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The Coles Notes of GST/HST and Real Estate
There is much discussion around exempt verses taxable supply of property. I have been advised by many accountants: the rule is: everything is subject to HST unless there is a specific rule that says otherwise!
A common such exemption relating to real property is the sale of a previously occupied residential home. A residential home or “complex” is a property used for long term occupancy (normally more than 60 consecutive days) by an individual as a place of residence. There are, however, several “traps” that could exclude such residential property from exemption. The following is a brief list of things for vendors and purchasers to watch out for:
No matter how small, or even if claimed in error, if there has been an input tax credit claimed a subsequent sale of the property is not exempt.
Generally, ½ hectare together with the home is exempt from HST. If the property is larger than this, from a tax perspective there are 2 transfers: One, the home with ½ hectare, which is exempt; and one for the remainder of the vacant land. The HST owing is on the value of the land above the ½ hectare. There is a further exemption if the excess land is necessary for the use and enjoyment of the property (the interpretation of which may be a good topic for my next blog!).
A property containing a residential complex and another component (i.e. a commercial unit) are deemed to be two separate supplies. There is an exemption for the residential portion of the sale, however, the commercial property is taxable. There is, however, a further exemption if the property is primarily (more than 50%) occupied by the owner of a relative (for example, a personal residence containing a small portion used as a home office or to operate business).
Properties used primarily to provide short term accommodation are taxable when sold. An example of this is a cottage that is only used to provide short term rentals. If the property owner also uses the cottage primarily for their own use, the exemption likely applies.
As a general rule, if you are a purchaser of a property, you want to ensure the Agreement of Purchase and sale stipulates the HST is “included in” the purpose price. Conversely, if you are a vendor, the Agreement of Purchase and Sale should state the GST/HST is “in addition to” to the purchase price.
Most importantly, although most real estate lawyers can give you a general guide to whether GST/HST is applicable to your sale or purchase, the best practice is to call your accountant, explain your specific situation and obtain his or her advice.
This entry was posted on April 7, 2017 by Jim and Iris
“Thank you for the memorable sales and closing experience of finding the cottage of our dreams. A perfect fit for our needs.”I & E – Lake Muskoka cottage buyers
“Jim and Iris Gardiner were both amazing to deal with. A truly professional team. They shared a great deal of knowledge with us and really shed important light regarding potential Island Cottage ownership – all the pros and cons. Not only did they sell our existing cottage in 24 hours for much higher than our asking price they helped us find our new slice of paradise on Lake Muskoka in a very tight market. We are thrilled with our new cottage and love being on Eilean Gowan Island! We would highly recommend either Jim or Iris for any of your Real Estate needs!”J & D – Sold on Echo Lake and bought on Lake Muskoka
Jim did me a favor 20 years ago and I wanted to return the favor – I approached him and Iris at the cottage show and, even though I already had a real estate agent, he recommended a cottage property that I purchased and enjoyed for those 20 years. I therefore, tracked him down and had him be our agent in selling that property. Our priority was to find new owners that would be friendly and fit in well with the neighbors and Jim and Iris found the perfect couple Jim and Iris made the entire sale most enjoyable. The experience was so smooth and enjoyable that the sellers, the buyers and the real estate agents all got together for supper the following summer at our old cottage!K & L – Lake Muskoka
It is with great pleasure and appreciation for me to recommend the services of Jim Gardiner and the entire Gardiner Team. Jim’s awareness of community by-laws and market related activities extracted incremental value for us when we were finalizing the purchasing agreement.JB – Mirror Lake
Just want to tell you that you did a fine job for me on the cottage sale on Lake Muskoka. The sale has removed a huge load from my shoulders. Iris, just a note to thank you again. Money is in the bank!!!!!!BJ – Lake Muskoka