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.
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 a resort business or the merits of an investment in the units.
Developer Issues
Qualifying Resort Developer
A Qualifying Resort Developer is a business registered to develop a Qualifying Resort Development Complex, and includes a corporation, partnership or limited partnership but does not include a trust.
Qualifying Resort Development Complex
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 such as tour guides and interpreters;
- a convention centre with seating capacity for at least 75 persons, as well as 3 meeting rooms; and
- dining facilities with seating capacity for at least 50 persons.
Qualifying Resort Development Property Unit
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.
Time Restrictions
The Qualifying Resort Developer has 12 months after being registered to commence 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.
Maximum Capital Approved
The maximum amount of capital that can be approved by the minister for a Qualifying Resort Development Complex is $50 million.
North East Avalon
Property development projects outside the North East Avalon may participate in this tax credit program. 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.
Investor Issues
Qualifying Investor
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.
Restrictions on When Investments Must be Made
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.
Maximum Tax Credits
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. 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.
Holding Period
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.
Administration/Other
Application Process for Qualifying Resort Developer
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; and
- be in the form and include any other information that the minister may require.
Process to Receive Tax Credits
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, identified on the tax credit receipt.
Monitoring and Compliance
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 with all aspects of the tax credit program.
Government Recourse/Penalties
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. Further, 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 Act.
Additional Information
- Resort Property Investment Tax Credit Regulations (under the Income Tax Act)
For more information about corporate income taxes in Newfoundland and Labrador, please contact the Fiscal and Economic Policy Branch.