Determining whether or not Goods and Services Tax (GST) will be payable on the purchase of property is a question that
should be referred to your accountant within Canada. Race and Company's lawyers can tell you our understanding of how Goods
and Services Tax may apply to your transaction, but you should seek appropriate financial advice from a qualified professional
such as a certified accountant.
1. The status of the vendor will determine whether or not GST must be dealt with in the transaction;
2. A sale of a bed and breakfast or other property providing nightly accommodation will likely attract GST. It
will not matter that the operator of the bed and breakfast is unregistered for GST;
3. The sale of vacant land from a developer will attract GST;
4. The sale of vacant land by an individual not in the business of holding and developing land for re-sale may
not attract GST. This may extend to small subdivisions where the number of lots being sold is small. A written ruling
from the GST authorities is essential to confirm exempt status for smaller subdivisions;
5. A sale of a dwelling from the builder attracts GST;
6. A sale of a substantially renovated dwelling from the builder/renovator attracts GST;
7. Rental of a dwelling by a builder prior to sale changes the status of the building and GST will not be attracted
on the sale of it. However, GST will be payable by the builder on the fair market value at the time of renting it;
8. Where a builder builds a dwelling for their personal residence, lives in the building and then later sells
it, the sale will not attract GST. However, the builder must have paid the GST on all materials and labour and land in
the course of the construction to qualify for the exemption. Such a builder will be entitled to the new housing rebate;
9. Properties built prior to the inception of GST are not necessarily exempt from the GST regime. Where an older
property has been substantially renovated the renovator will have to charge GST on a sale to a third party. However,
if the renovator lives on the property as their principal residence following renovation and pays all the GST in connection
with labour and materials throughout the course of the renovation, then a subsequent sale will not attract GST;
10. An older property that has been re-zoned to allow for bed and breakfast use will attract GST on a re-sale
where the property has been used for nightly rental accommodation. Moreover, if an owner of an operational bed and breakfast
decides to convert the property to residential-only use, then they will be liable for GST on the market value at the
time of the conversion;
11. A purchaser of property that attracts GST may defer the GST if their intended use of the property is commercial.
For example, the purchaser of a bed and breakfast that plans on continuing the business of a bed and breakfast may register
for GST and defer payment. Further, a builder buying vacant land that attracts GST may defer the GST if they are building
for re-sale.
At the time of taking a listing, GST issues should be determined, as the listing price may be affected by the GST status
of the property. If the property is in a category that is touched upon in the foregoing paragraphs, then the owner should
be advised to seek a determination from their accountant, and in some cases, a written determination from the Government
of Canada's GST Offices.
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