Maya Chen
Whether or not you have to charge HST on rent depends on the type of property being rented and the duration of the rental agreement. HST, or Harmonized Sales Tax, is generally charged on the supply of real property, including commercial lease rents. However, there are exceptions where HST may not apply, such as in the case of residential rentals for periods of one month or longer. Landlords are not permitted to charge sales tax on rent for residential complexes or units used as a place of residence with a rental period of continuous occupancy of one month or more by the same individual. On the other hand, short-term residential rents for periods of less than 30 days may be subject to HST, unless the rent charged is below a certain threshold and the property is occupied by the same person(s). Understanding the applicability of HST is crucial for landlords and tenants to comply with tax regulations and avoid legal issues.
Do I have to charge HST on rent?
| Characteristics | Values |
|---|---|
| Residential rent | No HST for rental property exceeding one month of rental. |
| Commercial rent | HST is charged on all amounts paid in connection with the supply of real property. |
| Short-term residential rent | HST is charged for periods less than 30 days, unless the rent is $20 per day or less and the property is occupied by the same person(s). |
| Landlord requirements | Landlords must invoice tenants and pay the extra amount of HST to the government before filing a lawsuit to get back what they owe. |
| GST/HST registration | Registration for a GST/HST account may be required if gross rental income exceeds $30k. |
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What You'll Learn
HST on residential vs. commercial rent
Whether you have to charge HST on rent depends on the type of property you are renting out and the duration of the rental.
Residential Rent
In general, landlords are not permitted to charge HST on residential rent. Residential rent is exempt from HST if the rental period is one month or more of continuous occupancy by the same individual. However, if the property is used to generate income, such as in the case of short-term rentals, the rules change.
Short-term rentals are typically defined as dwellings rented out for less than a set number of consecutive days, ranging from 28 to 90 days depending on the province or municipality. If a residential property is rented out on a short-term basis and surpasses a gross income threshold of $30,000, HST must be charged to the occupant and a GST62 form must be filed.
It is important to note that the distinction between short-term and long-term rentals is critical when it comes to HST. Converting a long-term rental into a short-term rental can trigger HST, and an official valuation or appraisal may be required to determine the fair market value and any applicable capital gains tax.
Commercial Rent
On the other hand, commercial rent is subject to HST. A person leasing commercial real property in Canada is generally required to register and collect GST/HST unless they are a small supplier with annual taxable supplies of $30,000 or less. In such cases, the small supplier is not mandated to collect GST/HST unless they have chosen to register voluntarily.
Real Estate Sales
When it comes to the sale of real estate, HST is generally applicable unless the property qualifies for certain exemptions. Used residential property and personal use property are exempt from HST, while new residential housing and commercial real property are subject to HST at a rate of 13% of the purchase price.
In summary, the applicability of HST on rent depends on the nature of the property and the duration of the rental. While residential long-term rentals are generally exempt from HST, commercial rentals and short-term rentals that meet certain criteria are subject to HST.
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Landlord charging HST illegally
In Canada, landlords are generally not permitted to charge sales tax on rent for residential properties. This is because residential rental income is exempt from the Goods and Services Tax/Harmonized Sales Tax (GST/HST). Therefore, if a landlord is charging HST on rent for a residential property, they may be doing so illegally.
There are, however, some exceptions to this rule. For example, if the rental property is being leased for commercial purposes, the landlord is typically considered to be making a taxable supply and would therefore charge GST/HST on the rent. Additionally, if the tenant's use of the property changes to a commercial nature, the landlord may be required to charge GST/HST, even if the landlord's use of the property has not changed.
In the case of a residential lease, it is illegal for a landlord to collect HST without being registered. If a landlord is found to be charging HST illegally, tenants can report this to the Canada Revenue Agency (CRA). The CRA takes a dim view of this practice and may take action against the landlord.
If you are a tenant and your landlord is charging you HST on your rent, you can take several steps to address the situation. First, verify that the property is indeed being used for residential purposes and not commercial purposes. If the property is residential, print off the relevant information from the CRA website and show it to your landlord. If your landlord is reasonable, they should change the rental agreement to exclude the HST charge.
If your landlord refuses to change the rental agreement or is unresponsive, you may need to consider walking away from the lease. Dealing with a landlord who charges illegal fees at the start of a lease may lead to future problems during the tenancy. It is important to protect yourself from potential issues and find a professional landlord who follows the law.
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HST on short-term rentals
In Canada, the rules for charging HST on rent depend on whether the rental property is for long-term or short-term use.
If you are renting out a residential property for long-term use, you are generally exempt from charging HST on the rent. However, if you are renting out a property for short-term use, such as a vacation property or Airbnb, HST may apply.
For short-term rentals, HST is applicable if the rent charged is more than $20 per day, and the property owner surpasses the earning threshold of $30,000 in gross income from rental revenue. In this case, the property owner must charge the occupant HST and file a GST62 form, known as the "Goods and Services Tax (GST)/Harmonized Sales Tax (HST) Return (Non-Personalized)".
It is important to note that if a property is used for both long-term and short-term rentals, the application of HST at the point of sale may vary depending on how the Canada Revenue Agency (CRA) categorizes the property. Additionally, property owners are responsible for understanding the tax implications of their rental activities, including capital costs and operating costs associated with short-term rentals.
When it comes to the purchase of a vacation property, an individual or personal trust that is a registrant must pay HST on the purchase if the property was previously used primarily for taxable short-term rentals. However, if the purchaser is considered a small supplier, with rental revenue below $30,000 in the last four consecutive calendar quarters, registration for HST is voluntary.
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HST on long-term rentals
In Canada, the rules for charging HST on rental properties depend on whether the property is a long-term or short-term rental.
For long-term rentals, landlords are exempt from charging HST on rent. A long-term rental is defined as a stay of more than 60 continuous days. This means that if you are renting out a property for more than two months to the same individual, you are not required to collect HST on the rent.
On the other hand, short-term rentals are subject to HST as they are considered commercial activities. This includes platforms like Airbnb and VRBO, where HST is typically collected and remitted on behalf of the property owner. It is important to note that if you are using a digital platform to facilitate bookings and take payments, you must notify them if you are registered for HST to avoid double taxation.
Additionally, when switching between short-term and long-term rentals, or if there is a significant change in the extent of use (more than 10%), there may be HST implications under the change-in-use rules. For example, when converting a short-term rental to a long-term rental, you may be required to pay HST on the basic tax content of the property to the Canada Revenue Agency (CRA).
It is also worth noting that if a property has been used as both a long-term and short-term rental and is considered a short-term rental at the time of sale, HST may need to be applied depending on how the CRA views the property. Therefore, it is important to seek professional advice when dealing with the tax implications of rental properties to ensure compliance with the relevant regulations.
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HST on parking spaces
In Ontario, Canada, the general consensus is that landlords are not permitted to charge HST on rent for a residential lease. This is because a rental of a residential complex or a residential unit in a residential complex is exempt if the unit is to be used by an individual as a place of residence and if the rental period is one month or more. However, HST does apply to commercial rent.
When it comes to the sale of a condo parking space, the applicability of HST becomes more complex. In most cases, if a parking spot is sold together with a used residential condominium unit, there should be no HST on the sale, and both the condo and the parking space are exempt from HST. However, when a parking space is sold on its own, it is typically subject to HST. This means that if an individual is selling a parking space, they may be required to charge and remit HST on the sale price, unless they are exempt from doing so.
It is important to note that the rules and regulations regarding HST on parking spaces may vary depending on the province or territory in Canada. Additionally, there may be exceptions and specific circumstances that influence the applicability of HST. As such, it is always advisable to consult with a tax professional or refer to the Canada Revenue Agency (CRA) for definitive information on HST requirements in a particular jurisdiction.
In some cases, the vendor may be able to reduce the amount of HST payable to the CRA if they have paid HST on the original purchase of the parking space. The rebate amount will depend on the original purchase price and the tax rate at the time of purchase. To claim this rebate, the vendor must complete the appropriate rebate application form within the specified timeframe.
Furthermore, when purchasing a secondary or resale condo parking spot, there may be confusion about whether HST is applicable. While some sources suggest that HST may not be charged on resale spots if the original owner did not pay HST when purchasing from the condo corporation, other sources indicate that HST may still be applicable, especially if the seller is registered for HST and has an HST registration number.
Overall, the applicability of HST on parking spaces can vary depending on the specific circumstances, such as the type of transaction, the location, and the registration status of the seller. It is crucial to seek professional advice or refer to official sources, such as the CRA, to ensure compliance with the relevant tax laws and regulations.
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Frequently asked questions
No, landlords are not permitted to charge sales tax on rent for residential properties.
Yes, HST is charged on all amounts paid in connection with the supply of commercial real property.
If you are renting out your residential property for short-term rentals (for periods of less than 30 days), you may be required to register for a GST/HST account and charge HST on the rent.
