In real estate, the beneficial owner of the property has the responsibility to collect GST and remit to Canada Revenue Agency (CRA). If the property is held “in trust” by another corporation or entity, the beneficial owner is still required to register and file GST returns. It is common for third parties such as agents or property managers to be designated to collect GST on rental income. There is a special election that allows the agent to remit GST on behalf of the owner, but responsibility is still on the beneficial owner.
Discussion:
The following types of real estate transactions are subject to GST:
- Sales of new residential properties
- Substantial renovations of used residential properties by builder
- Self-supply of new residential property
- Residential property used for commercial purposes
The following types of real estate transactions are not subject to GST:
- Sales of used residential properties
- Long term rentals of residential properties
- Renovations by “non-builders”
- Bare land may be exempt
- Sales of personal-use property by an individual are exempt such as vacation property or hobby farms
There are GST rebates available on the purchase of new homes and completion of eligible rental properties. However, the rebate only applies if the purchase price does not exceed a fair market value of $450,000. There are additional provincial rebates that may apply as well.
A GST registrant that sells residential real estate, may be eligible to claim GST paid (input tax credits) as well.
Have a real estate tax question in Canada? Contact Grant Gilmour.
Grant has been in the CA business since 1988, starting his own practice in 1994. His tax expertise encompasses tax planning, international tax issues, and Scientific Research and Development tax credits. He is a graduate of the CICA In-Depth Tax Course and in 2012, Grant received the CA Community Service Award and the Scout Leader Medal.
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