- What is the Resort Property Investment Tax Credit?
- What is the purpose of this new credit?
- Why is the program only available for areas outside the North East Avalon?
- Why is the focus on resort properties?
- What was the inspiration for this tax credit?
- Who is a Qualifying Resort Developer?
- What is a Qualifying Resort Development Complex?
- Why are the standards set so high for a Qualifying Resort Development Complex, such as the requirement that there shall be 50 units?
- What is a Qualifying Resort Development Property Unit?
- Why are there rigid requirements that Qualifying Resort Development Property Units be made available for a rental pool?
- What are the boundaries of the area referred to as the North East Avalon?
- What time restrictions are in place for Qualifying Resort Developers to develop their property units?
- What is the maximum amount of capital that can be approved by the Minister for a Qualifying Resort Development Complex?
- Who is eligible to invest as a Qualifying Investor and receive a Resort Property Investment Tax Credit?
- Are there any restrictions on when the investments must be made?
- Are there any limitations on the amount of tax credits a person can earn?
- Are there any limitations on the amount of tax credits that can be earned relative to one particular unit?
- How long does the investor have to keep a Qualifying Resort Development Property Unit?
- What is the application process for being considered as a Qualifying Resort Developer?
- What is the process for a Qualifying Investor to receive the tax credit?
- How will Government monitor this program for compliance?
- What kind of recourse does Government have under the tax credit program?
- Since Government is reviewing the applications and offering a tax credit, does this mean that Government is endorsing the program as a safe investment?
- How do people obtain more information on the Resort Property Investment Tax Credit program?
This new program provides a provincial income tax credit of 45% of the purchase price of Qualifying Resort Development Property Units outside the North East Avalon.
This tax credit is geared towards encouraging new resort developments with high-end amenities and services. It is specifically designed for individuals and corporations in Newfoundland and Labrador to invest in the tourism industry in the Province and it sends a clear message to potential developers from the international marketplace that we have confidence in our tourism product, and are eager to partner with industry players to continue to grow the tourism business base, especially high-end projects.
One of the economic strategies of this Government is to boost rural Newfoundland and Labrador. The North East Avalon is experiencing relative economic prosperity and is not lacking in quality tourism accommodations. There is a greater need for quality tourism facilities in rural Newfoundland and Labrador, and therefore the incentive is targeted that way.
The tax credit will encourage developers to build first class tourism facilities in rural areas of the Province. As a result, a greater number of tourists will have an opportunity to experience the breathtaking scenery and unwavering hospitality in rural Newfoundland and Labrador. The tax credit, along with the unprecedented tax measures and economic development initiatives contained in Budget 2007, will assist our government to build a stronger, more diversified economy and transition toward being less reliant on revenues from our non-renewable resources.
When developing the new resort property tax credit, the best practices of a similar tax credit implemented by Ireland were carefully reviewed. Ireland implemented tax credits for tourist centres, enabling that country to build a tourism industry to a point where millions of tourists visit the country during every season of the year.
A Qualifying Resort Developer is a person registered to develop a Qualifying Resort Development Complex, and includes a corporation, partnership or limited partnership but does not include a trust.
A Qualifying Resort Development Complex is a newly constructed accommodation facility, a newly constructed expansion, or a property where at least 90% of the building area is rebuilt. It must contain a minimum of 50 Qualifying Resort Development Property Units, be located outside the North East Avalon, and have obtained Canada Select 4 rating. It must also have at least three of the following features:
- a variety of directed exercise facilities and venues including a fitness area with a minimum of 5 exercise machines per 100 guest capacity, supported by trainers and sports professionals
- a variety of other directed leisure activities, supported by personal guidance, including tour guides and interpreters
- a convention centre with seating capacity for at least 75 persons, as well as 3 meeting rooms
- dining facilities with seating capacity for at least 50 persons
8. Why are the standards set so high for a Qualifying Resort Development Complex, such as the requirement that there shall be 50 units?
The standards are set so high for a Qualifying Resort Development Complex because of the need that has been identified in the higher range of the local tourism industry. For example, the 2004 Newfoundland and Labrador Tourist Product Development Strategy – A Special Place, A Special People, The Future for Newfoundland and Labrador Tourism (13.7 MB) – indicated that a demand exists for multi-seasonal tourism properties with a minimum of 50 units. The plan is to foster the development of larger, more significant, up-scale tourism destinations in this Province.
A Qualifying Resort Development Property Unit is a town house, chalet or a hotel condominium of the Qualifying Resort Development Complex, which must be at least 35 square metres, and must be acquired by the Qualifying Investor through an initial freehold sale or 99 year lease. The unit holder must enter into a 20 year contract relating to the availability of the unit for the rental pool of the Qualifying Resort Development Complex for at least three-quarters of the time annually.
10. Why are there rigid requirements that Qualifying Resort Development Property Units be made available for a rental pool?
In order for this tax credit program to cause the desired tourism impact, it is very important that the property units be made available for much of the year to the international tourist. These units are very high-end tourism properties that will attract international tourists with a lot of economic wealth to spread in this Province.
The North East Avalon includes Bauline, Conception Bay South, Flatrock, Logy Bay-Middle Cove-Outer Cove, Paradise, Petty Harbour, Portugal Cove-St Philip’s, Pouch Cove, Torbay, Mount Pearl and St. John’s. Property development projects outside the North East Avalon may participate in this tax credit program.
12. What time restrictions are in place for Qualifying Resort Developers to develop their property units?
The Qualifying Resort Developer has 12 months after being registered to begin construction of a Qualifying Resort Development Complex and 24 months after the commencement of construction to achieve Canada Select 4 status, complete construction and begin offering Qualifying Resort Development Property Units for sale.
13. What is the maximum amount of capital that can be approved by the Minister for a Qualifying Resort Development Complex?
The maximum amount of capital that can be approved by the Minister for a Qualifying Resort Development Complex is $50 million.
14. Who is eligible to invest as a Qualifying Investor and receive a Resort Property Investment Tax Credit?
This is a person, including a corporation, other than a trust who invests in a Qualifying Resort Development Property Unit, where that person and the Qualifying Resort Developer or owner are at arm’s length from each other and where, in the case of an individual investor, the person is 19 years of age or older.
The Qualifying Resort Development Property Unit must be acquired after June 14, 2007 but no more than five years after the units are first made available for sale.
The total tax credits earned respecting investments by a person can not exceed a lifetime limit of $150,000. The maximum that can be claimed in any one year by an investor is $50,000 and where credits are unused they can be carried forward seven years and back three, but can not be carried back before the 2006 taxation year.
17. Are there any limitations on the amount of tax credits that can be earned relative to one particular unit?
Where more than one person invests in a unit, the maximum tax credit that may be earned in aggregate by all investors is limited to $150,000 per unit. The tax credit shall be allocated to each person in proportion to his or her ownership interest.
A Qualifying Investor shall not sell or transfer ownership of the property unit for a minimum of 5 years after the original purchase of the unit.
- If a business intends to construct a resort property under this program it must apply on the required form to the Minister before January 1, 2013 for certification as a Qualifying Resort Developer. An application for a certificate of registration shall:
- indicate the name of the business
- list the names and residential addresses of all directors and principals of the business
- include a business plan containing a detailed description of the business’ proposed business activities, its financing plan, market analysis and timeline for construction
- indicate the amount of capital anticipated to be raised through the offering of Qualifying Resort Development Property Units
- state the location of the proposed Qualifying Resort Development Complex
- include a statement signed by an officer or director of the business stating that the information contained in the application is true and correct
- provide a commitment for continuous operation of the venture for a minimum period of five years from commencement
- be in the form and include any other information that the Minister may require
The Qualifying Resort Developer shall, not more than 90 days after the sale of a Qualifying Resort Development Property Unit, apply to the Minister on behalf of each Qualifying Investor for a tax credit receipt respecting to a tax credit to be claimed by the Qualifying Investor. An application shall be made in the required form and shall be signed by an authorized officer of the Qualifying Resort Developer and shall be accompanied by additional information that the Minister may require.The Minister will then issue the tax credit receipt and the Qualifying Investor will attach the receipt to the appropriate income tax return for the year, as identified on the receipt.
Qualifying Resort Developers must supply information as required by the Minister. A Qualifying Resort Developer, for example, shall report annually to the Minister on the availability of the property units for the rental pool. Also, the provincial Department of Finance will be conducting routine on-site audits to ensure compliance on all aspects of the tax credit program.
The Minister may, at any time after a certificate of registration for a business has been issued, revoke that certificate if in his or her opinion, that business has not complied with the regulations or the business misrepresented information to the Minister either knowingly or in a manner that would be considered negligent. Where the Minister revokes a certificate of registration after a Qualifying Resort Development Property Unit is sold, where tax credit receipts have been issued, the Qualifying Resort Developer is liable for the full amount of such tax credits and shall immediately surrender to the Minister from the escrow account an amount equal to the aggregate of the amounts of the tax credit receipts issued for Qualifying Resort Development Property Units. Where tax credit receipts have not been issued, the Minister will not issue tax credit receipts with respect to that Qualifying Resort Developer.Breach of the Qualifying Resort Developer’s five year operating commitment will also result in the surrender of the escrow account to the Minister.Also, where a Qualifying Investor receives, directly or indirectly, the benefit of all or a part of a tax credit that the Qualifying Investor is not entitled to, the Qualifying Investor shall pay the amount of the benefit to the Minister plus interest at the rate prescribed under the federal Income Act.
23. Since Government is reviewing the applications and offering a tax credit, does this mean that Government is endorsing the program as a safe investment?
The Province of Newfoundland and Labrador in no way guarantees the value of any Qualifying Resort Development Property Unit sold by a Qualifying Resort Developer, nor does it in any way express an opinion as to the financial condition of the resort business or the merits of an investment in the units. The tax credit is designed, in fact, to help mitigate risk.
The Resort Property Investment Tax Credit Regulations under the Income Tax Act is available on the House of Assembly website.
Resort Property Investment Tax Credit Program
Tax Policy Division
Department of Finance
P.O. Box 8700
St. John’s, NL A1B 4J6
Tel: (709) 729-2983
Fax: (709) 729-2070
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