Do you own a vacation property in which you rent out short-term? Do you know your obligations to CRA regarding GST/HST? If not, don’t worry we have the answers!
The most important thing to consider when it comes to GST/HST in property rental is the primary use of the property. A residential property is a property in which is occupied without a pause in tenancy, either as a principal residence or vacation property. These properties do not require charging/remitting GST/HST on the lease payments, or the purchase or sale of the property. A commercial property is a property that is only occupied as a short-term rental (30 days or less). These types of properties do require charging/remitting GST/HST on the lease payments.
If you currently own a vacation property that is used as a residential property and wish to make it a commercial property, there is little GST/HST implications. All that would be done is recovering of GST/HST that was paid in the purchase of the property. Therefore, if there was no GST/HST paid, there is no implications.
If you currently own a vacation property that is used as a commercial property and wish to change it to a residential property or sell it, there are more GST/HST implications. When the use of the property is changed from commercial to residential, GST/HST is calculated on the fair market value of the property at that time. Therefore, it is a deemed sale of a property by which you then owe GST/HST.
It is important to be aware of and follow the GST/HST requirements for vacation properties, as well as any other residential/commercial properties. If not handled, or incorrectly calculated, the implications can significant.
At Jibe Accounting, we help many clients manage their GST/HST accounts, along with the tax implications of their vacation properties!