Understanding GST/HST When Buying Residential & Rental Properties in Canada

The excitement of buying a property in Canada can be dampened by tax complexities. One crucial factor is the Goods and Services Tax (GST) or the Harmonized Sales Tax (HST), depending on your province. This blog clarifies GST/HST rules for residential and rental property purchases in Canada, helping you make informed decisions

GST/HST on Purchasing a Primary Residence

In most cases, buying a used residential property (your primary residence) is exempt from GST/HST. You won’t pay additional tax on top of the purchase price. However, there are exceptions:

  • New Housing Rebate (NHR): For newly built homes from registered builders, you might qualify for the NHR. This rebate helps recover some of the GST paid on construction costs. The purchase price might include an NHR amount, further reducing your GST burden.
  • Substantial Renovations: If a previously used property undergoes significant renovations, making it essentially “new” for the CRA, a portion of the purchase price reflecting the renovations might be subject to GST/HST.

GST/HST on Purchasing a Rental Property

The GST/HST implications for buying a rental property depend on whether it’s considered a residential complex:

  • Residential Rental Properties: The purchase of a typical rental property (apartment building, condo for rent) is generally exempt from GST/HST. However, similar to primary residences, landlords cannot claim input tax credits (ITCs) for GST/HST on purchases related to these exempt rentals.
  • Short-Term Rentals: Renting your property on a short-term basis (e.g., Airbnb) might be considered a commercial activity. In this case, GST/HST would apply to the rental income, and you might be able to claim ITCs for GST/HST paid on related expenses.

Important Considerations:

  • New Rental Property Construction: Special rules (self-supply rules) apply to the GST/HST implications for builders constructing new rental properties or making substantial renovations to existing ones.
  • Provincial Taxes: While this blog focuses on GST/HST, some provinces have additional provincial sales taxes that might apply to real estate transactions.

Different Types of Rebates Available:

  • New Housing Rebate (NHR): As mentioned earlier, this rebate helps offset a portion of the GST paid on the construction of a new home purchased from a registered builder.
  • Enhanced GST Rebate for Purpose-built Rentals (PBRH): This recent program offers a 100% rebate on the GST paid on construction costs for new purpose-built rental housing units. The program aims to incentivize the creation of more affordable rental options. (Note: Eligibility criteria and application details are subject to change)

Scenarios:

  • Buying a detached house as your primary residence (used property) means no GST/HST applies.
  • Purchasing a newly built condo from a developer might involve GST/HST, but you could be eligible for the NHR to offset some of that tax.
  • Buying a triplex to rent out all units qualifies as a residential rental property, exempt from GST/HST, but you cannot claim ITCs for related expenses.
  • A developer constructing a new apartment building for rentals might be eligible for the Enhanced GST Rebate for PBRH, depending on if the project meets the criteria.

Need Help?

Navigating GST/HST complexities can be stressful. CPA Pro Service Experts can help you:

  • Understand your GST/HST obligations.
  • Claim applicable rebates (like the NHR).
  • Comply with GST/HST regulations for rentals.

Visit our website https://cpaproservice.ca or email us at info@cpaproservice.com for assistance.

Disclaimer: This blog provides a general overview and shouldn’t be considered tax advice.

Leave a Comment

Your email address will not be published. Required fields are marked *

Shopping Cart