Developer as liquidated damages. Upon completion of the transaction, the Deposit would be applied against the purchase price of the lot.

Casa Blanca subsequently assigned most of these Agreements to the Assignees. To acquire the right to purchase the vacant lots under the Agreements, the Assignees paid:

  1. i. the Assignment Fee; and
  2. ii. a sum equal to the Deposit that Casa Blanca had paid to the Developer (the "Deposit Recovery").

Casa Blanca charged and collected GST on the Assignment Fee, but not on the Deposit Recovery.


At issue before the Tax Court was whether the Deposit Recoveries were subject to GST.

Casa Blanca's Position

Casa Blanca submitted that the Deposit Recovery should not be subject to GST because it was not consideration for acquiring an interest in the real property (i.e., the vacant lot). Rather, the Deposit Recovery was paid to acquire Casa Blanca's beneficial interest in the Deposit held by the Developer.

As a "debt security", the Deposit is a "financial instrument" under Part IX of the Excise Tax Act (the "ETA").2 The transfer of ownership of the financial instrument (i.e., the beneficial interest in the Deposit held by the Developer) from Casa Blanca to the Assignee was an exempt supply of a financial service.3

From a policy perspective, Casa Blanca argued that taxing the Deposit Recovery would result in double-taxation imposed against the Assignee (once on the Deposit Recovery and again on applying the Deposit against the purchase price). The first incidence would occur when the Assignee paid the Deposit Recovery to Casa Blanca. The second incidence would occur when the Developer applied the Deposit toward the payment of the purchase price for the vacant lot on behalf of the Assignee. As the Assignees were not registered for the GST and could not claim input tax credits ("ITCs") to recover the GST, the Assignees would bear the costs of GST imposed on the amount of the Deposits twice.

CRA's Position

In contrast to Casa Blanca's approach that Casa Blanca made two separate supplies to the Assignee, (i) an exempt supply of a financial service, and (ii) a taxable supply of an interest in real property, CRA argued that the Deposit Recovery and Assignment Fee together constituted the consideration for the taxable supply of the interest in the real property (i.e, the vacant lot). CRA submitted that this approach did not constitute double-taxation because each incidence of tax occurred on a separate transaction, not a single transaction, the first one between Casa Blanca and the Assignee, and the second one between the Developer and the Assignee. Accordingly, Casa Blanca should have charged, collected and accounted for GST on the entire consideration received for the taxable supply of real property made to the Assignee (both the Assignment Fee and the Deposit Recovery).

Analysis and Conclusions of the Tax Court

In resolving the issue of whether Casa Blanca made:

  1. i. an exempt supply of a financial service and a taxable supply of an interest in real property to the Assignee, as contended by Casa Blanca, or
  2. ii. a single taxable supply of an interest in real property to the Assignee, as advocated by the CRA,

the Tax Court applied the principles for determining whether there is a single supply or there are multiple supplies, as established by the leading case of O.A. Brown Ltd. v Canada4 ("OA Brown") and approved by the Supreme Court of Canada in Calgary (City) v Canada.5

As it was possible to structure the transactions such that the Assignee would pay a new Deposit to the Developer to replace the original Deposit released by the Developer to Casa Blanca (but was not structured this way for administrative simplicity), the Deposit Recovery and Assignment Fee were not so inextricably linked so as to be considered related to a single taxable supply of the vacant lot. Rather, each transaction had a sufficiently distinct purpose to be considered separate supplies. In addition to applying the principles from OA Brown, the Tax Court found this interpretation persuasive because it "avoids double taxation, which ... was not intended by Parliament."6

In the alternative, the Tax Court held that the assignment of a Deposit was not really a supply at all, but rather the transfer of an interest in money. A "supply" is defined as the provision of "property" or a "service", which, by definition, exclude "money".7

Practical Implications

This decision is a sensible one. The Deposit Recoveries were intended to compensate Casa Blanca for the Deposits that Casa Blanca had paid to the Developer and then beneficially assigned to the Assignees. As far as Casa Blanca was concerned, cash (the Deposits) was being replaced by other cash (the Deposit Recoveries). As strictly monetary or financial transactions, the Deposit Recoveries paid by the Assignees to Casa Blanca to reimburse the Deposits should not attract GST.

From a policy perspective, no double-taxation would arise on the Deposit amounts. The only incidence of tax would occur when the Deposits were applied against the taxable purchase price of the vacant lots. Double tax would be particularly egregious in these circumstances where the Assignees could not claim ITCs to recover the GST payable, resulting in duplicate tax costs borne by the Assignees. Such a double-up of the tax costs would be particularly burdensome under a HST regime.

By contrast, an Assignment Fee is a premium paid by an Assignee to Casa Blanca (i.e., the assignor) to acquire the right to purchase the vacant lot from the Developer. As such, the Assignment Fee is consideration for a taxable supply and subject to GST. Not only should this case settle what amount of tax an assignor should charge and collect, but in appropriate circumstances, how to calculate the tax to be self-assessed, reported and paid (subject to any ITC and rebate claims to offset the tax paid) by an assignee registered for the GST/HST.8

Although CRA did not appeal this Informal Procedure decision, CRA advises that it does not agree with, and will not apply, the principles enunciated in this decision. CRA stands by its policy established before this decision. In its view, there is only one supply, a taxable sale of an interest in real property, for which the assignee pays to the assignor consideration of the aggregate amount of the deposit, plus the assignment fee.

What CRA's intransigence means is that if an assignor and assignee follow the Casa Blanca Homes decision, then either the assignor or assignee could be assessed for GST/HST imposed on the deposit and may need to be prepared to go to Tax Court to dispute the assessment (to re-litigate the same issue in dispute and resolved in Casa Blanca Homes). Alternatively, to avoid GST/HST imposed on the deposit, the parties could structure the nature of the legal transactions (with appropriate legal documentation) so that the assignee would pay a new deposit to the vendor to replace the assignor's deposit released to the assignor. Stayed tuned, as abiding by the Casa Blanca Homes decision may be insufficient to satisfy the CRA.

It should be noted that the obligations to charge, collect, report and account for GST/HST are not restricted to a GST/HST registrant supplier. A private transaction between a non-registrant assignor and a non-registrant assignee could be subject to GST/HST.9 Where the non-registrant assignor is making a taxable supply of selling an interest in real property to an assignee unregistered for the GST/HST, the assignor would generally be required to report and remit the GST/HST charged and collected with a non-registrant GST/HST return due by the end of the month immediately following the month of the completion of the transaction and payment of the GST/HST on the assignment fee.10

1 [2013] GSTC 128 (TCC, Informal Procedure).

2 Excise Tax Act, (RSC 1985, c. E-15), subsection 123(1).

3 Section 1, Part VII, Schedule V to the ETA.

4 O.A. Brown Ltd. v Canada, [1995] GSTC 40 (TCC).

5 Calgary (City) v Canada, [2012] 1 SCR 689.

6 Supra, footnote 1, paragraph 25.

7 Supra, footnote 2.

8 ETA, subsections 221(2) and 228(4) and (6).

9 A "taxable supply" is a supply made by a person in the course of a "commercial activity" pursuant to subsection 123(1) of the ETA. A supply of real property by way of sale is considered to be made in the course of a "commercial activity" and, therefore, a taxable supply, unless there is a specific exemption in Schedule V of the ETA that applies.

10 ETA, section 221, subsections 238(2) and 245(1). Even if the assignee is registered for the GST/HST, the supplier may be required to charge and collect the GST/HST on the assignment fee because the assignee is an individual acquiring an interest in a "residential complex". Note that a non-resident supplier would generally be relieved from charging and collecting GST/HST pursuant paragraph 221(2)(a) of the ETA, placing the onus on the purchaser (regardless of the purchaser's GST/HST registration status) to self-assess, report and pay the GST/HST directly to CRA.  

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2014

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Jamie M. Wilks
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.