RC4052 GST/HST Information for the Home Construction Industry

From: Canada Revenue Agency

RC4052(E) Rev. 18

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This guide uses plain language to explain the most common tax situations. It is provided for information only and does not replace the law.

La version française de ce guide est intitulée Renseignements sur la TPS/TVH pour l'industrie de la construction résidentielle.


Table of contents

Is this guide for you?

This guide is for you if you are a builder, land developer, renovator, contractor, or other person involved in the home construction industry. This guide explains the rules for charging, collecting, and remitting the goods and services tax/harmonized sales tax (GST/HST) on various supplies of real property and other supplies related to the home construction industry. This guide also gives information about claiming input tax credits (ITCs) and rebates for real property.

This guide is not for you if you are an individual who is not a builder for GST/HST purposes and you are building your own house, or you have engaged someone else to build your house. To determine if you are a builder for GST/HST purposes, see Are you a builder for GST/HST purposes? To find out about rebates that may be available to individuals who build, hire someone else to build, or purchase a new house to use as their primary place of residence, see Guide RC4028, GST/HST New Housing Rebate.

This guide does not include information on the special rules for selected listed financial institutions. If you are a selected listed financial institution, please see Guide RC4050, GST/HST Information for Selected Listed Financial Institutions.

GST/HST and Quebec

In Quebec, Revenu Québec generally administers the GST/HST. If the physical location of your business is in Quebec, you have to file your returns with Revenu Québec using its forms, unless you are a person that is selected listed financial institution (SLFI) for GST/HST or Quebec sales tax (QST) purposes or both. For more information, see the Revenu Québec publication IN-203 V, General Information Concerning the QST and the GST/HST, available at Revenu Québec, or call 1-800-567-4692. If you are an SLFI, go to Financial institutions.

What's new? 

GST/HST information for taxi operators and commercial ride-sharing drivers

A driver who supplies taxable commercial ride-sharing services on or after July 1, 2017, is deemed to be a taxi business for GST/HST purposes. For more information, see GST/HST information for taxi operators and commercial ride-sharing drivers.

Definitions

Basic tax content – of a property generally means the amount of the GST/HST that was payable for your last acquisition of the property, and for any improvements you made to the property since that last acquisition, less any amounts that you were, or would have been, entitled to recover (for example, by rebate or remission, but not by input tax credits). The calculation for the basic tax content also takes into account any depreciation in the value of the property since you last acquired it (for example, when you purchased it or were last considered to have purchased it).

You may have to calculate the basic tax content of a property if you are a registrant and you increase or decrease your use of the property in your commercial activities.

Builder – has a very specific meaning for GST/HST purposes that is not limited to a person who physically constructs housing. It is important to determine whether you are a builder of a house for GST/HST purposes as there are many special rules that apply to builders. For more information, see Are you a builder for GST/HST purposes?

Commercial activity – means any business or adventure or concern in the nature of trade carried on by a person, but does not include:

  • the making of exempt supplies; or
  • any business or adventure or concern in the nature of trade carried on without a reasonable expectation of profit by an individual, a personal trust, or a partnership where all the members are individuals.

Commercial activity also includes a supply of real property, other than an exempt supply, made by any person, whether or not there is a reasonable expectation of profit, and anything done in the course of making the supply or in connection with the making of the supply.

Exempt supplies – are supplies of property and services that are not subject to the GST/HST. GST/HST registrants generally cannot claim ITC to recover the GST/HST paid or payable on property and services acquired to make exempt supplies.

House and housing – are used throughout this guide to include a single family house, a semi-detached house, a duplex, a townhouse, a residential condominium unit, units in a co-operative housing corporation, apartments, and additions to apartment buildings, but they do not include a mobile home or a floating home. Unless otherwise noted, these terms generally include the land upon which the house is situated.

Input tax credit (ITC) – means a credit that GST/HST registrants can claim to recover the GST/HST paid or payable for property or services they acquired, imported into Canada, or brought into a participating province for use, consumption, or supply in the course of their commercial activities.

Lease – is used throughout this guide to include a lease or a licence, or an arrangement that is similar to a lease or a licence.

New or substantially renovated house – is used throughout this guide to include a house (or housing) that is newly built, has been substantially renovated (see the definition of substantial renovation), has undergone a major addition with the renovation of the existing house, or has been converted from non-residential use to use as a place of residence for individuals.

Participating province – means a province that has harmonized its provincial sales tax with the GST to implement the HST. Participating provinces include New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island, but do not include the Nova Scotia offshore area or the Newfoundland offshore area except to the extent that offshore activities, as defined in subsection 123(1) of the Excise Tax Act, are carried on in that area.

Personal trust – generally means, for GST/HST purposes, either:

  • a trust or estate that is created as a consequence of the death of an individual (testamentary trust); or
  • any trust that is not a testamentary trust, in which no person paid any consideration to acquire a beneficial interest and all of the beneficiaries of the trust are individuals, or in the case of contingent beneficiaries, individuals, charities, or public institutions.

Primary place of residence – of an individual generally means the residence that the individual lives in on a permanent basis. An individual may hold more than one residence, but is considered to have only one primary place of residence. If an individual lives in more than one place, the primary place of residence is generally the place most often occupied as a residence. For more information, see Primary place of residence.

Property – includes goods, real property and intangible personal property such as trademarks, rights to use a patent, and admissions to a place of amusement, but does not include money.

Public service body – means a charity, non-profit organization, municipality, university, public college, school authority, or hospital authority.

Real property – includes:

  • a mobile home or floating home and any leasehold or ownership interest in such property; or
  • in Quebec, immovable property and every lease of such property; and
  • in any other place in Canada, all land, buildings of a permanent nature, and any interest in real property.

Generally, a person has an interest in real property if they hold any rights to the property. For example, if a person receives the title to real property or acquires real property by way of lease, they have acquired an interest in that property.

Registrant – means a person that is registered or has to be registered for the GST/HST.

Relative – of an individual means another individual related to the individual by blood, marriage, common-law partnership, or adoption within the meaning of the Income Tax Act.

Related by blood is limited to parents, children, or other descendants or siblings. Related by marriage includes a spouse or a person who is connected to the spouse by blood or adoption.

However, for purposes of the GST/HST new housing rebate only, a relative of an individual includes a former spouse or former common-law partner of the individual.

Also, for purposes of the HST transitional rules for the assignment of purchase and sale agreements for, and for the resale of, certain new housing in British Columbia, Ontario, and Prince Edward Island, aunts and uncles would be considered to be related to their nieces and nephews.

Residential care facility – includes any facility at which an individual intends to reside indefinitely and that provides the individual with a room or suite together with additional property and services. The additional property and services may include meals, housekeeping, laundry, security monitoring, nutritional and nursing care services, scheduled transportation, social, recreational, educational and religious services, personal supervision, personal care, and assistance with the activities of daily living (for example, bathing, dressing, grooming, eating, ambulating).

Residential care facilities include facilities that are generically described as care homes, personal care homes, congregate housing, assisted living residences, seniors' residences, retirement residences, nursing homes and homes for the aged. However, a residential care facility does not include a facility such as a hospital.

Self-supply – is used throughout this guide to describe the situation where a person is considered to have both made a sale of new housing and to have repurchased that housing. For more information, see What is a self-supply?

Substantial renovation – of a house generally means that 90% or more of the interior of the existing house was removed or replaced. If a house has been substantially renovated, it is generally treated as a newly built house. For more information on the extent and type of changes that must be made to a house to be considered substantially renovated, see Substantial renovation, major addition, and conversion.

Substantially completed – generally means that the construction or substantial renovation of the housing is 90% or more completed and an individual could reasonably live in it. Minor repairs, adjustments, or outstanding upgrades are not considered to impair the use and enjoyment of the housing as a place of residence.

The construction or substantial renovation of multiple-unit housing or an addition to such housing is considered to be substantially completed no later than the day that 90% or more of the residential units in the housing or addition are occupied.

Supply – means the provision of property or a service in any way, including sale, transfer, barter, exchange, licence, rental, lease, gift, or disposition.

Taxable supplies – are supplies of property and services that are made in the course of a commercial activity and are subject to the GST/HST (including zero-rated supplies).

Zero-rated supplies – are supplies of property and services that are taxable at the rate of 0%. This means there is no GST/HST charged on these supplies, but GST/HST registrants may be eligible to claim ITCs for the GST/HST paid or payable on property and services acquired to provide these supplies.

What is the GST/HST?

The goods and services tax (GST) is a tax that applies to most supplies of goods and services made in Canada. The GST also applies to many supplies of real property (for example, land, buildings, and interests in such property) and intangible personal property such as trademarks, rights to use a patent, and digitized products downloaded from the Internet and paid for individually.

The participating provinces harmonized their provincial sales tax with the GST to implement the harmonized sales tax (HST) in those provinces. Generally, the HST applies to the same base of property (for example goods) and services as the GST. In some participating provinces, there are point-of-sale rebates equivalent to the provincial part of the HST on certain qualifying items.

GST/HST registrants who make taxable supplies (other than zero-rated supplies) in the participating provinces collect tax at the applicable HST rate. GST/HST registrants collect tax at the 5% GST rate on taxable supplies they make in the rest of Canada (other than zero-rated supplies). Special rules apply for determining the place of supply. For more information on the HST and the place-of-supply rules, see GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax - Place of supply rules for determining whether a supply is made in a province.

The HST rate can vary from one participating province to another. For the list of all applicable GST/HST rates, go to GST/HST calculator (and rates).

How does the GST/HST work?

If you are a GST/HST registrant, you generally have to charge and collect the GST/HST on taxable supplies (other than zero-rated supplies) you make in Canada and file regular GST/HST returns to report that tax.

Exception

In certain cases, you do not have to collect the GST/HST on a taxable sale of real property. Instead, the purchaser may have to pay the tax directly to us. For more information, see Who remits the tax for a taxable sale of real property - vendor or purchaser?

If you are a GST/HST registrant, you can generally claim ITCs on your GST/HST return to recover the GST/HST paid or payable on purchases and expenses to the extent you use, consume, or supply them in your commercial activities. Usually, commercial activities are those undertaken to provide taxable (including zero-rated) supplies of property and services. For more information on ITCs, see Claiming input tax credits.

For the consumer, there is no difference between zero-rated and exempt supplies of property and services, because tax is not collected in either case. However, the differences for you, as the registrant, is that although you do not collect the GST/HST on zero-rated or exempt supplies of property and services, you can only claim ITCs for the GST/HST paid or payable on purchases acquired to make zero-rated supplies of property and services. You cannot claim ITCs for any GST/HST paid or payable on your purchases or expenses used to provide exempt supplies of property and services.

Taxable and exempt supplies:

Taxable

You charge GST/HST

You can claim ITCs

Exempt

You do not charge GST/HST

You cannot claim ITCs

When you complete your GST/HST return, deduct your ITCs from the GST/HST you charged your customers. The result is your net tax.

Note

Special rules apply to charities. For more information, see Guide RC4082, GST/HST Information for Charities.

If you are not a GST/HST registrant, you do not charge GST/HST on your supplies of property and services, or on your rentals of real property, and you cannot claim ITCs for tax paid or payable on your related purchases and expenses. However, if you are a public service body, you may be eligible for a public service bodies' rebate. For more information, see Guide RC4034, GST/HST Public Service Bodies' Rebate.

If you are not a registrant and you make a taxable sale of real property, you may be able to claim a rebate to recover some or all of the GST/HST you paid when you purchased the property or when you made improvements to it (see Rebate for taxable sale of real property by a non-registrant).

Who pays the GST/HST?

Almost everyone has to pay the GST/HST on purchases of taxable supplies of property and services (other than zero-rated supplies). The GST/HST also applies to most supplies of intangible personal property and certain real property. However, Indians, and some groups and organizations, such as certain provincial and territorial governments, do not always pay the GST/HST on their purchases. For more information, see Guide RC4022, General Information for GST/HST Registrants.

Note

We recognize that many First Nations people in Canada prefer not to describe themselves as Indians. However, we use the term Indian because it has a legal meaning in the Indian Act.

Who charges the GST/HST?

Generally, GST/HST registrants have to charge and collect the GST/HST on all taxable (other than zero-rated) supplies of property and services they provide to their customers.

Both GST/HST registrants and non-registrants are generally required to charge and collect the GST/HST on a taxable sale of real property in Canada. However, there are some exceptions. For more information on when you have to collect the GST/HST on a taxable sale of real property, and when you do not, see Who remits the tax for a taxable sale of real property - vendor or purchaser?

Taxable supplies

Most property and services supplied in or imported into Canada are subject to the GST/HST.

Taxable supplies (other than zero-rated)

The following are examples of taxable, other than zero-rated, supplies (for the list of all applicable GST/HST rates, go to GST/HST calculator (and rates).

  • sales and rentals of commercial real property
  • sales of newly built residential real property (certain sales of new housing may be subject to a previous rate of GST/HST). For more information, see Which rate of GST/HST applies to the sale of real property?
  • construction services
  • construction materials (for example, lumber, insulation, drywall)
  • construction equipment and tools (sales and rentals)
  • septic systems
  • security systems
  • plumbing and electrical services
  • heating/cooling/ventilation systems
  • flooring
  • cabinetry
  • installation services (for example, for the installation of heating/cooling/ventilation systems, flooring, cabinetry)
  • fixtures and appliances
  • decorating and staging services
  • architectural and engineering services
  • legal and accounting services
  • services provided by land surveyors
  • services provided by real estate agents
  • sales and leases of automobiles
  • gasoline
  • vehicle and equipment repairs
  • computers and furniture

Notes

This list is not all inclusive. It only provides examples of some of the property and services that are generally subject to the GST/HST when supplied by a registrant. It is also important to note that a sale of real property may be subject to the GST/HST even if it is made by a non-registrant.

If you are involved in home construction, you will not likely supply or purchase property and services that are zero-rated.

Examples of property and services taxable at 0% (zero-rated) include basic groceries, agricultural products, prescription drugs, and exports.

Exempt supplies

A small number of property and services related to the construction industry are exempt from the GST/HST—that is, no GST/HST applies to them. If you make an exempt supply, you do not charge your customers the GST/HST on that supply. You cannot claim ITCs for the tax paid or payable on purchases you make or expenses you incur to provide exempt supplies.

Examples of exempt property and services include:

Before you begin construction

Before you begin construction, it is important to become familiar with the GST/HST terms and concepts that apply to the construction industry. The terms house, registrant, residential care facility, supply, self-supply, and builder have very specific meanings for GST/HST purposes. See Definitions.

What is a supply of property or a service?

A supply of property or a service generally means providing property or a service in any way, including sale, transfer, barter, exchange, licence, rental, lease, gift, or disposition. Therefore, if you provide property or a service in any way, you are making a supply.

If you make a supply, it is important to establish the nature of what you are supplying (property or service), since the rules for charging and collecting the GST/HST will depend on this determination. For example, the rules for charging and collecting tax on a sale of real property are different than those for charging tax on a supply of a construction service. For more information, see What are you supplying - Construction services or real property?

What is a self-supply?

The term self-supply describes a situation where a builder is considered to have both made a supply by way of sale of real property and, at the same time, to have repurchased that property. To determine if you are a builder, see Are you a builder for GST/HST purposes?

Self-supply rules may apply to builders of new or substantially renovated housing, whether they are GST/HST registrants or not. If you are a builder of new or substantially renovated housing, you may be considered to have made a self-supply of that housing (that is, you may be considered to have sold and repurchased it) if you lease the housing to an individual for long-term residential use and that individual is the first to occupy the housing as a place of residence, or if as an individual, you are the first to occupy the housing as a place of residence.

The purpose of the self-supply rules is to make sure that a builder who builds or substantially renovates housing and then leases the housing or uses it for their own personal use is treated in the same way as a person who is not a builder and who purchased new or substantially renovated housing.

If you build a new house and you use the house as a model home, you are not considered to have made a self-supply until you either occupy the house as a place of residence or you lease the house to an individual for long-term residential use. If you sell the model home before it is occupied as a place of residence, the self-supply rules do not apply and the sale of the model home is subject to the GST/HST.

If you are a builder and you are considered to have made a self-supply of housing, you generally have to account for the GST/HST for that self-supply by reporting it on a GST/HST return, whether you are a GST/HST registrant or not. In this case, the amount of the GST/HST you have to account for on the self-supply you are considered to have made is calculated on the fair market value of the housing (building and land) as of the date of the self-supply. For more information, see When you finish construction.

Transitional rules for self-supplies

Transitional rules may apply for any of the self-supplies of new housing described in this guide that occur in British Columbia, New Brunswick, Nova Scotia, Ontario, Prince Edward Island, and Newfoundland and Labrador.

Is your property situated in New Brunswick or Newfoundland and Labrador?

For more information on how the transitional rules for the increase of the provincial part of the HST that is effective July 1, 2016, apply to self-supplies of new housing in New Brunswick and Newfoundland and Labrador, see GST/HST Info Sheet GI-190, New Brunswick and Newfoundland and Labrador HST Rate Increases: Sales and Rentals of New Housing.

Is your property situated in British Columbia?

As of April 1, 2013, the HST at the rate of 12% no longer applies in British Columbia. The HST has been replaced by the GST at the rate of 5% and a provincial sales tax.

Self-supplies of new housing in British Columbia after March 2013 and before April 2015

A new and temporary 2% transition tax will apply to self-supplies of certain new housing where the GST becomes payable on the self-supply after March 2013 and before April 2015, and the construction or substantial renovation of the housing was at least 10% complete before April 2013. In this case, the new and temporary British Columbia transition rebate may be available.

For more information, see:

Self-supplies of new housing in British Columbia after June 2010 and before April 2013

For information on how the transitional rules for the implementation of the HST apply to self-supplies of new housing in British Columbia after June 2010 and before April 2013, see GST/HST Info Sheet GI-091, Harmonized Sales Tax: Information for Landlords of New Rental Housing.

Note

An application for a British Columbia provincial transitional new housing rebate must be filed before July 2014.

Is your property situated in Nova Scotia?

For more information on how the transitional rules for the increase of the provincial part of the HST that was effective July 1, 2010, apply to self-supplies of new housing in Nova Scotia, see GST/HST Info Sheet GI-104, Nova Scotia HST Rate Increase: Sales and Rentals of New Housing.

Is your property situated in Prince Edward Island?

For more information on how the transitional rules for the increase of the provincial part of the HST that is effective October 1, 2016, apply to self-supplies of new housing in Prince Edward Island, see GST/HST Info Sheet GI‑194, Prince Edward Island HST Rate Increase – Sales and Rentals of New Housing, and GST/HST Notice 302, Prince Edward Island HST Rate Increase – Questions and Answers on Housing Rebates and Transitional Rules for Housing and Other Real Property Situated in Prince Edward Island.

Also, as of April 1, 2013, Prince Edward Island harmonized its provincial sales tax with the GST to implement the HST at the rate of 14%. For more information on how the transitional rules for the HST apply, see GST/HST Info Sheet GI-149, Harmonized Sales Tax: Information for Landlords of New Rental Housing in Prince Edward Island, and GST/HST Notice 279, Harmonized Sales Tax for Prince Edward Island (P.E.I.) - Questions and Answers on Transitional Rules for Housing and Other Real Property Situated in P.E.I.

What are you supplying - Construction services or real property?

The application of the GST/HST depends on whether you are supplying construction services (that is, a service of building a house) or real property (that is, selling the house and land).

Once you determine the nature of your supply, you can determine which rules you have to use for charging and collecting the GST/HST, since these rules are different depending on what you are supplying. The nature of the supply will also be an indicator of whether you are a "builder" of a house for GST/HST purposes. To find out more about the importance of determining whether you are a builder for GST/HST purposes, see Are you a builder for GST/HST purposes?

The following are some of the factors to consider when determining whether you are supplying a service or real property:

  • What does the agreement state that you are providing? If the agreement is a purchase and sale agreement for a new house including the land upon which the house is to be built, you are supplying real property. If the agreement is a contract for construction services only (for example, to build a house on land owned by your customer), you are generally supplying a service.
  • Who owns the land while the construction of the house is in progress? For example, if you own the land while you are constructing the house, this is an indicator that you are supplying real property.
  • Who is liable to pay the property taxes while the construction is in progress? For example, if you are liable to pay the property taxes directly to the taxing authority, this may be an indicator that you are supplying real property.
  • Upon completion of the contract, will you transfer the legal title to the real property to the purchaser? For example, if you transfer legal title to the property, you are supplying real property.

Note 

You are also supplying real property if you lease or license real property to another person, or if you sell or assign an interest in real property.

For more information on determining the nature of a supply, see GST/HST Memorandum 19.1, Real Property and the GST/HST.

Are you a builder for GST/HST purposes?

For GST/HST purposes, the term builder has a very specific meaning that is not limited to a person who physically constructs housing.

It is important to determine whether you are a builder of a house for GST/HST purposes, since there are many special rules that apply to builders. This guide discusses these special rules. We also discuss general rules that will apply to other people involved in home construction who are not builders (for example, someone who is supplying only construction services and who does not have any interest in the land upon which the housing is being constructed).

Generally, you are a builder of housing, or of an addition to multiple-unit housing, if you:

  • build or substantially renovate the housing or construct an addition on land you own or have acquired by way of lease, or you hire someone else to do it for you. However, you are not a builder if your only interest in the land is a right to purchase the housing or an interest in the housing from a builder;
  • acquire an interest in the housing when it is already under construction or substantial renovation or when the addition is under construction, except where the interest is only a right to purchase the housing or an interest in the housing from a builder;
  • acquire an interest in the housing before anyone has lived in it, and your primary purpose in acquiring the interest is to either sell the house or the interest, or to lease the house to a person who will not use the house for their own personal use (for example, you lease the house to another landlord); or
  • acquire an interest in a residential condominium unit either before the complex is registered as a condominium, or before anyone has lived in it, and your primary purpose in acquiring the interest is to either sell the unit or the interest, or to lease the unit to a person who will not use the unit for their own personal use (for example, you lease the unit to another landlord).
     

Note 

An interest in a house generally means any right to the land upon which the house is being constructed. For example, if you receive title to the land, you have acquired an interest in the house. If you enter into a lease agreement for the land, you have generally acquired an interest in the house.

Exception for certain individuals

You are not a builder if you are an individual whose activities are described by any one of the above and those activities are not carried out in the course of a business or an adventure or concern in the nature of trade. For example, you are not a builder of a house for GST/HST purposes if you are an individual who built the house on land that you own and the house is your primary place of residence.

You may also be a builder if you convert a commercial building that you own, or have an interest in, into a house even if you did not complete a substantial renovation. For more information, see Substantial renovation, major addition, and conversion.

It is important to note that you do not have to physically construct or substantially renovate a house yourself to be a builder of the house.

As discussed above, you may also be considered a builder for example if you hire someone else to do the work for you, the work is already underway by another person when you acquire an interest in the house, or even if construction on the house is completely finished when you acquire it, or an interest in it.

If you purchased a house with the intention to substantially renovate and resell it you would be a builder of the house even if it is only a one-time event and you have no intention of doing it on a regular basis, or ever again.

Note

You are not a builder if you are supplying construction services only and you do not own, or have an interest in, the land on which the housing or addition is being built. For information on determining whether your supply is a construction service, see What are you supplying - construction services or property?

Do you have to register for the GST/HST?

You have to register for the GST/HST if:

  • you provide taxable supplies in Canada; and
  • you are not a small supplier.

You do not have to register if:

As a GST/HST registrant, you generally have to charge the GST/HST on your taxable supplies (other than zero-rated supplies) and file regular GST/HST returns to report that tax. You are also entitled to claim ITCs to recover the GST/HST paid or payable on purchases and expenses you use, consume, or supply in making taxable supplies (including zero-rated supplies). For more information, see GST/HST returns.

Exception

There are special rules for charging and collecting the GST/HST on a taxable sale of real property. For more information, see Charging the GST/HST.

What is a small supplier?

You are a small supplier and do not have to register if you meet one of the following conditions:

  • You are a sole proprietor and the total amount of all revenues (before expenses) from your worldwide taxable supplies from all your businesses and those of your associates, is $30,000 or less in any single calendar quarter and in the last four consecutive calendar quarters.
  • You are a partnership or a corporation and the total amount of all revenues (before expenses) from your worldwide taxable supplies and those of your associates, is $30,000 or less in any single calendar quarter and in the last four consecutive calendar quarters.
  • You are a public service body and the total amount of all revenues (before expenses) from your worldwide taxable supplies from all of the organization’s activities and those of your associates, is $50,000 or less in any single calendar quarter and in the last four consecutive calendar quarters. A gross revenue threshold of $250,000 also applies to charities and public institutions.

For more information, see Guide RC4082, GST/HST Information for Charities.

In determining the total amount of revenues from taxable supplies (including zero-rated supplies) of property and services made inside and outside Canada by you and your associates, do not include revenues from supplies of financial services, sales of capital property, and goodwill from the sale of a business.

In summary, you are no longer a small supplier and you must register for the GST/HST if your total revenues from taxable supplies are over $30,000 ($50,000 for public service bodies) in a single calendar quarter or over four consecutive calendar quarters.

Voluntary registration

If you are a small supplier and you are engaged in a commercial activity in Canada, you can choose to register voluntarily. If you register voluntarily, you have to charge and remit the GST/HST on your taxable (other than zero-rated) supplies of property and services, and you can claim ITCs for the GST/HST paid or payable on your purchases and expenses related to the making of these supplies. You have to stay registered for at least one year before you can ask to cancel your registration if you are still a small supplier.

If you choose not to register, you do not charge your customers the GST/HST (other than for certain taxable supplies of real property) and the GST/HST you pay on your business purchases becomes a cost for which you cannot claim ITCs. Depending on the circumstances, however, you may be eligible to claim a rebate of the GST/HST paid on certain expenses if you sell real property.

Charging the GST/HST

Generally, if you are a GST/HST registrant and you make a taxable supply (other than a zero-rated supply) of property or a service in Canada, you have to charge the GST/HST to the purchaser. For example, if you are an electrician who is wiring a new house for a builder and you are a registrant, you will charge the GST/HST to the builder for your services. Also, as a general rule, you would be required to collect the GST/HST on a taxable sale of real property in Canada, whether or not you are a registrant. For information on whether a supply of real property or a supply of a service or intangible personal property that is in relation to real property is made in or outside Canada, see GST/HST Memorandum 19.1, Real Property and the GST/HST.

Exception

There are special rules for collecting, reporting, and remitting the GST/HST on a taxable sale of real property made in Canada. These special rules are discussed in the following sections.

Whether you charge the GST or the HST depends on where you make the supply. Generally, if you make a supply in a participating province, you charge the HST, and if you make a supply in a non-participating province, you charge the GST. For more information, see Which tax applies - the GST or the HST?

The amount of GST/HST you have to charge is calculated on the total amount that you charge the purchaser. This would include amounts you charge the purchaser for your labour, your markup, and for amounts you charge to recover the costs you incurred to purchase property or services you used in making your taxable supply to the purchaser.

As a GST/HST registrant, you are entitled to claim ITCs to recover the GST/HST paid or payable on purchases you make and expenses you incur to provide your taxable supplies. For more information, see Claiming input tax credits.

Which rate of GST/HST applies to the sale of real property?

The following information will help to determine which rates of GST/HST applies to the sale of real property.

In general, whether the GST or the HST applies for the taxable sale of real property, and at what rate, depends on:

  • the province in which the real property is situated (see Which tax applies - the GST or the HST?; and
  • the rate of the GST/HST that is in effect in that province on the day that tax becomes payable for the sale. The GST/HST for a taxable sale of real property is generally payable on the earlier of:
    • the day ownership of the property is transferred; and
    • the day possession of the property is transferred under the agreement for the sale.

Exceptions for certain sales of new housing

The general rule, above, may not apply to certain taxable sales of:

Sales of new housing – transitional rules

The following sections discuss certain transitional rules that apply for sales of new housing in New Brunswick, Newfoundland and LabradorBritish Columbia, Nova Scotia, Ontario, and Prince Edward Island.

Sales of new housing – New Brunswick and Newfoundland and Labrador

As of July 1, 2016, the rate of the provincial part of the HST in both New Brunswick and Newfoundland and Labrador increased from 8% to 10%. Therefore, as of July 1, 2016, the HST rate of 15% (5% federal part and 10% provincial part) applies in those provinces.

General rule

Generally, the HST at 15% applies to a taxable sale by a builder of newly constructed or substantially renovated housing in New Brunswick or Newfoundland and Labrador where both ownership and possession of the housing are transferred to the purchaser after June 2016. However, if the sale is grandparented, the previous HST rate of 13% applies, rather than the new HST rate of 15%.

Grandparented sales

A builder’s taxable sale of newly constructed or substantially renovated housing may be grandparented (that is, subject to the HST at the previous rate of 13%) if:

  • for housing situated in New Brunswick, both ownership and possession of the housing are transferred to the purchaser after June 2016, under a written agreement of purchase and sale that was entered into on or before March 30, 2016; and
  • for housing situated in Newfoundland and Labrador, both ownership and possession of the housing are transferred to the purchaser after June 2016, under a written agreement of purchase and sale that was entered into on or before May 3, 2016.

Note

Owner-built houses, apartment buildings, and condominium complexes, are not grandparented for purposes of the New Brunswick and Newfoundland and Labrador HST rate increases.

For more information, see GST/HST Info Sheet GI-190, New Brunswick and Newfoundland and Labrador HST Rate Increases: Sales and Rentals of New Housing.

Sales of new housing – British Columbia

As of April 1, 2013, HST at the rate of 12% (5% federal part and 7% provincial part), no longer applies in British Columbia. The HST has been replaced by the GST at the rate of 5% and a provincial sales tax.

General Rule

When does the GST at 5% apply?

Generally, GST at 5% applies to the sale of newly constructed or substantially renovated housing where the tax on the sale becomes payable:

When does the HST at 12% apply?

Generally, the HST at 12% applies to a taxable sale by a builder of newly constructed or substantially renovated housing in British Columbia where both ownership and possession of the housing were transferred to the purchaser on or after July 1, 2010 and before April 1, 2013. However, if the sale is made under a written agreement of purchase and sale entered into before November 19, 2009 (a grandparented sale), GST at 5% applies, rather than the HST at 12%, regardless of when ownership and possession transfer.

For more information, see GST/HST Info Sheet GI-084, Harmonized Sales Tax: Information for Builders of New Housing in British Columbia.

British Columbia transition tax and transition rebate

The new, and temporary, British Columbia transition tax and transition rebate came into effect on April 1, 2013, to aid the transition between the HST at 12% and the GST at 5%.

British Columbia transition tax

The 2% British Columbia transition tax applies on sales of certain newly constructed or substantially renovated housing and sales of qualifying interests in such housing where:

  • the construction or substantial renovation was at least 10% complete before April 2013; and
  • ownership and possession transfer on or after April 1, 2013 and before April 1, 2015.

If the British Columbia transition tax applies, it is equal to 2% of the purchase price of the housing (not including any GST or First Nations' GST, and any GST/HST new housing rebate). The builder (or the builder's agent) must report the British Columbia transition tax that became collectible in the reporting period in the builder's (or agent's) GST/HST NETFILE return for that reporting period.

Note

Where a GST/HST registrant acts as agent in making a sale on behalf of a builder who is required to collect the GST/HST on the sale, the agent and builder may make a joint election using Form GST506, Election and Revocation of an Election Between Agent and Principal, to have the agent report and remit the GST/HST on the sale as if the tax were collectible by the agent. Where this election is in effect for a sale to which the British Columbia transition tax applies, the agent must also report any British Columbia transition tax on the sale as if it were collectible by the agent. This election may be made in respect of a taxable sale of new housing or an interest in such housing.

British Columbia transition rebate

The British Columbia transition rebate may be available to a builder where:

  • the sale of the newly constructed housing, or qualifying interest in such housing, is subject to the British Columbia transition tax; and
  • the construction or substantial renovation of the housing was at least 10% completed immediately before April 1, 2013.

The rebate must generally be filed no later than two years after the due date for the GST/HST return in which the 2% British Columbia transition tax had to be reported.

Note

An agent that must report the British Columbia transition tax collectible by the builder may also claim the amount of the British Columbia transition rebate to which the builder is entitled on the agent's GST/HST NETFILE return. In this case, the agent may only claim the amount of the rebate on its return for the reporting period in which the British Columbia transition tax must be reported. If the amount of the rebate is not claimed in that return, the agent is not entitled to claim the amount in a later return. If the agent claims the amount of the rebate on its return, the builder cannot include the amount of that rebate on its GST/HST return.

Before April 2013 –Transitional tax adjustment and provincial transitional new housing rebate

If the GST at 5% became payable on a sale of housing after June 2010 and before April 2013, the British Columbia transitional tax adjustment may have applied. If so, the builder was required to account for the transitional tax adjustment on its GST/HST return for the reporting period in which the transitional tax adjustment was considered to have been collected by the builder (although not actually collected from anyone). For more information, see GST/HST Info Sheet GI-095, Harmonized Sales Tax: Information on the Transitional Tax Adjustment for Builders of Housing in Ontario and British Columbia.

If the HST at 12% or the British Columbia transitional tax adjustment applied to a sale of housing after June 2010 and before April 2013, either the builder or the purchaser would have been entitled to claim a British Columbia provincial transitional new housing rebate if all of the conditions for claiming that rebate were met, including the condition that the rebate application be filed before July 2014. The rebate was available only where the rebate application was filed before July 2014.

For more information on the British Columbia transition tax, British Columbia transition rebate, and other information on the elimination of the HST in British Columbia, see:

Sales of new housing – Nova Scotia

General Rule

Generally, the HST at 15% applies to a taxable sale by a builder of newly constructed or substantially renovated housing in Nova Scotia where both ownership and possession of the housing are transferred to the purchaser after June 2010. However, the HST rate of 15% does not apply to a grandparented sale.

Grandparented sales

Where both ownership and possession transfer to the purchaser, under a written agreement of purchase and sale, after June 30, 2010, the taxable sale of certain types of new housing may be grandparented where the agreement was entered into on or before April 6, 2010.

Note

Owner-built houses, apartment buildings, and condominium complexes are not grandparented for purposes of the Nova Scotia HST rate increase.

Sales of new housing – Ontario

General rule

Generally, the HST at 13% applies to a taxable sale by a builder of newly constructed or substantially renovated housing in Ontario where both ownership and possession of the housing transfer to the purchaser after June 2010. However, the provincial part of the HST does not apply to a grandparented sale.

Grandparented sales

Where both ownership and possession of the housing are transferred to the purchaser under the agreement on or after July 1, 2010, the taxable sale of certain types of new or substantially renovated housing in Ontario may be grandparented where a written agreement of purchase and sale was entered into on or before June 18, 2009. The GST at 5%, rather than the HST, applies to the grandparented sale. For more information, see GST/HST Info Sheet GI-083, Harmonized Sales Tax: Information for Builders of New Housing in Ontario.

Transitional tax adjustment

In certain situations, a builder may be required to account for the transitional tax adjustment if their sale is grandparented. For more information, see GST/HST Info Sheet GI-095, Harmonized Sales Tax: Information on the Transitional Tax Adjustment for Builders of Housing in Ontario and British Columbia.

Provincial transitional new housing rebate

If the HST at 13% or the Ontario transitional tax adjustment applied to a sale of housing after June 2010, either the builder or the purchaser would have been entitled to claim an Ontario provincial transitional new housing rebate if all of the conditions for claiming that rebate were met, including the condition that the rebate application be filed before July 2014. The rebate was available only where the rebate application was filed before July 2014.

Assignment of purchase and sale agreement for grandparented housing

After you enter into a contract of purchase and sale with a purchaser, the purchaser may assign the agreement to another person (referred to here as an assignee purchaser). The assignee purchaser may, in turn, assign the agreement to another assignee purchaser.

Where certain conditions are met, your sale of the housing to the assignee purchaser would remain grandparented.

See GST/HST Info Sheet GI-097, Harmonized Sales Tax: Assignment of Purchase and Sale Agreements for Grandparented Housing in Ontario and British Columbia, for details.

Re-sales of housing

When the purchaser of grandparented housing is also considered to be a "builder" of that housing for GST/HST purposes and their resale of the housing is taxable, the housing may or may not be subject to the HST, depending on the circumstances. There are also consequences if you are the original builder who sold the new housing on a grandparented basis and reacquired that housing from the original purchaser, or a subsequent reseller.

Sales of new housing – Prince Edward Island

As of October 1, 2016, the rate of the provincial part of the HST in Prince Edward Island increased from 9% to 10%. Therefore, as of October 1, 2016, the HST rate of 15% (5% federal part and 10% provincial part) applies in this province.

General rule

Generally, the HST at 15% applies to a taxable sale by a builder of newly constructed or substantially renovated housing in Prince Edward Island where both ownership and possession of the housing are transferred to the purchaser after September, 2016.

However, if the sale is grandparented, either the previous HST rate of 14% or the GST of 5% would apply, rather than the new HST rate of 15%.

Note

As of April 1, 2013, Prince Edward Island harmonized its provincial sales tax with the GST to implement the HST at the rate of 14% (5% federal part and 9% provincial part).

Grandparented sales

A builder’s taxable sale of certain types of newly constructed or substantially renovated housing may be grandparented (that is, subject to the HST at the previous rate of 14%) if the housing is situated in Prince Edward Island, and both ownership and possession of the housing are transferred to the purchaser after September 2016, under a written agreement of purchase and sale that was entered into after November 8, 2012 and on or before June 16, 2016.

Where both ownership and possession of the housing transfer to the purchaser under the agreement on or after April 1, 2013, the taxable sale of certain types of new or substantially renovated housing in Prince Edward Island may be grandparented if the written agreement of purchase and sale was entered into on or before November 8, 2012. The GST at 5%, rather than the HST, applies to the grandparented sale.

Notes

Owner-built houses, apartment buildings, and condominium complexes are not grandparented for purposes of the Prince Edward Island HST rate increase.

For more information, see GST/HST Info Sheet GI-194, Prince Edward Island HST Rate Increase – Sales and Rentals of New Housing.

Owner-built houses, duplexes, apartment buildings, mobile homes, and floating homes are not grandparented for purposes of Prince Edward Island harmonization.

For more information, see GST/HST Info Sheet GI-146, Harmonized Sales Tax: Information for Builders of New Housing in Prince Edward Island.

Transitional tax adjustment

In certain situations, a builder may be required to pay a transitional tax adjustment if their sale is grandparented. For more information see GST/HST Info Sheet GI-150, Harmonized Sales Tax: Information on the Transitional Tax Adjustment for Builders of Housing in Prince Edward Island.

Provincial transitional new housing rebate

A provincial transitional new housing rebate may be available for the Prince Edward Island provincial sales tax (PST) embedded in the housing. In some cases, it is the purchaser who is entitled to claim this rebate, while in other cases the builder is entitled to claim this rebate. For more information, see GST/HST Info Sheet GI-151, Harmonized Sales Tax: Provincial Transitional New Housing Rebate for Housing in Prince Edward Island.

Assignment of purchase and sale agreement for grandparented housing

After you enter into a contract of purchase and sale with a purchaser, the purchaser may assign the agreement to another person (referred to here as an assignee purchaser). The assignee purchaser may, in turn, assign the agreement to another assignee purchaser.

Where certain conditions are met, your sale of the housing to the assignee purchaser would remain grandparented.

For more information, see GST/HST Info Sheet GI-152, Harmonized Sales Tax: Assignment of Purchase and Sale Agreements for Grandparented Housing in Prince Edward Island, for details.

For more information about the special rules that apply for Prince Edward Island's transition to the HST, see the following publications:

2006 and 2008 rate reductions – sales of new housing

Under the transitional rules for the 2006 and 2008 rate reductions, certain taxable sales of new housing will still be subject to the GST/HST at one of the previous GST/HST rates. The following rules apply only to the taxable sale of new or substantially renovated housing (including the related land if the land is sold under the same written agreement as the housing). These rules do not apply in any other case.

Note

If a previous rate of tax applies, a GST/HST transitional rebate may be available to the purchaser. For more information, see Transitional rebate for the 2006 and 2008 GST/HST rate reductions.

If you make a taxable sale of new housing, the GST/HST applies at the rate of:

  • 5% GST or 12%, 13%, 14%, or 15% HST if you entered into the written agreement with the purchaser after October 30, 2007, and both ownership and possession transfer under that agreement after December 31, 2007 (for a sale of real property situated in British Columbia, Nova Scotia, Ontario, or Prince Edward Island, see the previous section for that province);
  • 6% GST or 14% HST if you entered into the written agreement with the purchaser after October 30, 2007, and both ownership and possession transfer under that agreement before January 1, 2008;
  • 6% GST or 14% HST if you entered into the written agreement with the purchaser after May 2, 2006, and before October 31, 2007, and both ownership and possession transferred under that agreement after June 30, 2006; or
  • 7% GST or 15% HST if you entered into the written agreement with the purchaser before May 3, 2006.

For information about special rules that apply to the sale of housing where the underlying land is provided by way of lease, licence, or similar arrangement, call 1-800-959-8287.

You may be entitled to claim a transitional rebate in certain circumstances as a result of the 2006 and 2008 rate reductions. For more information, see Transitional rebate for the 2006 and 2008 GST/HST rate reductions.

Who remits the tax for a taxable sale of real property – vendor or purchaser?

If you make a taxable sale of real property, (such as the sale of a new house to an individual) you generally have to charge and collect the tax on the sale, even if you are not registered for the GST/HST. However, in some cases it is the purchaser who has to remit the tax directly to us instead of paying it to you.

Note

This information does not apply if you are considered to have made a self-supply. To find out how you send us the tax for a self-supply, see the information that applies to you in the section When you finish construction.

Generally, if you are a vendor, you do not collect the tax from the purchaser when you make a taxable sale of real property if:

  • the purchaser is registered for the GST/HST. This rule does not apply if the registered purchaser to whom you make a taxable sale of housing is an individual (you must collect the tax from the individual in that case);
  • you are a non-resident of Canada. This rule still applies if you are considered a resident for only certain activities you carry on through a permanent establishment in Canada; or
  • you and the purchaser have made a type 2 election on Form GST22, Real Property - Election to Make Certain Sales Taxable.

Note

These rules only apply to taxable sales of real property. They do not apply, for example, if you lease real property or supply it in any other way.

If you do not have to collect the tax on your taxable sale of real property because one of these conditions applies, the purchaser has to report and pay any tax due on their purchase directly to us.

Vendor collects and remits

If you are a vendor who has to collect the tax due on your taxable sale of real property, including a house, account for the tax as follows:

  • If you are registered for the GST/HST, include the GST/HST collectible on your regular GST/HST return for the reporting period during which the GST/HST became collectible (in your line 105 calculation if you are filing your return electronically or on line 103 if you are filing a paper GST/HST return).
  • If you are not registered for the GST/HST, report the tax collectible on line 103 of Form GST62, Goods and Services Tax/Harmonized Sales Tax (GST/HST) Return (Non-personalized). File this return by the end of the month following the month in which the tax became collectible and remit the net tax due with that return. GST/HST payments that are $50,000 or more must be paid electronically or at your financial institution.

Note

Only a Form GST62 in the pre-printed format may be used to file your return or make a payment at your financial institution. To order a pre-printed Form GST62, go to Order forms and publications.

Purchaser pays tax directly to us

If you are a purchaser who has to pay the tax on the purchase of real property directly to us, account for the tax as follows:

  • If you are a GST/HST registrant and will use or supply the real property:
    • more than 50% in your commercial activities, report the tax due on line 205 (GST/HST due on the acquisition of taxable real property) of your GST/HST return for the reporting period in which the tax became payable and remit any positive amount of tax owing for that return;
    • 50% or less in your commercial activities, report the tax due on Form GST60, GST/HST Return for Acquisition of Real Property. File this return by the end of the month following the month in which the tax became payable and pay the tax due with that return.
  • If you have to pay the tax directly to us (for example, because the vendor is a non-resident) and you are a non-registrant, report the tax due on Form GST60. You have to file this return by the end of the month following the month in which the tax became payable and pay the tax due with that return.

Notes

GST/HST payments that are $50,000 or more must be paid electronically or at your financial institution.

Form GST60 is available on our website Forms and publications for GST/HST. You cannot file Form GST60 electronically.

Which tax applies – the GST or the HST?

Generally, whether you charge the GST or the HST for a taxable supply of property or a service depends on whether you make the supply in a participating province or in a non-participating province.

The following sections discuss the special rules for determining which tax applies to a taxable supply of real property and to services and intangible personal property related to such property.

Place of supply rule for real property

A supply of real property is made in the province where the real property is situated. A taxable supply made in a participating province is subject to the HST (for HST rate information, see GST/HST calculator (and rates), and a taxable supply made in a non-participating province is subject to the GST.

If you make a supply of real property that is situated partly in a participating province and partly in a non-participating province, that supply is treated as if it were two separate supplies. This means that you will charge the GST on the portion of the amount payable that is reasonably attributable to the part of the real property that is in the non-participating province and the HST on the portion of the amount payable that is reasonably attributable to the part of the real property that is in a participating province.

Example

You purchase land on which you will build your new house. The purchase price of the land is $100,000. The land is situated 65% in New Brunswick (a participating province) and 35% in Quebec (a non-participating province). Generally, this means that $65,000 ($100,000 × 65%) of the sale price is subject to the HST and $35,000 ($100,000 × 35%) of the sale price is subject to the GST. The allocation of the amount payable for the land must be reasonable.

Real property situated outside of Canada is not subject to the GST/HST. However, if part of the real property supplied is situated in Canada and part is situated outside Canada, we also treat that supply as if it were two separate supplies. The GST/HST will apply to the part of the amount payable for the supply of the real property that can be reasonably attributed to the part of the real property that is situated in Canada.

Place of supply rules for services and intangible personal property related to real property

A supply of a service in relation to real property is regarded as having been made in a participating province if the real property in Canada to which the service relates is situated primarily in the participating provinces. The supply will be regarded as having been made in the participating province in which the greatest proportion of the real property is situated.

Example

In August 2016, an engineering firm is hired to supervise the repair of a bridge over the Rideau River in Ottawa, Ontario. The supply of the service will be subject to the HST at the rate of 13%.

If the greatest proportions of the real property are situated in two or more participating provinces, the supply is made in the particular participating province for which the rate of the provincial part of the HST is the highest.

Example

A property management company is hired in April 2016 to provide property management services for real property situated in three provinces (40% in Ontario, 40% in Nova Scotia, and 20% in Alberta). The supplier will charge the HST at the rate of 15% since the greatest proportions of the real property are situated in two or more participating provinces and the highest rate among those provinces is 15%.

A supply of a service in relation to real property will be considered to be made in a non-participating province if the real property in Canada to which the service relates is not situated primarily in participating provinces.

Similar rules apply to a supply of intangible personal property that relates to real property, for example, the supply of a right to use a camp site for a specified period of time in any of a number of properties that are located in several provinces. For more information on the place of supply rules, see GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of Supply Rules for Determining Whether a Supply is Made in a Province.

GST/HST and provincial sales tax

Recovering the provincial sales tax you paid by including it in the selling price you charge the purchaser

In the construction industry, the selling price you charge to a purchaser usually includes all applicable taxes, duties, and fees that you have to pay on your construction costs that you are unable to recover.

If you have to charge the GST/HST to a purchaser and you included an amount in the selling price to recover an amount of provincial sales tax (PST) that you paid on your construction costs, you have to calculate the GST/HST on the full selling price, including any part of that price that you charged to recover the PST you paid.

Note

If you pay the HST on an expense and you are entitled to claim an ITC for the amount of that tax, you recover the provincial part of the HST by claiming the ITC. This means that the provincial part does not represent a cost to you and you do not need to include it in your selling price to recover it. In some cases, the provincial part of the HST may be a cost to you if you are required to recapture an ITC under the British Columbia and Ontario temporary recapture rules. There are also temporary recapture rules for Prince Edward Island. For more information, see Info Sheet GI-100, Harmonized Sales Tax: Builders and Recaptured Input Tax Credits, and GST/HST Technical Information Bulletin B-104, Harmonized Sales Tax - Temporary Recapture of Input Tax Credits in Ontario and British Columbia.

Example

A structural steel contractor is a GST/HST registrant located in Manitoba. The contractor enters into a contract to supply and install structural steel for a building project in Manitoba. For PST purposes, the value of the fabricated steel the contractor buys is $80,000. The PST rate is 7%. The structural steel contractor pays $5,600 in PST ($80,000 × 7%). The PST is not recoverable and the contractor includes this amount in the contract-selling price to the customer. The contractor also had to pay the GST on its purchase of the fabricated steel; however, because the contractor is entitled to recover the amount of that GST by claiming an ITC, the contractor does not include this amount in the contract selling price it charges its customer.

In addition, the contractor includes $10,000 in the contract selling price for the contractor's on-site labour and a mark-up of $18,000 for the materials.

The contractor calculates the total amount payable by the customer as follows:

Fabricated steel
  $80,000
Provincial sales tax 7%
   $5,600
On-site labour
  $10,000
Mark-up
$18,000
Contract selling price
$113,600
GST (113,600 × 5%)
$5,680
Total payable by customer
$119,280

The $5,600 PST is part of the steel contractor's costs to provide and install the fabricated steel under the contract terms. As shown above, the contractor includes the cost of the PST in the contract selling price of $113,600, and calculates the GST on that contract selling price ($113,600 × 5%).

Charging the GST and the PST on your sale

If your supply is made in a non-participating province and you have to charge the purchaser both the GST and the PST, calculate the GST on the price of the item before the PST is added. Check with provincial officials for details on how to calculate the PST in relation to the GST.

When does the GST/HST become collectible?

It is important to know when the GST/HST becomes collectible for a taxable supply you make, as you have to report the amount of that GST/HST on your GST/HST return for the reporting period in which the tax became collectible even if you have not yet actually collected the tax from your customer.

Note

The GST/HST becomes payable by a purchaser on the same day that it becomes collectible by you. Purchasers who are GST/HST registrants, may be entitled to claim an input tax credit (ITC) for that tax in their GST/HST return for their reporting period in which the tax becomes payable by them, if all of the conditions for claiming an ITC are met.

The following sections discuss the general rule for determining when the GST/HST becomes collectible, and the exceptions to this rule.

General rule

The GST/HST for a taxable supply becomes collectible on the earlier of:

  • the day the purchaser pays the amount due for the supply; or
  • the day the payment for the supply becomes due.

Note

We usually consider the payment for the supply to become due on the date you issue an invoice for the amount or on the due date specified in a written agreement, whichever date is earlier.

If the payment becomes due before the purchaser pays it, the GST/HST is collectible on the full amount due from the purchaser, even if a payment is not made or if the payment is less than the full amount due.

Partial payments

The general rule also applies to partial payments that become payable over a series of dates. In this case, the GST/HST becomes collectible on the amount of each partial payment (other than partial payments in respect of a sale of real property) on the earlier of:

  • the day the purchaser pays the partial payment; and
  • the day the partial payment becomes due.

Leases of real property

The GST/HST becomes collectible on each lease payment on the earlier of:

  • the day the lessee pays the lease payment; and
  • the day the lease payment is due according to the written agreement.

Sales of real property

The GST/HST for a taxable sale of real property (including a new house) becomes collectible on the earlier of:

  • the day you transfer ownership to the purchaser; and
  • the day you transfer possession to the purchaser under an agreement to transfer ownership.

Special rule: residential condominium units

If you sell a new a residential condominium unit and the condominium complex in which the unit is located is not registered as a condominium before you transfer possession to the purchaser, the GST/HST becomes collectible on the earlier of:

  • the day you transfer ownership to the purchaser; and
  • the day that is 60 days after the condominium complex is registered as a condominium.

Deposits

For GST/HST purposes, a deposit is an amount given by a purchaser as security for the performance of a future obligation.

If you collect a deposit from a purchaser for a taxable supply of property or services you will make, we do not consider it to be a payment until you apply it as a payment toward the amount the purchaser owes you for the taxable supply, or until the purchaser forfeits the deposit because of a modification, violation, or cancellation of the agreement. This applies whether the deposit is refundable or not.

Deposit applied as a payment

The GST/HST is collectible on the day you apply the deposit as a payment.

Deposit forfeited by purchaser

When the purchaser forfeits the deposit because of a breach, modification, or termination of the agreement, we consider the amount of the deposit to include the GST/HST. You are considered to have collected the amount of the tax included in the deposit on the day that the purchaser forfeits the deposit and you have to report the amount of the tax included in the deposit on your GST/HST return for the reporting period that includes that day.

To calculate the amount of the GST/HST included in a deposit that was forfeited, multiply the amount that was forfeited by:

  • 5/105, if the supply is subject to GST at 5%;
  • 12/112, if the supply is subject to the HST at 12%;
  • 13/113, if the supply is subject to the HST at 13%;
  • 14/114, if the supply is subject to the HST at 14%; or
  • 15/115, if the supply is subject to the HST at 15%.

Use this calculation even if the purchaser made the deposit before January 1, 2008.

Note

Purchasers who forfeited the deposit are considered to have paid the GST/HST. As a result, they may be entitled to claim an ITC for the GST/HST included in the forfeited amount if they are a GST/HST registrant.

Progress payments

When construction extends over a period of time, the written contract often calls for the purchaser to make progress payments as the work on the project proceeds. These payments are not deposits and are usually for work completed, but they can also be made in anticipation of work being completed. Payments made in respect of a sale of real property are not progress payments.

Generally, the GST/HST becomes collectible on each progress payment on the earlier of:

  • the day the purchaser pays the progress payment; and
  • the day the progress payment becomes due.
Part of work completed

A contract may state that a payment, other than a deposit, becomes due when you complete certain parts of the contract (for example, pouring a foundation) or when certain events have occurred (for example, preliminary inspection of a building).

The GST/HST becomes collectible on the day you complete the work or on the day the specific event occurs, as specified in the contract, unless the amount of the payment is paid before that date. In this case, the GST/HST is collectible on the date the payment is made.

Value of work completed

Your contract may state that you can request a payment based on the value of work completed. In this case, another person, usually a consultant, an engineer, or an architect, has to approve the work and issue a certificate stating the value of the work completed. Generally, the purchaser has to make the payment within a certain number of days after the consultant, engineer, or architect issues the certificate.

In this situation, your request or application for payment is not considered to be an invoice, since it is only a request that an assessment be made of the work completed and that a certificate for payment be issued according to the contract. Therefore, the GST/HST does not become collectible at the time of the request or application.

The GST/HST becomes collectible on the day the purchaser makes the payment or on the day the payment becomes due under the terms of the contract (for example, 10 days after the certificate is issued), whichever day is earlier.

When you cannot establish the value

When it is not possible to establish the value of all or part of a payment that is due on a particular day, the GST/HST is collectible on the part of the payment for which the value can be determined on that day.

For all or part of the payment that you cannot establish the value on the particular day, the GST/HST becomes collectible on the day you can establish the value of the payment or the remaining part of the payment.

Transitional rules for progress payments in Prince Edward Island

For an explanation of the HST transitional rules for progress payments in Prince Edward Island, see GST/HST Notice 279, Harmonized Sales Tax for Prince Edward Island (P.E.I.) - Questions and Answers on Transitional Rules for Housing and Other Real Property Situated in P.E.I.

Holdbacks

A holdback occurs when a person purchases goods or services and keeps part of the payment for those goods or services until the person is satisfied with the condition of the goods or the performance of the service.

If, in accordance with federal or provincial law or a written agreement for the construction, renovation, alteration, or repair of real property, a purchaser keeps a part of a payment as a holdback pending satisfactory completion of the work, the GST/HST on the amount of the holdback becomes collectible on the earlier of:

  • the day the purchaser pays you the amount of the holdback; and
  • the day the holdback period expires.

The GST/HST is collectible by you on the earlier of the above dates even if you already issued an invoice for the holdback amount and charged the GST/HST on this amount.

If federal or provincial law or a written agreement for the construction, renovation, or alteration of, or repair to, real property does not provide for a holdback, the general rule applies. The general rule also applies if the purchaser pays the full amount and does not keep a part of the payment as a holdback, even if the written agreement or federal or provincial law allows the purchaser to make a holdback.

Transitional rules for holdbacks in Prince Edward Island

For an explanation of the HST transitional rules for holdbacks in Prince Edward Island, see GST/HST Notice 279, Harmonized Sales Tax for Prince Edward Island (P.E.I.) - Questions and Answers on Transitional Rules for Housing and Other Real Property Situated in P.E.I.

Substantially completed

A special rule applies to written contracts for constructing, renovating, altering, or repairing real property when the work is substantially completed. If you substantially complete the work specified in the contract and the purchaser has not paid for the work, or the payment has not yet become due, the GST/HST becomes collectible by the end of the month after the month in which you substantially completed the work. This special rule does not apply to holdbacks described in the previous section. Generally, we consider the construction, renovation, alteration, or repair to be substantially complete when 90% or more of the work is complete.

Example

You enter into a written agreement to repair a deck that is attached to a house in Alberta. You finish most (90%) of the work on October 20, 2015, but you have not billed the owner of the house by the end of November and the owner has not paid you. There is no holdback provision in your agreement or under any federal or provincial law. Although the amount payable for your work is specified in your agreement, the agreement does not include a date for when payment is due. The GST/HST for your work becomes collectible on November 30, 2015. You have to include the GST/HST collectible on the full consideration (total price) payable for your work in your net tax calculation for your reporting period that includes November 30, 2015.

Combined supplies

If you supply any combination of goods, services, and real property for an all-inclusive price (the price of each element is not separately identified), the time at which the GST/HST becomes collectible depends on the situation.

Situation 1

If the value of one element can reasonably be seen as exceeding the value of each of the other elements, for purposes of determining when tax becomes collectible, we consider the combined supply to be a supply of that element.

For example, if a sale includes real property and certain goods, and it is reasonable to conclude that the value of the real property exceeds the value of each good, then the entire sale is considered to be a sale of real property for purposes of determining when the tax becomes collectible. To determine when the GST/HST becomes collectible on that sale, you have to use the rules that apply for the sale of real property.

Situation 2

In any other case:

  • if real property is an element of the combined supply, we consider the combined supply to be a supply of real property only, and you have to use the rules that apply for the sale or lease of real property. To determine when the GST/HST becomes collectible, see the General rules; or
  • if real property is not an element of the combined supply, the combined supply is considered to be a supply of a service only, and you have to use the general rule. To determine when the GST/HST becomes collectible, see the General rules. However, if one of the exceptions to the general rule applies (for example, if the customer makes a deposit or a progress payment), use the rule that applies for that particular exception, see When does the GST/HST become collectible?

Paying the GST/HST

You will likely have to pay the GST/HST on most of the purchases you make to build or substantially renovate a house, including most purchases of land and buildings. The GST/HST becomes payable by you as a purchaser on the same day that it becomes collectible by the vendor. Follow the rules explained in the previous section, to see when you are required to pay the tax on your purchases and expenses.

Note

As a registrant, you can generally recover some or all of the GST/HST paid or payable on the purchases and expenses that you use, consume, or supply in your commercial activities. You can claim an ITC for that tax in your GST/HST return for your reporting period in which the tax becomes payable by you, even if you have not yet paid the tax, as long as all of the conditions for claiming an ITC are met. For more information, see Claiming input tax credits.

Certain purchases of real property may be exempt. For example, most purchases of previously occupied residential housing are exempt. If you acquire exempt real property, you do not have to pay the GST/HST.

If you purchase real property that is taxable, you may have to remit the tax directly to us instead of paying the tax to the vendor. For more information, see Who remits the tax for a taxable sale of real property - vendor or purchaser?

GST/HST returns

Registrants

As a GST/HST registrant, you have to file regular GST/HST returns, according to your reporting period, to report the tax you have to charge and collect on your taxable supplies. You also claim any ITCs to which you are entitled on your GST/HST return.

Electronic filing methods

There are several different electronic filing methods, including:

  • GST/HST NETFILE;Footnote 2
  • TELEFILE;
  • GST/HST Internet file transfer (GIFT);
  • My Business Account; and
  • electronic data interchange (EDI).

There are other cases in which a registrant must file electronically, and may be required to use a particular electronic filing method. To find out if any electronic filing requirements apply to you, see Mandatory electronic filing.

Note

Registrants that are not required to use GST/HST NETFILE can choose to use that method to file their returns.

For information, including line-by-line instructions, on how to complete the GST/HST NETFILE return, see GST/HST Info Sheet GI-118, Builders and GST/HST NETFILE. For information on how to file using any of the other electronic filing methods, see Guide RC4022, General Information for GST/HST Registrants.

Paper filing method

Registrants that are not required to file their GST/HST return electronically, and choose not to, can file their return using Form GST34, Goods and Services Tax/Harmonized Sales Tax (GST/HST) Return for Registrants, or Form GST62, Goods and Services Tax/Harmonized Sales Tax (GST/HST) Return (Non personalized).

See Guide RC4022, General Information for GST/HST Registrants, for information on how to get these forms and how to complete them.

Non-registrants

If you are not a GST/HST registrant, you do not file regular GST/HST returns. However, you would have to file Form GST62, Goods and Services Tax/Harmonized Sales Tax (GST/HST) Return (Non Personalized), to report GST/HST collectible by you on a taxable sale, or on a taxable self-supply, of real property. Although you are not eligible to claim ITCs, you may be eligible to claim a rebate. (See Rebate for taxable sale of real property by a non-registrant) Non-registrants are not eligible to file electronically.

If you sell or rent new housing in Prince Edward Island, British Columbia, or Ontario, you may be eligible for additional rebates. For details on these other rebate(s) that may be available, see GST/HST rebates for new housing.

Mandatory electronic filing

You must file your return electronically if you are a registrant and any of the following apply:

  • you have more than $1.5 million in annual taxable supplies (unless you are a charity);

  • you are required to recapture ITCs for the provincial part of the HST on certain inputs in British Columbia (July 1, 2010 to March 31, 2013), Ontario, or Prince Edward Island (in these cases, you must use GST/HST NETFILE only); or

  • you are affected by the transitional housing measures in British Columbia (including transitional measures for the elimination of the HST), Nova Scotia, Ontario, Prince Edward Island, New Brunswick, or Newfoundland and Labrador (in these cases, you must use GST/HST NETFILE only).

Note 

If you are a builder with greater than $1.5 million in annual taxable supplies and you are claiming a deduction for a GST/HST new housing rebate amount paid or credited to a purchaser, you have to file your return using GST/HST NETFILE or GST/HST TELEFILE. However, you must use GST/HST NETFILE (you cannot use TELEFILE) if you also have information to report as a result of the transitional housing measures in British Columbia, Nova Scotia, Ontario, Prince Edward IslandNew Brunswick, or Newfoundland and Labrador

For more information on the different electronic filing options, and how to remit any amount owing when you are required to file electronically, go to Filing a GST/HST return or see GST/HST Info Sheets GI-099, Builders and Electronic Filing Requirements, GI-118, Builders and GST/HST NETFILE, or Guide RC4022, General Information for GST/HST Registrants.

Reporting periods

Reporting periods are the periods of time for which you file a GST/HST return. A reporting period can be a calendar or fiscal year, a calendar or fiscal quarter, or a calendar or fiscal month.

The reporting period for a non-registrant is the calendar month.

When you register for the GST/HST, we assign you the reporting period that requires you to file your GST/HST returns the least frequently. You may be able to choose one of the optional reporting periods. For more information, see Guide RC4022, General Information for GST/HST Registrants.

Filing and remitting due dates

Monthly and quarterly filers

If you have a monthly or quarterly reporting period, you have to file your GST/HST return and remit any amount owing no later than one month after the end of your reporting period.

Annual filers

If you have an annual reporting period, you usually have to file your return and remit any amount owing no later than three months after the end of your fiscal year.

Exception

Your GST/HST payment is due by April 30 if all of the following conditions are met:

  • You are an individual with business income for income tax purposes.
  • You file annual GST/HST returns.
  • You have a December 31 fiscal year end.

Although your payment is due April 30, you have until June 15 to file your GST/HST return.

Note

As an annual filer, you may also have to pay quarterly instalments. If so, they are due no later than one month after the last day of each fiscal quarter. You can use the "Instalment Payment Calculator" service and view their related due dates. To find out more, go to:

Using the Quick Method of accounting to calculate your net tax

The quick method of accounting is another way to calculate the GST/HST you have to remit. You may be eligible to use this method if the annual revenue from your worldwide taxable supplies and those of your associates (including zero-rated supplies) is no more than $400,000 (including the GST/HST) in any four consecutive fiscal quarters over the last five fiscal quarters. The $400,000 limit does not include the following:

  • supplies of financial services;
  • sales of real property;
  • sales of capital assets; and
  • eligible capital property (including goodwill).

Certain businesses cannot use the quick method, for example, accountants, lawyers (or law offices), and tax return preparation providers or tax consultants. For more information on who can use the quick method of accounting, see Guide RC4058, Quick Method of Accounting for GST/HST.

Before you start using the quick method of accounting, file a quick method election. You can do this by using our online services or by completing and sending a Form GST74, Election and Revocation of an Election to Use the Quick Method of Accounting, to your tax services office.

How does the quick method work?

With the quick method of accounting, you charge and collect the GST/HST on taxable property and services you supply to your customers in the usual way. However, to calculate the net GST/HST to remit, you multiply your taxable supplies including the GST and your taxable supplies including the HST made during the reporting period by the applicable quick method remittance rate(s).

The remittance rates are less than the GST/HST rates of tax that you have to charge, as they take into account the GST/HST you pay on purchases and expenses. Therefore, using the remittance rates, you remit only a part of the tax that you collect, or that is collectible.

Because you remit only a part of the tax that you collect, or that is collectible, you cannot claim ITCs for your operating expenses when you use the quick method. You can, however, claim ITCs for certain purchases, such as purchases of land and purchases for which you can claim a capital cost allowance for income tax purposes, such as computers, vehicles, and other large equipment and machinery.

If you elect to use the quick method, you have to continue using it for at least one year. There are other rules as well. For more information on how the quick method works, who is eligible, how to elect to use it, and what remittance rate(s) to use, see Guide RC4058, Quick Method of Accounting for GST/HST.

Note

Different simplified accounting methods are available for charities, qualifying non-profit organizations, and other public service bodies. For information on these simplified accounting methods, go to Special quick method of accounting for public service bodies or see the following publications:

Claiming input tax credits

As a registrant, you recover the GST/HST paid or payable on your purchases and expenses related to your commercial activities by claiming an ITC in your line 108 calculation if you are filing electronically or on line 106 if you are filing a paper GST/HST return.

You can claim ITCs only to the extent that your purchases and expenses are for consumption, use, or supply in your commercial activities.

To claim an ITC, the expenses or purchases must be reasonable in quality, nature, and cost in relation to the nature of your business.

However, there are some purchases and expenses for which you cannot claim an ITC, such as:

  • certain capital property (for example, purchases of equipment, vehicles, and computers not used primarily in your commercial activities). For more information, see Claiming input tax credits for capital property);
  • generally, any part of capital real property that is not for use in your commercial activities (except if at least 90% of the capital real property is for use in commercial activities);
  • taxable supplies of property and services you bought or imported to provide exempt supplies of property and services; and
  • property or services you bought or imported for your personal consumption, use, or enjoyment.

You can claim an ITC for the HST you pay when you buy property and services in a participating province to use in your commercial activities, even if your business is not located in a participating province.

Note

You may be able to use the simplified method for claiming ITCs for most of the tax you pay on your purchases. For more information, see Simplified method for claiming ITCs.

The rules for claiming ITCs are different depending on the nature of the expense and, in some cases, who the purchaser is (for example, the rules for claiming ITCs for real property purchased by a corporation are not the same as the rules for real property purchased by an individual). The sections that follow will discuss the rules for claiming ITCs for:

  • operating expenses;
  • capital personal property; and
  • capital real property.

If you are a new registrant, you may be able to claim an ITC for the GST/HST paid or payable on property such as capital property and inventory that you have on hand on the day you register. For more information, see Guide RC4022, General Information for GST/HST Registrants.

Time limit for claiming ITCs

Most registrants claim their ITCs when they file their GST/HST return for the reporting period in which they made their purchases. However, you may have ITCs that you did not claim when you filed the return for the corresponding reporting period.

If so, you can claim those previously unclaimed ITCs on a future GST/HST return. ITCs must be claimed by the due date of the return for the last reporting period that ends within four years after the end of the reporting period in which the ITC could have first been claimed.

Example

You are a quarterly filer and you bought a new table saw on October 10, 2015, for use exclusively in your house construction business. You paid the GST on the purchase, and you are entitled to claim an ITC. Your reporting period that includes this date is October 1, 2015, to December 31, 2015. The due date of the return for this reporting period is January 31, 2016.

You have up to four years from January 31, 2016, to claim ITCs for tax that became payable or was paid without becoming payable in the October 1, 2015, to December 31, 2015, reporting period. This means that you can claim the ITC for the table saw in any future return due to be filed on or before January 31, 2020.

In some cases, the time limit for claiming ITCs for a reporting period is reduced from four to two years. For example, if your total annual revenues from taxable supplies of property and services was more than $6 million for each of the two preceding fiscal years, your time limit may be reduced. For more information, see Guide RC4022.

Recaptured ITCs

As a temporary measure beginning July 1, 2010, large businesses and certain listed financial institutions and persons related to these financial institutions are required to recapture (repay) their ITCs for the provincial part of the HST paid or payable on specified property and services in British Columbia and Ontario. As of April 1, 2013, Prince Edward Island has similar reporting requirements.

For more information on the recapture of ITCs, see GST/HST Technical Information Bulletin, B-104, Harmonized Sales Tax Temporary Recapture of Input Tax Credits in Ontario and British Columbia, and GST/HST Info Sheets GI-100, Harmonized Sales Tax: Builders and Recaptured Input Tax Credits, GI-165, Prince Edward Island: Transition to the Harmonized Sales Tax – Builders and Recaptured Input Tax Credits, and GI-171, Phasing out of Recaptured Input Tax Credits in Ontario.

Simplified method for claiming ITCs

The simplified method for claiming ITCs is another way for eligible registrants to calculate their ITCs, when completing their GST/HST return using the regular method of filing.

When you use the simplified method for claiming ITCs, you do not have to show the GST/HST separately in your records. Instead, total the amount of your taxable purchases for which you can claim an ITC. If you make purchases in both participating and non-participating provinces, you have to separate your taxable purchases based on the rate of GST/HST you paid. You still have to keep the usual documents to support your ITC claims in case we ask to see them.

You are eligible to use the simplified method of claiming ITCs if you meet all of the following conditions:

  • Your annual revenues from worldwide taxable property and services (including those of your associates) are $1 million or less in your last fiscal year.

  • Your total taxable supplies (including those of your associates) for all preceding fiscal quarters of the current fiscal year must also be $1 million or less. These limits do not include goodwill, zero-rated financial services, or sales of capital real property.

  • You have $4 million or less in taxable purchases made in Canada in your last fiscal year. The $4 million purchase limit does not include zero-rated purchases, but it does include purchases imported into Canada or brought into a participating province.

In addition, if you are a public service body, you must be able to reasonably expect that your taxable purchases in the current fiscal year will not be more than $4 million.

Exception

Listed financial institutions cannot use the simplified method to calculate ITCs.

If you qualify, you can start using the simplified method for claiming ITCs at the beginning of a reporting period. You do not have to file any forms to use it. Once you decide to use this method, you have to use it for at least one year if you continue to qualify.

For information on using the simplified method to calculate your ITCs, see Guide RC4022.

Claiming input tax credits for operating expenses

Some examples of operating expenses for which you may be entitled to claim a full or partial input tax credit (ITC) include: commercial rent, equipment rentals, advertising, utilities, and office supplies.

If you intend to use at least 90% of an operating expense for your commercial activities, you can claim a full ITC for the GST/HST paid or payable on that expense.

If you intend to use at least 90% of an operating expense for making exempt supplies, you cannot claim an ITC for the GST/HST paid or payable on that expense. For example, if you hire a waste disposal company to remove refuse from an apartment building that you rent out for long-term residential use only (an exempt activity), you cannot claim an ITC for the GST/HST paid or payable to the waste disposal company.

If you provide both taxable and exempt supplies of property and services and you cannot attribute at least 90% of an expense to a taxable or exempt activity, you can only claim ITCs for the part of the expense you use in your commercial activities.

Example

You own a building that you constructed in Nova Scotia. You lease 60% of the building for long-term residential use by individuals (an exempt activity). You use the remaining 40% of the building for your construction business (a commercial activity). The residential rents include utilities.

Your utility bill for the building that is used for both commercial and exempt activities includes $80 HST. You can claim an ITC for 40% of the HST paid or payable on your utility bill, as you are using the building 40% in commercial activities:

$80 × 40% = $32

The method you use to determine the percentage of operating expenses you use in commercial activities has to be fair and reasonable and used consistently throughout the year. For example, a method commonly used is the number of square metres of space used in commercial activities relative to the total square metres of space of the building.

Claiming ITCs for meal and entertainment expenses

You can claim an ITC for the GST/HST you pay on reasonable meal and entertainment expenses that relate to your commercial activities. When the deduction for income tax purposes is limited to 50% of the cost of meals and entertainment, you can claim 50% of the GST/HST you pay on those expenses as an ITC.

Note

The above rule does not apply to charities or public institutions. These persons may be able to claim a 100% ITC for the GST/HST they pay on eligible meal and entertainment expenses that relate to their commercial activities. For more information, see GST/HST for businesses.

Choose one of the following two ways to calculate your ITCs for meal and entertainment expenses:

  • Claim 100% ITCs for these expenses throughout your fiscal year. If you file monthly or quarterly GST/HST returns, add the 50% adjustment for the excess ITCs you claimed during the year to your net tax calculation for the first reporting period of your next fiscal year. If you file annually, add the 50% adjustment to your net tax calculation for that fiscal year. Include the adjustment in your line 105 calculation if you are filing electronically or enter it on line 104 if you are filing a paper GST/HST return.

  • Claim 50% of the actual GST/HST you pay on these expenses during each reporting period. By choosing this method, you do not have to make any adjustments at the end of your fiscal year.

You can claim ITCs for the GST/HST you reimburse to your employees and partners for meal and entertainment expenses they incurred in Canada. However, these expenses are also subject to the 50% limit.

Claiming input tax credits for capital property

What is capital property?

Capital property, for GST/HST purposes, is based on the meaning of the term for income tax purposes, and includes:

  • depreciable property (property that is eligible for capital cost allowance for income tax purposes); and
  • other property, that would result in a capital gain or capital loss for income tax purposes if you disposed of it.

Generally, capital property is property you buy for investment purposes or to earn income. It may include:

  • real property, such as land or a building (for more information, see Claiming ITCs for purchases of capital real property;
  • personal property such as equipment or machinery that you use in your business;
  • photocopiers and computers, and cash registers;
  • furniture and appliances used to furnish places such as offices, lobbies, and hotel rooms; and
  • free-standing refrigerators, ovens, and other large appliances. Built-in appliances are fixtures that are usually considered to be part of real property.

Note

Capital property for GST/HST purposes does not include property described for income tax purposes in class 12 (such as chinaware, cutlery, and certain tableware), class 14 (certain patents, franchises, concessions, or licences for a limited period), or class 44 (a patent or a right to use patented information for a limited or unlimited period). To claim ITCs for these items based on the rules for operating expenses, see Claiming input tax credits for operating expenses.

Claiming ITCs for purchases of capital personal property

Primary use rule

The general rule, known as the primary use rule, for claiming ITCs for capital personal property, other than passenger vehicles and aircraft, is as follows:

  • If you use the capital personal property primarily (more than 50%) in your commercial activities, you can claim a full ITC.
  • If you use the capital personal property 50% or less in your commercial activities, you cannot claim an ITC.

For more information on if you purchase a passenger vehicle or aircraft, see Special rule: claiming ITCs for passenger vehicles and aircraft.

Note

The above rules do not apply for determining ITCs for purchases of real property. For more information, see Claiming ITCs for purchases of capital real property.

The chart is a quick reference to the rules for claiming ITCs on capital personal property.

Example

You bought a computer for $2,000 plus the GST/HST. You will use the computer 60% in your commercial activities and 40% for personal use. Since you will use the computer more than 50% in your commercial activities, you can claim an ITC for the full amount of the GST/HST you paid for the computer.

Note

The primary use rule also applies to public service bodies claiming ITCs for capital real property. For more information, see Claiming ITCs for purchases of capital real property.

If you sell capital personal property

If you sell capital personal property that was used more than 50% in your commercial activities, you have to charge the GST/HST on the sale. However, you do not charge the GST/HST on the sale if the property was used 50% or less in your commercial activities. See the chart ITCs for acquisition for capital personal property.

Special rules apply to municipalities. For more information, see Guide RC4049, GST/HST Information for Municipalities.

Claiming ITCs for improvements to capital personal property

An improvement to capital personal property means any property or service supplied or goods imported to improve the capital personal property, to the extent that the price paid for those supplies is included in determining the adjusted cost base of the capital personal property for income tax purposes.

You can claim an ITC for the GST/HST paid or payable for the acquisition or importation of an improvement to such property, if you were using the capital personal property primarily (more than 50%) in your commercial activities immediately after you last acquired the capital property or a portion of it.

Note

The last acquisition could be an actual acquisition or an acquisition you were deemed to have made for GST/HST purposes.

If the improvement is to a passenger vehicle or aircraft, you can add the cost of the improvement to the adjusted cost base of the passenger vehicle or aircraft. However, you cannot include any amount for improvements to a passenger vehicle that will make the adjusted cost base exceed the capital cost limitation. Passenger vehicles have a capital cost limitation of $30,000, not including the GST/HST and the PST. For more information on claiming ITCs for passenger vehicles, see Special rule: claiming ITCs for passenger vehicles and aircraft.

Special rule: claiming ITCs for passenger vehicles and aircraft

Corporations follow the primary use rule (more than 50%) to determine their ITCs for passenger vehicles and aircraft.

However, individuals and partnerships usually claim ITCs for passenger vehicles and aircraft based on the capital cost allowance (CCA) claimed for income tax purposes. If the use in commercial activities is 10% or less, you cannot claim any ITC. If the use in commercial activities is 90% or more, you can claim a full ITC.

You usually calculate your CCA for income tax purposes at the end of your fiscal year.

Once you have calculated your CCA, calculate your ITC by using one or more of the formulas shown in the chart below "ITCs for acquisition of capital personal property – Passenger vehicles and aircraft".

 

ITCs for acquisition of capital personal property - Personal Property
Percentage of use in commercial activities Corporations and public service bodies Partnerships and individuals Financial institutions
≤ 50% None None % of use
> 50% 100% 100% % of use
ITCs for acquisition of capital personal property -
Passenger vehiclesFootnote 1a and aircraft
Percentage of use in commercial activities Corporations and public service bodies Partnerships and individuals Financial institutions
≤ 10% None None % of use
> 10% and ≤50% None CCAFootnote 1b % of use
> 50% and < 90% 100% CCAFootnote 1b % of use
≥90% 100% 100% % of use

If you paid the provincial part of the HST for a vehicle or aircraft after you brought it into a participating province from another participating province with a lower HST rate, you can claim an ITC based on the difference between the rates, using the following calculations:

For tax years ending during the period from July 1, 2010 to March 31, 2013:
CCA × 1/101, into New Brunswick, Newfoundland and Labrador, or Ontario from British Columbia
CCA × 2/102, into Nova Scotia from New Brunswick, Newfoundland and Labrador, or Ontario
CCA × 3/103, into Nova Scotia from British Columbia

For tax years ending during the period from April 1, 2013 to June 30, 2016:
CCA × 1/101, into Nova Scotia from Prince Edward Island
CCA × 1/101, into Prince Edward Island from New Brunswick, Newfoundland and Labrador, or Ontario
CCA × 2/102, into Nova Scotia from Ontario, New Brunswick, or Newfoundland and Labrador

For tax years ending during the period from July 1, 2016 to September 30, 2016:
CCA × 1/101, into New Brunswick, Newfoundland and Labrador, or Nova Scotia from Prince Edward Island
CCA × 1/101, into Prince Edward Island from Ontario
CCA × 2/102, into Nova Scotia, New Brunswick or Newfoundland and Labrador, from Ontario

For tax years ending on or after October 1, 2016:
CCA × 2/102, into New Brunswick, Newfoundland and Labrador, Nova Scotia, or Prince Edward Island from Ontario

If you paid the provincial part of the HST for a vehicle or aircraft after you brought it into a participating province from a non-participating province or imported it into Canada for business purposes, you can claim an ITC by using the following calculations:

For tax years ending during the period from July 1, 2010 to March 31, 2013:
CCA × 7/107, if you paid 12% HST in British Columbia
CCA × 8/108, if you paid 13% HST in New Brunswick, Newfoundland and Labrador, or Ontario
CCA × 10/110, if you paid 15% HST in Nova Scotia

For tax years ending during the period from April 1, 2013 to June 30, 2016:
CCA × 8/108, if you paid 13% HST in New Brunswick, Newfoundland and Labrador, or Ontario
CCA × 9/109, if you paid 14% HST in Prince Edward Island
CCA × 10/110, if you paid 15% HST in Nova Scotia

For tax years ending during the period from July 1, 2016 to September 30, 2016:
CCA × 8/108, if you paid 13% HST in Ontario
CCA × 9/109, if you paid 14% HST in Prince Edward Island
CCA × 10/110, if you paid 15% HST in New Brunswick, Newfoundland and Labrador, or Nova Scotia

For tax years ending on or after October 1, 2016:
CCA × 8/108, if you paid 13% HST in Ontario
CCA × 10/110, if you paid 15% HST in New Brunswick, Newfoundland and Labrador, Nova Scotia, or Prince Edward Island

 

Change-in-use rules for capital personal property

The following change-in-use rules do not apply to an individual or a partnership that changes the use of a passenger vehicle or an aircraft.

Basic tax content

Generally, you have to calculate the basic tax content (BTC) of capital property when you change the use of the property because the amount of any tax payable or ITC entitlement that results from the change-in-use is based on the amount of the BTC of the property. Change-in-use rules for capital personal property.

The following basic tax content formula in its simplified form can be used by most registrants.

The basic tax content formula is as follows:

(A - B) × C

where:

A is the GST/HST payable for your last acquisition of the property and for later improvements you made to the property;

B is any rebate or refund you were entitled to claim (or would have been entitled to claim if you had not been entitled to claim an ITC) for the GST/HST payable for your last acquisition of the property and for later improvements you made to it, but not including ITCs you were entitled to claim; and

C is the lesser of:

  • 1; and
  • the fair market value of the property at the time of the change in use divided by the total cost (not including the GST/HST) for your last acquisition of the property and for later improvements you made to it.

Changing the use to more than 50% in commercial activities

When you buy capital personal property for use 50% or less in your commercial activities, you cannot claim ITCs to recover the GST/HST paid or payable. However, if you later change the use of the property to more than 50% in your commercial activities, we consider you to have purchased the property and paid the GST/HST at that time. This means you can claim an ITC, equal to the basic tax content of the property at the time of the change in use, by including this amount in your line 108 calculation if you are filing electronically or on line 106 if you are filing a paper GST/HST return.

Note

If you later change the use again and begin to use the property 50% or less in your commercial activities, you may have to pay all or part of the GST/HST that you claimed, or were entitled to claim, as an ITC. For more information, see Changing the use to 50% or less in commercial activities.

Example

You operate several commercial and residential rental buildings in Manitoba. You bought a tractor for use more than 50% in operating the residential rental buildings (an exempt activity) and paid the GST on your purchase. Since you were not using the tractor more than 50% in your commercial activities, you could not claim an ITC for the tax paid on this purchase and were also not entitled to any refunds or rebates of that tax.

Cost of tractor: $10,000

GST payable ($10,000 × 5%): $500

Later, you change the use of the tractor and begin using it more than 50% for the commercial buildings (commercial activity). Since you are now using the tractor more than 50% in your commercial activities, you can claim an ITC equal to the basic tax content of the tractor at the time of the change in use.

The fair market value of the tractor at the time of the change in use is $7,000. You did not make any improvements to the tractor since you bought it. You calculate the basic tax content of the tractor as follows:

Basic tax content = (A - B) × C

                                = ($500 - $0) × ($7,000/$10,000)
                                = $350

You can claim an ITC of $350 on your GST/HST return.

Changing the use to 50% or less in commercial activities

When you buy capital personal property for use more than 50% in your commercial activities, you can claim an ITC to recover the GST/HST you paid, or that was payable, on your purchase. However, if you change the use of the property from more than 50% in your commercial activities to 50% or less in commercial activities, you are considered to have sold the property and to have collected the GST/HST on that later sale.

This generally means that you have to repay all or part of the GST/HST you claimed, or were entitled to claim, as an ITC when you bought the property and when you made any improvements to it.

The tax you have to repay is equal to the basic tax content of the capital personal property at the time of the change in use. This amount has to be included, in your line 105 calculation if you are filing electronically or on line 103 if you are filing a paper GST/HST return, for the reporting period in which the change in use occurred.

Note

If you later change the use again and begin to use the property more than 50% in your commercial activities, you may be entitled to claim an ITC. For more information, see Changing the use to more than 50% in commercial activities.

Example

You are the operator described in the previous example. After changing the use of the tractor to more than 50% in your commercial activities, you now change the use back to 50% or less in your commercial activities. Since you are no longer using the tractor more than 50% in your commercial activities, you have to pay tax equal to the basic tax content of the tractor at the time of the change in use.

The tractor’s fair market value is now $4,000. You have not made any improvements to the tractor. You calculate the basic tax content of the tractor as follows:

Basic tax content:
(A - B) × C
= ($500 - $0) × ($4,000/$10,000)
= $200

You include $200 in your line 105 calculation if you are filing electronically or on line 103 if you are filing a paper GST/HST return, for the reporting period in which the change in use occurred.

Exception

There are specific change-in-use rules that apply to capital personal property of financial institutions.

Claiming ITCs for purchases of capital real property

The following rules are for GST/HST registrants. Generally, you can claim an ITC equal to either a percentage or the entire amount of the GST/HST paid or payable on purchases of real property (including improvements to real property) that you intend to use in your commercial activities.

Note

The purchase could be an actual purchase or a purchase you were deemed to have made for GST/HST purposes.

There are different rules for claiming ITCs for real property, depending on whether you are:

  • a corporation or a partnership;
  • an individual;
  • a public service body; or
  • a financial institution.

Note

See the chart ITCs for capital real property. This chart summarizes the ITC rules for purchases of real property that are explained in the following sections.

Corporations and partnerships

The rules for claiming ITCs on the purchase of real property are as follows:

  • If the intended use of the real property in commercial activities is 10% or less, you cannot claim an ITC.
  • If the intended use of the real property in commercial activities is more than 10% and less than 90%, you can claim an ITC based on the percentage of use in commercial activities.
  • If the intended use of the real property in commercial activities is 90% or more, you can claim a full ITC.
Note

These rules do not apply to a corporation or a partnership that is a financial institution.

Individuals

Individuals have to follow the same rules for claiming ITCs on the purchase of real property as those mentioned for corporations and partnerships. However, an individual cannot claim any ITC for the purchase of capital real property if the property is intended to be primarily (more than 50%) for their or a relative’s personal use and enjoyment, either individually or in combination.

Public service bodies

Public service body (PSB) means a non-profit organization, a charity, a municipality, a school authority, a hospital authority, a public college, or a university.

Generally, if a PSB has not made an election to treat certain exempt sales and leases of real property as taxable for a particular real property, the PSB can claim a full ITC if the capital real property is used primarily (more than 50%) in its commercial activities. No ITC is available if the capital real property is not used primarily in its commercial activities.

Where a PSB made an election for a particular property, the same rules that apply to corporations and partnerships (explained above) apply to the capital real property for which the election was made.

For information on the ITC rules that apply to PSBs when they purchase real property, see the following guides and form:

Financial institutions

Financial institutions have to claim their ITCs for capital real property based on the percentage of use in commercial activities, even when the property is used 10% or less, or 90% or more, in commercial activities.

ITCs for capital real property
Percentage of use in commercial activities Corporations and partnershipsFootnote 2c IndividualsFootnote 2a Public service bodiesFootnote 2b Financial institutions
≤ 10% None None None % of use

> 10% to ≤50%

% of use % of useFootnote 2b None % of use
> 50% to < 90% % of use % of use 100% % of use
≥90% 100% 100% 100% % of use

Claiming ITCs for improvements to capital real property

An improvement to capital real property means any property or service acquired, or goods imported, to improve the capital real property, to the extent that the price paid for those acquisitions or importations is included in determining the adjusted cost base of the capital real property for income tax purposes (or would be included if the owner of the property were a taxpayer under the Income Tax Act).

If you are a GST/HST registrant, you may be able to claim an ITC for the GST/HST paid or payable for the acquisition or importation of an improvement to capital real property. The ITC you can claim is based on the extent you were using the real property in your commercial activities at the time you last acquired the real property. This means the ITC is based on the use of the real property in your commercial activities, not on the extent to which you use the improvement itself in your commercial activities.

However, the ITC rules in the preceding chart continue to apply. For example, if you are a GST/HST registrant who is an individual, you cannot claim an ITC for an improvement to capital real property if you last acquired the real property primarily for your personal use and enjoyment or that of a relative, either individually or in combination.

Change-in-use rules for capital real property

Corporations and partnerships

The following rules apply to corporations and partnerships that are GST/HST registrants.

Note

The following change-in-use rules also apply to certain capital real property of a public service body (PSB) that has made an election (using Form GST26) to treat certain otherwise exempt supplies of that property as taxable.

If you are a corporation, a partnership, or a PSB that has made an election as discussed previously, and you begin to use, or you increase your use of, capital real property in your commercial activities, you may be able to claim an ITC. If you stop using or decrease your use of capital real property in your commercial activities, you generally have to repay all or part of the ITC you previously claimed or were entitled to claim.

If you change your use of capital real property, any ITC you may be entitled to claim, or any amount you have to repay, is calculated based on the basic tax content of the property at the time of the change-in-use. For an explanation, of the basic tax content, see Basic tax content.

Beginning use in commercial activities

If you own capital real property that you do not use in your commercial activities, you would not have been entitled to claim any ITCs when you last acquired the property. However, if you begin to use that property more than 10% in your commercial activities, you are considered to have purchased the real property at that time and, unless the purchase is exempt, to have paid the GST/HST on the purchase equal to the basic tax content of the property at the time you begin using it in commercial activities. If you are considered to have paid the GST/HST, you can claim an ITC equal to the basic tax content of the property multiplied by the percentage of use of the property in your commercial activities.

Note

For the ITC rules that apply on becoming a registrant, if you become a registrant on the same day that you begin to use the property in commercial activities, see Guide RC4022, General Information for GST/HST Registrants.

Example 1 - Beginning use

A corporation that is a registrant buys an office building and the related land, located in Manitoba, to use only in exempt activities (other than residential rentals). Therefore, it cannot claim an ITC for any of the tax it paid to purchase the property.

Cost of property: $500,000

GST ($500,000 × 5%): $25,000

The corporation has not made any improvements to the property. The corporation later begins to use the property 60% in commercial activities. As a result, the corporation is considered to have made a taxable purchase of the property and to have paid an amount of GST/HST equal to the basic tax content of the property at that time.

The fair market value of the property at the time the corporation begins using it in commercial activities is $550,000. The corporation can claim an ITC, based on the basic tax content of the property, calculated as follows:

Basic tax content = (A - B) × C
= ($25,000 - $0) × $550,000 / $500,000
= $25,000 × 1 (maximum) Footnote 3  
= $25,000

ITC allowable: $25,000 × 60% = $15,000

Increasing use in commercial activities

When you increase the percentage of use of capital real property in your commercial activities by 10% or more, you are considered to have purchased the real property to the extent you increased the use in such activities and, unless the purchase is exempt, to have paid an amount of GST/HST equal to the basic tax content of the property multiplied by the percentage of the increase-in-use in commercial activities. As a result, you can claim an ITC equal to the GST/HST you are considered to have paid.

Example 2 - Increasing use

Continuing with example 1, the corporation later increases the use of the real property in its commercial activities from 60% to 80% (an increase of 20%). As a result, the corporation is considered to have purchased an additional 20% of the property. In this case, the purchase of that part of the property is taxable.

The fair market value of the property at the time of this change-in-use is $600,000. Since the corporation increased the commercial use of the property by 10% or more, it can claim an additional ITC calculated as follows:

Basic tax content = (A - B) × C
= ($25,000 - $0) × $600,000 / $500,000
= $25,000 × 1 (maximum)
= $25,000

Additional ITC: $25,000 × 20% = $5,000

Note

If you increase the use in your commercial activities to 90% or more, you are considered to be using the property 100% in your commercial activities.

Decreasing use in commercial activities

When you decrease the use of capital real property in your commercial activities by 10% or more (without stopping its use in those activities), for purposes of determining the amount of tax you owe, you are considered to have sold the property to the extent by which you have decreased the use, and, unless the sale is exempt, to have collected the GST/HST on the part of the property that you are no longer using in your commercial activities.

To calculate the amount of the GST/HST you are considered to have collected, multiply the basic tax content of the property at the time you change the use by the percentage of the decrease-in-use in your commercial activities.

Example 3 - Decreasing use

Continuing with example 2, the corporation later decreases the use of the property in its commercial activities from 80% to 30% (a decrease of 50%). As a result, the corporation is considered to have sold 50% of the property. In this case, the sale of that part of the property is taxable.

The fair market value of the property at the time of this change-in-use is $550,000. The corporation has to account for the GST it is considered to have collected, calculated as follows:

Basic tax content = (A - B) × C
= ($25,000 - $0) × $550,000 / $500,000
= $25,000 × 1 (maximum)Footnote 4  
= $25,000

GST collected: $25,000 × 50% = $12,500

The corporation has to account for the tax it is considered to have collected, by including $12,500 GST in its line 105 calculation if it is filing electronically, or on line 103 if it is filing a paper GST/HST return, when it calculates its net tax for the reporting period during which the change-in-use occurs.

Stopping use in commercial activities

When you stop using capital real property for commercial activities (that is, when you reduce the use in commercial activities to 10% or less) and you begin to use the property 90% or more for non-commercial activities, we consider you to have sold the property and, unless the sale is exempt, to have collected the GST/HST on this sale. You are also considered to have repurchased the property and to have paid the same amount of tax.

The GST/HST that you are considered to have collected is equal to the basic tax content of the property. As a result, you have to include the amount of the basic tax content in your net tax calculation on your GST/HST return for the reporting period in which the change-in-use occurs.

Example 4 - Stopping use

Continuing with example 3, in which the property was being used 30% in commercial activities, it is now no longer being used in commercial activities and is used exclusively in exempt activities. As a result, the corporation is considered to have sold the property and, because the sale in this case would be a taxable sale, to have collected the GST/HST equal to the basic tax content of the property at that time. The corporation is also considered to have repurchased the property and to have paid the same amount of tax.

The fair market value of the property at the time of this change-in-use is $650,000. The GST the corporation is considered to have collected is calculated as follows:

Basic tax content = (A - B) × C
= ($25,000 - $0) × $650,000 / $500,000
= $25,000 × 1 (maximum)

GST collected = $25,000

The corporation has to account for the tax it is considered to have collected by including $25,000 GST in its line 105 calculation if it is filing electronically, or on line 103 if it is filing a paper GST/HST return, for the reporting period during which it stopped using the building in its commercial activities and began using it exclusively in exempt activities.

However, since the corporation is considered to have made a taxable sale of the building, as a registrant, the corporation may be eligible to claim an ITC to recover the tax it paid on the property that it could not previously recover.

To calculate the amount of the ITC that may be available, multiply the percentage that the property was used in non-commercial activities immediately before the sale that the corporation is considered to have made by the lesser of:

  • the basic tax content of the property at the time of the deemed sale ($25,000, as calculated above); and
  • the tax payable (the tax the corporation is considered to have collected) on that sale ($25,000).

In this case, the corporation would be eligible to claim an ITC as follows:

ITC: 70% x $25,000 × = $17,500

We use 70%, because it is the percentage of use in non-commercial activities immediately before the sale the corporation is considered to have made (since the corporation was using the property 30% in its commercial activities).

We use $25,000 because, in this case, the basic tax content of the property and the tax payable on the deemed sale both equal $25,000.

Since the corporation is no longer using the property in its commercial activities, the corporation is now in the same position it would have been if it initially bought the property to use exclusively in non-commercial activities.

For more information on the change in use rules, see GST/HST Memorandum 19.4.2, Commercial Real Property - Deemed Supplies, or call 1-800-959-8287.

Individuals

The following rules apply to individuals who are GST/HST registrants.

If you are an individual and you begin to use, or you increase your use of, capital real property in your commercial activities, you may be considered to have purchased the property at that time and to have paid the GST/HST. Therefore, you may be entitled to claim an ITC. If you decrease your use of, or stop using capital real property in your commercial activities, or if you begin to use it primarily for your or your relative's, personal use and enjoyment, either individually or in combination, you generally have to repay all or part of any ITC previously claimed.

If you begin to use or increase your use of capital real property in your commercial activities, any ITC you are entitled to claim is based on the basic tax content of the property at the time of your change-in-use. If you decrease or stop your use of capital real property in your commercial activities, any GST/HST you have to repay is based on the fair market value or the basic tax content of the property at the time of the change in use, depending on whether there is an increase in personal use or in the use in exempt activities.

For more information on the basic tax content calculation, see Basic tax content.

Beginning use in commercial activities

If you are an individual and you own capital real property that you use primarily (more than 50%) for your or a relative's personal use and enjoyment, either individually or in combination, or if you do not use the property in commercial activities (10% or less), you would not have been entitled to claim an ITC when you last acquired the property.

However, if you begin to use that property more than 10% in your commercial activities and you do not use the property primarily for such personal use, you are considered to have purchased the property at that time and, unless the purchase is exempt, to have paid the GST/HST on the purchase equal to the basic tax content of the property at the time you begin using it in commercial activities. If you are considered to have paid the GST/HST, you can claim an ITC equal to the basic tax content of the property multiplied by the percentage of use of the property in your commercial activities.

Note

If you become a registrant on the same day that you begin to use the property in commercial activities, see Guide RC4022 for the rules that apply on becoming a registrant.

Example 1 - Beginning use

You are an individual who is registered for the GST/HST. You paid a total of $300,000 plus $15,000 GST to purchase land, construction materials, and services to construct a building in Alberta. The property is capital property used exclusively to provide exempt music lessons.

You were not entitled to claim any rebates or ITCs for the tax paid on the land or on any of your construction costs.

You later begin to use the property 60% in your bookkeeping business (commercial activity). As a result of the change in use, you are considered to have purchased the property at that time and, because the purchase is taxable in this case, you are also considered to have paid an amount of GST equal to the basic tax content of the property.

The fair market value of the property at the time you begin using it in your commercial activities is $400,000. You are entitled to claim an ITC, calculated as follows:

Basic tax content = (A - B) × C
= ($15,000 - $0) × $400,000 / $300,000
= $15,000 × 1 (maximum)
= $15,000

ITC allowable = $15,000 × 60%

= $9,000

Increasing use in commercial activities

When you increase the percentage of use of capital real property in your commercial activities by 10% or more, and you are not using the property primarily for your or a relative’s personal use and enjoyment, either individually or in combination, you are considered to have purchased the property to that extent and, unless the purchase is exempt, to have paid an amount of GST/HST calculated by the formula:

A × B

where:

A is the basic tax content of the property at the time of the change in use; and

B is the percentage by which you increased the use of the property in your commercial activities.

You can claim an ITC equal to the GST/HST you are considered to have paid.

Example 2 - Increasing use

You are an individual who is a registrant and you purchase a building in Saskatchewan. You use 40% of the property in your daycare business to provide exempt daycare services and 60% of the property is for use in your taxable construction activities. The building is capital property used primarily in your commercial activity. You claimed an ITC for a portion of the tax you paid at the time you purchased the property.

Cost of property: $500,000

GST ($500,000 × 5%): $25,000

ITC claimed (25,000 × 60%): $15,000

You later increase the use of the property in your commercial activities from 60% to 80%. As a result, you are considered to have purchased an additional 20% of the property, and, as the purchase of that part of the property is taxable in this case, you are considered to have paid GST equal to the basic tax content multiplied by 20% of the property and to have paid an amount of GST on the purchase, as calculated below.

The fair market value of the property at the time of this change in use is $600,000. You can claim an additional ITC, calculated as follows:

Basic tax content = (A - B) × C
= ($25,000 - $0) × $600,000 / $500,000
= $25,000 × 1 (maximum)
= $25,000

To calculate the additional ITC you can claim, multiply the basic tax content by the % of increase in commercial use.

Additional ITC = $25,000 × 20%

= $5,000

Note

If you increase the use in commercial activities to 90% or more, you are considered to be using the property 100% in your commercial activities.

Decreasing use in commercial activities

When you decrease the use of capital real property in your commercial activities by 10% or more (without stopping its use in those activities) and you do not begin to use it primarily (more than 50%) for your or your relative's personal use and enjoyment, either individually or in combination, you are considered to have sold the property to the extent that you reduced the use in commercial activities. Unless the sale is exempt, you are considered to have collected the GST/HST on the part of the property that you are no longer using in your commercial activities.

Note

If you decrease the use of the property in your commercial activities to 10% or less, you are considered to have stopped using the property in your commercial activities. For more information see Stopping use in commercial activities without changing the use to primarily personal use or Changing the use of the property to primarily personal use.

When you decrease the use in your commercial activities, use the following formula to calculate the amount of the GST/HST you are considered to have collected:

(A × B) - C

where:

A is the basic tax content of the property at the time of the change in use;

B is the percentage by which you reduced the use of the property in your commercial activities; and

C is the amount of any GST/HST that you are considered to have collected on the fair market value of the property, or a part of the property, because you appropriated the property (or part) that was used as capital property in your business or commercial activities for your or your relative's personal use and enjoyment, including residential use. For more information, see Changing the use of the property to primarily personal use.

Example 3 - Decreasing use

Continuing with example 2, you later decrease your use of the property in commercial activities from 80% to 40% (a decrease of 40%). You are now using the building 60% to provide the exempt daycare services.

As a result of this change-in-use, you are considered to have made a taxable sale of the part of the building that you were using in commercial activities and are now using in exempt activities (40%).

The fair market value of the property at the time you reduce its use in commercial activities is $650,000. The GST you are considered to have collected on that sale is calculated as follows:

Basic tax content = (A - B) × C
= ($25,000 - $0) × $650,000 / $500,000
= $25,000 × 1 (maximum)
= $25,000

GST collected = (A × B) - C
= ($25,000 × 40%) - $0
= $10,000

Stopping use in commercial activities without changing the use to primarily personal use

If you reduce the use of capital real property in your commercial activities to 10% or less and begin to use it exclusively (90% or more) for other purposes (but not primarily for your or your relative's personal use and enjoyment, either individually or in combination), you are considered to have stopped using the property in commercial activities, to have sold the property and, unless the sale is exempt, to have collected the GST/HST on the sale.

In most cases, the GST/HST you are considered to have collected is equal to the basic tax content of the property at the time of the change in use.

Example 4 - Stopping use in commercial activities

Continuing with example 3, in which the property was being used 40% in commercial activities and 60% in exempt activities, you now decide to use the entire building to provide exempt daycare services. The property is no longer being used in commercial activities. As a result, you are considered to have sold the property. The fair market value of the property at the time of this change in use is still $650,000.

As you have not appropriated the property for personal use, the GST you are considered to have collected is based on the basic tax content and is calculated as follows:

Basic tax content = (A - B) × C
= ($25,000 - $0) × $650,000 / $500,000
= $25,000 × 1 (maximum)

GST collected = $25,000

Account for the tax you are considered to have collected by including $25,000 GST in your line 105 calculation if you are filing electronically, or on line 103 if you are filing a paper GST/HST return, for the reporting period during which you stopped using the building in your commercial activities.

Since you are considered to have made a taxable sale of the building as a registrant, you may be eligible to claim an ITC to recover the tax you previously paid on the property but were not entitled to recover. For details see Claiming ITCs when you make a taxable sale of real property.

Changing the use of the property to primarily personal use

If you were using the property in your commercial activities and not primarily for your or your relative's personal use and enjoyment, and begin using the property primarily for your or your relative's personal use and enjoyment, either individually or in combination, you are considered to have:

  • stopped using the property in your commercial activities;
  • sold the property; and
  • collected the GST/HST on that sale (unless that sale is exempt).

The method used to calculate the GST/HST you are considered to have collected depends on the extent to which you increase the personal use or enjoyment of the property.

If you begin to use the property primarily for personal use but do not use it exclusively (90% or more) for personal use, the GST/HST you are considered to have collected is equal to the basic tax content of the property at the time you and/or your relative begin to use it primarily for personal use.

Example 5 - Changing use to primarily personal use

Returning to example 3, in which the property was being used 40% in commercial activities and 60% in exempt activities, you later decide to close your daycare business and you begin to use that part of the building only as a place of storage for your personal items. This means that you are now using 40% of the building for commercial use and 60% for personal use. Because you are using the property primarily (but not exclusively) for personal use, you are considered to have stopped using the property in your commercial activities.

The fair market value of the property at the time you begin to use it primarily for personal use is $700,000. The basic tax content of the property (as calculated in example 3) is $25,000.

The GST you are considered to have collected because you began using the property primarily (but not exclusively) for your personal use is equal to the basic tax content of the property at the time you began using it primarily for personal use ($25,000).

Report the $25,000 GST that you are considered to have collected, on your regular return for the reporting period in which you changed the use of the property (in your line 105 calculation if you are filing your return electronically, or on line 103 if you are filing a paper GST/HST return).

If you begin to use the property exclusively (90% or more) for personal use, and cease business use of the property, you are considered under two separate provisions to have sold the property and, unless the sale is exempt, to have collected the GST/HST on the sale.

Under the first provision (which applies to the appropriation of real property for personal use), you are considered to have collected the GST/HST calculated on the fair market value of the property because you had used the property as capital property in a business or commercial activity and began to use it entirely for your and/or your relative's personal use and enjoyment.

Under the second provision (which applies to the cessation of use in commercial activities), you are considered to have collected the GST/HST calculated under the following formula:

A - B

where:

A is the basic tax content of the property at the time of the change in use; and

B is the amount of the GST/HST, if any, that you are considered to have collected on the fair market value of the property, or part of the property, because you had used the property, or part, as capital property in a business or commercial activity and begin using it for the personal use of you or your relative, either individually or in combination.

The combined effect of these two provisions, therefore, is that where you begin to use the property exclusively (90% or more) for personal use and cease business use of the property, you are considered to have collected tax equal to the greater of tax on the fair market value of the property or the basic tax content of the property.

Example 6 - Changing use to exclusively (90% or more) personal use

Returning to example 3, in which the property was being used 40% in commercial activities and 60% in exempt activities, you now decide to use the entire building as a place of storage for your personal items. The property is no longer being used in any commercial activity or business activity. As a result, you are considered to have sold the property.

The fair market value of the property at the time of this change in use is $700,000. The basic tax content of the property (as calculated in example 3) is $25,000.

Because you have appropriated the property for personal use, you are considered (under the first provision) to have collected the GST calculated on the fair market value of the property at the time you began using it exclusively for personal use ($700,000 × 5% = $35,000).

GST collected $700,000 × 5% = $35,000

You are also considered (under the second provision) to have collected the GST because you stopped using the property in commercial activities. In this case, the GST is $0, calculated as follows:

GST collected = A - B
= $25,000 - $35,000
= $0Footnote 5

Therefore, you are considered to have collected a total of $35,000 GST (under the first provision).

Since you are considered to have made a taxable sale of the building, as a registrant, you may be eligible to claim an ITC to recover the tax you previously paid on the property but were not entitled to recover. See Claiming ITCs when you make a taxable sale of real property.

Public service bodies

If you are a public service body (PSB), the change-in-use rules that apply to you for capital real property are generally the same as those that apply to you for capital personal property. However, if you have filed an election to treat your exempt supplies of certain capital real property as taxable, the change-in-use rules apply for capital personal property. For a list of the guides that provide more information, see Public services bodies.

If you have filed an election (Form GST26) to treat your exempt supplies of certain capital real property as taxable, the change-in-use rules for capital personal property do not apply. The change-in-use rules for capital real property that apply to corporations and partnerships would apply, but only for the property for which you filed the election. For more information, see Corporations and partnerships.

Financial institutions

The change-in-use rules for real property that apply to financial institutions are similar to those that apply to corporations and partnership. For more information, see GST/HST Memorandum 19.4.2, Commercial Real Property – Deemed Supplies.

Claiming ITCs when you make a taxable sale of real property

If you are a GST/HST registrant and you make a taxable sale (including a deemed taxable sale) of real property, you may be entitled to claim an ITC for some or all of the GST/HST embedded in the property (generally tax that you paid for your last acquisition of the property or for a later improvement to the property, but were not previously entitled to recover). Your last acquisition could, for example, be when you originally purchased the property, or when you were last considered to have purchased it under the self-supply rules for builders of new housing.

For more information, see GST/HST Memorandum 19.2.3, Residential Real Property - Deemed Supplies, or call 1-800-959-8287.

Example

You are an individual who is a GST/HST registrant and you construct a building in Saskatchewan. You paid a total of $500,000 plus $25,000 GST to purchase land, goods and services to construct the building. You use 40% of the building to provide exempt daycare services and 60% to provide taxable construction services. The building is capital property used primarily in a commercial activity.

You claimed ITCs of $15,000 (60% x $25,000) for the tax paid on the land and on your construction costs. Because you are using 40% of the building in exempt activities, you were unable to recover the GST you paid on the land and construction costs that relate to those activities.

You then make a taxable sale of the building for $700,000 plus $35,000 GST. Since you made a taxable sale of the building, you are eligible to claim an ITC to recover some or all of the tax that you paid on your purchase of the property but that you could not previously recover.

To calculate the amount of the ITC that may be available, multiply the percentage that the property was used in non-commercial activities immediately before the sale by the lesser of the following two amounts:

  • the basic tax content of the property at the time of that sale; and
  • the tax payable on that sale.

In this case, you would be eligible to claim an ITC as follows:

ITC: 40%Footnote 6 × $25,000Footnote 7 = $10,000

When you finish construction

The following sections only apply to you if you are a builder for GST/HST purposes. They discuss how the GST/HST generally applies in each of the following situations if you:

  • sell the new house;
  • sell the house after renovating it (not a substantial renovation);
  • lease the new house;
  • sell the building part of a new house and lease the related land; and
  • are an individual and you live in the new house.

For information on whether you are a builder, see Are you a builder for GST/HST purposes?

For what qualifies as a substantial renovation, major addition, and conversion, see Substantial renovation, major addition, and conversion.

If you sell the new house

If you are a builder of a new or substantially renovated house and you sell that house, the sale will generally be taxable. For more information on exempt sales, see Exempt sales of housing.

Special rules apply for charging and collecting the GST/HST when you make a taxable sale of a house. For information, see the following sections:

Special rule: residential condominium units
You are considered to have made a taxable sale of a residential condominium unit and to have collected the GST/HST calculated on the fair market value of the unit (that is, you are considered to have made a self-supply of the unit) if:

  • you enter into a purchase and sale agreement for the unit and that agreement for the unit terminates (for a reason other than the transaction being completed) after the purchaser has occupied it as a place of residence and before the condominium complex is registered as a condominium; and
  • you did not enter into another purchase and sale agreement for that unit with the same purchaser.

You have to include the GST/HST you are considered to have collected in your line 105 calculation if you are filing electronically or on line 103 if you are filing a paper GST/HST return for the reporting period that includes the day the agreement was terminated.

If you sell the house after renovating it (not a substantial renovation)

If, in the course of a business of making supplies of real property, you sell a house that you renovated or altered, but those renovations or alterations were not significant enough to be a substantial renovation, you are considered to have made a taxable self-supply.

In this case, you are considered to have collected, and you have to account for, the GST/HST on costs that:

  • are for the renovation or alteration (other than purchases of financial services and property and services for which you were required to pay the GST/HST); and
  • would be included in your adjusted cost base for income tax purposes if the house was your capital property.

Generally, a cost has to be added to the adjusted cost base of a house if it enhances the building beyond a simple repair or maintenance. 

As a result, you are considered to have collected the GST/HST on costs such as wages and salaries and employee benefits payable to your employees who are involved in on-site renovation work, as well as on contracts entered into with non-registrants.

This rule generally ensures that renovators who use their own labour or the services of non-registrants will pay equivalent amounts of the GST/HST when compared to those who use independent contractors. In other words, the GST/HST you are considered to have collected should be approximately equal to the GST/HST that you would have been charged by an independent contractor who is a GST/HST registrant had you acquired the property or services from them instead of providing the property or services yourself.

Note

You do not have to account for the GST/HST on ordinary repair and maintenance costs that would not be included in the adjusted cost base for income tax purposes.

If you are considered to have collected the GST/HST on costs incurred to renovate or alter a house, you have to include that GST/HST you are considered to have collected in your line 105 calculation if you are filing electronically or on line 103 if you are filing a paper GST/HST return for the reporting period that includes the earlier of:

  • the day the renovation is substantially completed; and
  • the day you transfer ownership of the house to the purchaser.

Your sale of the house will generally be exempt. As your sale of the house is exempt, you are not entitled to claim ITCs for the tax you are considered to have collected on the renovations costs.

Note

You are also considered to have collected the GST/HST if the renovation is not a substantial renovation and you lease the house (as opposed to selling it).

If you lease the new house

If you lease the new house to someone who will live in it continuously for one month or more, the lease payments are exempt.

The lease payments you charge will also be exempt if the person you are leasing the new house to sub-leases it to an individual who will live in it continuously for one month or more.

Note

If you also lease a parking space to be made available throughout a period of one month or more, the lease of that space will usually be exempt if you lease it to a person who is also leasing a house from you and the parking space is part of the house, or the use of the parking space is related to the use and enjoyment of the house as a place of residence for individuals.

For information on how the application of the GST/HST to leases of new housing is affected by the:

Self-supply when you lease the new house

If you are a builder, you are generally considered to have made a taxable self-supply if you build or substantially renovate housing (whether it has single or multiple units) and you give possession or use of the housing, or a unit in it, under a lease for its use as a place of residence by an individual. You are also considered to have made a taxable self-supply if you are a builder who leases new or substantially renovated housing to a person who in turn will lease it to an individual as a place of residence.

Note

This self-supply rule can apply to a builder of new or substantially renovated housing whether the builder is a GST/HST registrant or not.

For information on the meaning of self-supply, see What is a self-supply?

If you are considered to have made a self-supply of a house that you later sell, the sale will usually be exempt from the GST/HST if your only use of the house was in exempt activities (for example, long-term residential leases). If you are an individual that is a builder of a house and you or your relative occupies the house as a place of residence and you later sell the house, the sale will usually be exempt if it was used primarily (more than 50%) as your or your relative's place of residence, either individually or in combination. For more information, see Exempt sales of housing.

If you are considered to have made a taxable self-supply and you do not use the house in commercial activities after that taxable supply, you are not entitled to claim ITCs for the tax you are considered to have paid for the self-supply. However if, at any time, you begin to use all or part of the house in commercial activities, you may be entitled to claim an ITC. For more information, see Change-in-use rules for capital real property.

Notes

Special self-supply rules apply if you lease housing partly for long-term residential use and also partly for commercial use. For more information, see Self-supply for mixed-use real property.

Self-supply rules do not apply to certain communal organizations when they build or substantially renovate residences for their members. Nor do the self-supply rules apply to universities, school authorities, or public colleges when they build or substantially renovate student residences that are for use primarily as residences of their students.

In the case of remote work sites, the application of the self-supply rules may be deferred. For more information, see Remote work sites.

Single unit house (including a residential condominium unit)

You are considered to have made a taxable self-supply of a single unit house and are considered to have collected the GST/HST calculated on the fair market value of the house (which includes the land) if:

  • you are a builder;
  • you build or substantially renovate the house;
  • you give possession or use of the house under a lease agreement for the use of the house as a place of residence by an individual; and
  • that individual is the first to occupy the house after the construction or substantial renovation is substantially completed.

Note

You may not be considered to have made a self-supply if you are an individual who is a builder and you built or substantially renovated a house that you or your relative use more than 50%, either individually or in combination, as a place of residence. For more information, see If you are an individual and you live in the new house.

Multiple-unit housing or an addition to such housing (does not include a residential condominium unit or condominium complex)

You are considered to have made a taxable self-supply of the entire multiple-unit housing (for example, a duplex or an apartment building), or an addition to such housing, and are considered to have collected the GST/HST calculated on the fair market value of the multiple unit housing, or the addition, (including the related land) if:

  • you are a builder;
  • you build or substantially renovate the multiple-unit housing or you build the addition;
  • you give possession or use of a unit in the housing or addition under a lease for the use of the unit as a place of residence by an individual; and
  • that individual is the first to occupy a unit in the housing or addition after the construction or substantial renovation is substantially completed.
Note

You are considered to have paid and collected the GST/HST calculated on the fair market value of the entire multiple unit housing, or addition, even if you have only given possession or use of one unit in the housing or addition. However, you may be entitled to claim a GST/HST new residential rental property rebate for some of the tax you are considered to have paid. For more information, see GST/HST new residential rental property rebate.

Self-supply of subsidized housing

If you are considered to have made a taxable self-supply of subsidized housing, special rules may apply for determining the amount of tax you have to remit. For more information, see Subsidized housing.

Timing of self-supply

You are considered to have made a self-supply on the later of:

  • the day you first give possession or use of the house (or of a unit, in the case of multiple unit housing or an addition to such housing); or
  • the day that the construction or substantial renovation of the house or multiple unit housing or addition is substantially completed.

How do you account for the tax on a self-supply?

If you are a GST/HST registrant, include the GST/HST you are considered to have collected in your line 105 calculation if you are filing electronically or on line 103 if you are filing a paper GST/HST return for the reporting period in which you are considered to have made the self-supply (see Timing of self-supply). Remit any positive amount of net tax due by the due date of that return.

If you are not a GST/HST registrant, include the GST/HST you are considered to have collected on line 103 on Form GST62, Goods and Services Tax/Harmonized Sales Tax (GST/HST) Return (Non-Personalized). Remit the tax due along with that return by the end of the month following the month during which you are considered to have made the self-supply (see Timing of self-supply). As a non-registrant, you may be entitled to claim a rebate to recover the tax you paid on the construction costs that you could not previously recover. For more information, see Rebate for taxable sale of real property by a non-registrant.

Note

Form GST62 is only available in pre-printed format and is not available for download on our website; however, you can order it using the online order form at Getting forms and publications.

Self-supply for mixed-use real property

If you are considered to have made a self-supply because you built or substantially renovated a building, and you leased part of the building for long-term residential use (an exempt activity), and the other part of the building was leased for commercial use (a taxable activity), you are only considered to have made a self-supply of the residential part of the property. As a result, you are considered to have paid and collected the GST/HST calculated on the fair market value of the residential part of the property.

You cannot claim an ITC for the GST/HST you are considered to have paid on the self-supply of the residential part of the property if you are using 90% or more of this part of the property to provide long-term residential rentals.

Sale of mixed-use real property

If you later sell the real property that you had leased partly for long-term residential use (an exempt activity) and also partly for commercial use (a taxable activity), you are considered to have made two separate sales of real property—one sale of the residential part and another sale of the commercial part.

In this case, the GST/HST will generally apply to the commercial part of the building but the residential part of the building may be exempt. This ensures that housing that would be exempt if sold on its own will still be exempt if sold with other taxable real property.

Example

A corporation sells a 10-story building. The building has apartments on nine floors, which the corporation leased to individuals for long-term residential use, and several businesses on the main floor.

For GST/HST purposes, the corporation is considered to have made two separate sales - one sale of the commercial part of the building and a separate sale of the residential part.

The GST/HST applies to the sale of the commercial part of the building. The sale of the residential part of the building is exempt. However, if the building was new and no one had lived in it, the sale of the entire building—both the residential and commercial parts—would be taxable.

If you sell the building part of a new house and lease the related land

If you sell only the building part of the new house and you lease the related land to the purchaser under the same agreement (other than a site in a residential trailer park), you are considered to have made a self-supply of the building and the land and are considered to have paid and collected the GST/HST calculated on the fair market value of both the house and the land.

You are considered to have made the self-supply on the later of:

  • the day you first give possession or use of the house, or of a unit in multiple unit housing, or in an addition to such housing, under the agreement; and
  • the day that the construction or substantial renovation of the house, or multiple unit housing or addition, is substantially completed.

For information on how to account for the GST/HST you are considered to have collected, see How do you account for the tax on a self-supply?

If you are an individual and you live in the new house

If you are a builder who is an individual and you build or substantially renovate a house or multiple unit housing or construct an addition to multiple unit housing you may be considered to have made a taxable self-supply and to have paid and collected the GST/HST calculated on the fair market value of the house, the entire multiple unit housing or the addition that you built or substantially renovated if you are the first to live in the house or a unit in the multiple unit housing, or addition. For information on what qualifies as a substantial renovation, see Substantial renovation, major addition, and conversion.

However, you are not considered to have made a self-supply if:

  • you did not claim any ITCs for the construction, or substantial renovation of the house or multiple unit housing, or the construction of the addition;
  • after the construction or substantial renovation is substantially complete, you or your relative use the house, the multiple unit housing, or the addition primarily (more than 50%) as a place of residence, either individually or in combination; and
  • you did not use the house, multiple unit housing, or addition primarily for any other purpose between the time the construction or substantial renovation was substantially completed and the time at which you began to use it primarily as a place of residence. 

Note

This exception does not apply where the builder is a corporation or a partnership and an individual who is a shareholder of that corporation or a partner of that partnership begins living in the house. In this case, the corporation or partnership is considered to have made a taxable self-supply and is considered to have paid and collected the GST/HST calculated on the fair market value of the housing. To find out how the self-supply rules apply in this case, see If you lease the new house.

If you are considered to have made a taxable self-supply, you are considered to have paid and collected the GST/HST on the later of:

  • the day construction or substantial renovation is substantially complete; and
  • the day you or your relatives begin to use the house as a place of residence.

If you are considered to have made a taxable self-supply on housing that you later sell, the sale will usually be exempt from the GST/HST if the last use of the house was primarily (more than 50%) as your or your relative's place of residence, either individually or in combination.

For information on how to account for the GST/HST you are considered to have collected, see How do you account for the tax on a self-supply?

For information on transitional rules that apply to self-supplies of new housing in:

Exempt sales of housing

The following is a list of some sales of housing that are exempt:

  • A sale of a house by a person who is not a builder of the house if:
    • they did not claim ITCs for the GST/HST that was payable when they last purchased or were considered to have purchased the house, or that was payable on any later improvements they made to the house; and
    • they did not file an election to treat the exempt sale as taxable.
  • A sale of a house by a builder of the house if the builder was considered to have made a self-supply of the house and had to account for the GST/HST on that supply (for example, when they first leased the house for long-term residential use) as long as the builder did not claim any ITCs for that tax or for any tax payable on any later improvements to the house.
  • A sale of a house by an individual who is a builder of the house if they did not claim any ITCs for any tax payable on the last acquisition of the property (for example, the land) and on any improvements to the property (for example, construction costs), and they or their relative, either individually or in combination, used the house primarily (more than 50%) as their own place of residence.
  • A sale of a house, excluding the land, where the vendor leases the related land to the purchaser of the house and both the sale of the house and lease of land are under the same written agreement. For more information, see If you sell the building part of a new house and lease the related land.

For more information on when a sale of housing is exempt, see GST/HST Memorandum 19.2.1, Residential Real Property - Sales.

Substantial renovation, major addition, and conversion

The following information will help you determine if the construction work you did to a house is extensive enough to consider the house as substantially renovated for GST/HST purposes.

Substantial renovation

If a house has been substantially renovated, it is generally treated as a newly built house.

However, major changes have to be made to a house to meet the definition of a substantial renovation. In a major renovation project, the interior of a house is essentially gutted. This type of renovation project qualifies as a substantial renovation. Generally, 90% or more of the interior of an existing house is the minimum that has to be removed or replaced to qualify as a substantial renovation (referred to as the 90% test). You do not have to remove or replace the foundation, external and interior supporting walls, roof, floors, and staircases to meet the 90% test. If you do remove or replace any of these during a substantial renovation, they will form part of the 90% test.

Any fair and reasonable method, such as comparing the square footage of the renovated areas to the total floor space of the house, is an acceptable measure of the 90% test. You can also compare the square footage of floor and wall space of the areas renovated to the total floor and wall space of the house.

Only liveable areas count toward a substantial renovation. This would include the main floor living areas and finished basements and attics. Liveable areas do not include garages or crawl spaces, which are not considered when meeting the 90% test. Work done to partially complete a basement but not make it a liveable basement does not count toward the 90% test.

However, if all or part of an unfinished basement was renovated into a liveable area, this area would be taken into account in applying the 90% test.

Renovating the basement by itself or adding a garage or a deck to an existing house would not meet the definition of a substantial renovation.

An addition to a house is not considered to be a substantial renovation, as it is the existing house that must be renovated. For example, if a 900 square metre bungalow is being renovated and a 100 square metre addition is added, the 90% test does not consider the addition. However, if the renovation of the 900 square metre bungalow is found to be a substantial renovation, the construction of the addition is considered to be part of the substantial renovation.

Note

If you are a person who acquires a house and undertakes a substantial renovation of that house to lease or sell that house, you are a builder of that house for GST/HST purposes. For more information, see Are you a builder for GST/HST purposes? As a builder, if you sell a substantially renovated house before it has been occupied by any individual as their place of residence, you are required to collect the GST/HST on the sale, and the purchaser may be entitled to claim a GST/HST new housing rebate. For more information, see GST/HST rebates for new housing.

Major addition

Although an addition to a house is not considered to be a substantial renovation on its own, a major addition that is built together with the renovation of the existing house may be equivalent to a new construction. In this case, the work must be so great that the result is viewed as a newly built house.

To be a major addition, the addition should at least double the size of the liveable areas of an existing house, which is absorbed into the new one. An example would be adding a full second story to an existing bungalow. Along with doubling the size, the changes to the existing house and use of its rooms after construction should be so great that the existing house ceases to exist.

The construction of a porch, sunroom, family room, or bedroom by itself is not considered to result in a newly built house.

Conversion

When you convert a property from non-residential into a house, it is considered a substantial renovation, regardless of how much work, if any, is actually done. If a house has been substantially renovated, it is generally treated as a newly built house.

For more information on substantial renovation, major addition and conversion, see Technical Information Bulletin B-092, Substantial Renovations and the GST/HST New Housing Rebate.

GST/HST rebates for new housing

The following rebates may be available for new housing and are discussed in the following sections:

  • GST/HST new housing rebate
  • provincial new housing rebates
  • GST/HST new residential rental property rebate
  • provincial new residential rental property rebate
  • provincial transitional new housing rebate
  • British Columbia transition rebate
  • transitional rebate for the 2006 and 2008 GST/HST rate reductions
  • rebate for a taxable sale of real property by a non-registrant

GST/HST new housing rebate

An individual may be entitled to claim a rebate of 36% of the GST or federal part of the HST they paid on their purchase of a new house or on their costs to build or substantially renovate their own house, up to a maximum rebate of $6,300.

Note

No GST/HST new housing rebate is available for a house if the purchase price of the new house, or, in certain cases, the fair market value of the house, is $450,000 or more.

To qualify, the individual or their relative has to use the house as their primary place of residence, and must be the first individual to live in the new or substantially renovated house.

An individual who purchases their house from a builder has to apply for the rebate using Form GST190, GST/HST New Housing Rebate Application for Houses Purchased From a Builder. An individual who builds their own house has to use Forms GST191, GST/HST New Housing Rebate Application for Owner-Built Houses and GST191-WS, Construction Summary Worksheet.

For more information on eligibility conditions and how an individual can apply for a new housing rebate, see Guide RC4028, GST/HST New Housing Rebate.

If your house is located in Ontario, British Columbia, or Nova Scotia, you may be eligible to claim a provincial new housing rebate for a percentage of the provincial part of the HST. For more information, see Provincial new housing rebates.

Primary place of residence

An individual's primary place of residence is generally the residence that the individual lives in on a permanent basis. An individual may hold more than one residence but is considered to have only one primary place of residence.

For rebate purposes, if a person has more than one place of residence, the following are some of the factors we may consider to determine if the residence is the primary place of residence:

  • whether the individual intends to use the house as his or her primary residence;
  • the length of time the individual lives in the house; and
  • the designation or description of the address on personal and public records.

For more information on determining whether a house is an individual's primary place of residence, see GST/HST Memorandum 19.3, Real Property Rebates, and Policy Statement P-228, Primary Place of Residence.

If you choose to pay or credit the amount of the GST/HST new housing rebate to the purchaser

If you are a builder, and you make a taxable sale of a house to an individual purchaser who is entitled to a GST/HST new housing rebate, you can choose to pay or credit the amount of that rebate to the purchaser. In this case, both you and the purchaser have to fully complete all of the applicable sections of Form GST190. Make sure that you sign Section D and that the purchaser signs Section E.

Enter the amount of the rebate you paid or credited to the purchaser on line 135 and in your line 108 calculation if you are filing electronically, or otherwise on line 107 (adjustments) of your GST/HST return for the reporting period in which you paid or credited the amount of the rebate (your net tax will be reduced by the amount you paid or credited). You have to send the completed Form GST190 with that GST/HST return by the due date of the return.

Note

We do not pay you interest on the amount you pay or credit to the purchaser.

Joint liability

If we determine that the purchaser is not entitled to the rebate, or that the amount paid or credited to them was more than they were entitled to, and you knew, or should reasonably have known this, you and the purchaser are jointly and severally liable to pay the amount, or the excess, to the Receiver General.

Provincial new housing rebates

If your new housing is located in British Columbia, Nova Scotia, or Ontario, the purchaser may be eligible to claim a provincial new housing rebate for some of the provincial part of the HST paid on the purchase, construction, or substantial renovation of the house. Use the applicable provincial rebate schedule to calculate the amount of the provincial new housing rebate.

Note

At this time, in Prince Edward Island, there are no provisions for a new housing rebate for the provincial part of the HST.

If the purchase price, or in some cases, the fair market value of a substantially completed house is $450,000 or more, the purchaser may still be eligible for a provincial rebate.

British Columbia

In British Columbia, the purchaser is eligible to claim the provincial rebate if:

  • the house is located in British Columbia;
  • the HST on the purchase became payable before April 1, 2013; and
  • the purchaser is eligible to claim a GST/HST new housing rebate for the federal part of the HST, or would be eligible if the purchase price (or fair market value) was less than the maximum threshold ($450,000) for claiming that rebate.

Before April 1, 2012, the maximum British Columbia new housing rebate amount was $26,250. After March 2012, the maximum British Columbia new housing rebate was $42,500.

For more information, see GST/HST Info Sheet GI-078, Harmonized Sales Tax: Purchasers of New Housing in British Columbia, and GST/HST Info Sheet GI-080, Harmonized Sales Tax: British Columbia New Housing Rebates.

Nova Scotia

If the purchaser's new housing is located in Nova Scotia, the purchaser is generally eligible to claim the Nova Scotia new housing rebate if:

  • the house is located in Nova Scotia for use as the primary place of residence of the purchaser, if the purchaser is an individual, or a relative of the individual;
  • the purchaser, or the purchaser's spouse or common-law partner have not owned and occupied a house in Canada within the last five years (there may be an exception if the purchaser did own and occupy a house in Canada) and the house was involuntarily destroyed (for example, by fire); and
  • the purchaser is eligible to claim a GST/HST new housing rebate for the federal part of the HST; or would be eligible if the purchase price (or fair market value) was less than the maximum threshold for claiming that rebate.

Note 

The Nova Scotia rebate is available for new house construction only and not for a substantial renovation or conversion. 

New rule: Builder cannot credit rebate

Service Nova Scotia and Municipal Relations will generally assume responsibility for Nova Scotia new housing rebate claims for sales of:

  • new housing together with land;
  • sales of new housing together with leased land; and
  • purchases of qualifying shares of a housing cooperative.

Where the written agreement of purchase and sale is entered into after April 6, 2010, unless ownership or possession is transferred before July 1, 2010.

Any Nova Scotia new housing rebate application affected by this change would have to be filed by the purchaser directly with Service Nova Scotia and Municipal Relations. Builders will no longer have the option of paying or crediting the Nova Scotia new housing rebate to the purchaser at the time of purchase.

As a result, a builder and purchaser will be allowed to treat only the amount of the GST/HST new housing rebate as payment towards the purchase, and builders will be allowed to price their sales of new housing net of that rebate alone.

For more information, see GST/HST Info Sheet GI-087, Nova Scotia HST Rate Increase: Stated Price Net of GST/HST New Housing Rebates in Nova Scotia, and the Ministry of Finance Notice, Transitional Rules for the Nova Scotia HST Rate Increase for the fiscal year 2010-2011, released by the Government of Nova Scotia on April 6, 2010.

Ontario

In Ontario, the purchaser is eligible to claim the provincial rebate if:

  • the house is located in Ontario; and
  • the purchaser is eligible to claim a GST/HST new housing rebate for the federal part of the HST; or would be eligible if the purchase price (or fair market value) was less than the maximum threshold for claiming that rebate.

For more information, see GST/HST Info Sheet GI-077, Harmonized Sales Tax: Purchasers of New Housing in Ontario; and GST/HST Info Sheet GI-079, Harmonized Sales Tax: Ontario New Housing Rebates.

GST/HST new residential rental property rebate

As a landlord who leases new housing for long-term residential use by individuals, you may be entitled to claim a GST/HST new residential rental property rebate if you:

  • purchased or built new housing, substantially renovated existing housing, made an addition to an apartment building, or converted a commercial property into a residential rental property;
  • leased the new housing for long-term residential use by individuals as their primary place of residence and it is reasonable to expect that the housing will be their primary place of residence for at least one year;
  • paid the GST/HST on your purchase of the new housing or, if you are considered to have made a taxable self-supply of the housing, you included the GST/HST calculated on the fair market value of that housing that you are considered to have collected in your net tax calculation and remitted any resulting positive amount of net tax; and
  • are not entitled to claim ITCs for the tax paid or payable on the purchase or as a result of the self-supply.

For more information on the eligibility criteria, see Guide RC4231, GST/HST New Residential Rental Property Rebate.

Provincial new residential rental property rebate

You may also be eligible for a rebate for some of the provincial part of the HST if the housing is located in Ontario, or British Columbia.

Generally, you may be eligible to claim the provincial new residential rental property (NRRP) rebate if you qualify for the federal NRRP rebate for a rental property located in Ontario or British Columbia and you paid the HST on your purchase or self-supply of the property.

If the fair market value or purchase price of the housing is $450,000 or more, you may still be eligible for a provincial rebate (even though a rebate for the federal part of the HST may not be available).

Note

Due to the elimination of the HST in British Columbia, the provincial new residential rental property rebate may be available for housing in British Columbia only where the HST became payable on the purchase or self-supply before April 2013.

Provincial transitional new housing rebates

British Columbia

If the HST at 12% or the British Columbia transitional tax adjustment applied to a sale of housing after June 2010 and before April 2013, either the builder or the purchaser would have been able to claim a British Columbia provincial transitional new housing rebate if all of the conditions for claiming that rebate were met, including the condition that the rebate application be filed before July 2014. This rebate was available only where the rebate application was filed before July 2014.

Ontario

If the HST at 13% of the Ontario transitional tax adjustment applied to a sale of housing after June 2010, either the builder or the purchaser would have been able to claim an Ontario provincial transitional new housing rebate if all of the conditions for claiming that rebate were met, including the condition that the rebate application be filed before July 2014. This rebate was available only where the rebate application was filed before July 2014.

Prince Edward Island

A provincial transitional new housing rebate to recover the estimated Prince Edward Island provincial sales tax that is embedded in the price of new housing may be available for new or substantially renovated housing in Prince Edward Island in certain situations where the construction was at least 10% completed before April 1, 2013.

Depending on the circumstances, the rebate may be available to the builder or to a purchaser that is an individual.

For more information, see GST/HST Info Sheet GI-151, Harmonized Sales Tax: Provincial Transitional New Housing Rebate for Housing in Prince Edward Island, and GST/HST Notice 279, Harmonized Sales Tax for Prince Edward Island (P.E.I.) - Questions and Answers on Transitional Rules for Housing and Other Real Property Situated in P.E.I.

Apply for the Prince Edward Island transitional new housing rebate using one of the following forms, whichever applies:

  • Form RC7000-PE, Prince Edward Island Provincial Sales Tax Transitional New Housing Rebate
  • Form RC7001-PE, Prince Edward Island Provincial Sales Tax Transitional New Housing Rebate - Residential Condominiums 
  • Form RC7002-PE, Prince Edward Island Provincial Sales Tax Transitional New Housing Rebate - Apartment Buildings

Transitional new housing rebates for a first reseller

If you are a non‑registrant who purchased new housing on a grandparented basis from the original vendor and you make a resale of the housing that is subject to the HST, you may be able to claim a rebate equal to 2% of the purchase price that was payable on your purchase of the grandparented housing from the original vendor.

Ontario

If the housing is situated in Ontario, apply for this rebate using Form RC7003-ON, Ontario Retail Sales Tax (RST) Transitional New Housing Rebate for Non-registrant First Resellers, within two years after the day possession of the housing is transferred to the purchaser.

For more information, see GST/HST Info Sheet GI–101, Harmonized Sales Tax: Information for Non-Registrant Builders of Housing in Ontario, British Columbia, and Nova Scotia.

Prince Edward Island

If the housing is situated in Prince Edward Island, apply for this rebate using Form RC7003-PE, Prince Edward Island Provincial Sales Tax Transitional New Housing Rebate for Non-registrant First Resellers, within two years after the day possession of the housing is transferred to the purchaser.

For more information, see GST/HST Info Sheet GI-164, Prince Edward Island: Transition to Harmonized Sales Tax: Information for Non-registrant Builders.

British Columbia transition rebate

You may be eligible for the British Columbia transition tax rebate if you are the builder of newly constructed or substantially renovated housing in British Columbia that was at least 10% complete immediately before April 2013 and:

  • the 2% British Columbia transition tax applied to your sale of the housing or qualifying interest in the housing;
  • you had to account for the 2% British Columbia transition tax on a self-supply of the housing; or
  • the purchase price is considered to include the 2% British Columbia transition tax because the written agreement of purchase and sale was entered into before November 19, 2009, and the sale is grandparented.

The British Columbia transition tax applied until April 1, 2015.

The British Columbia transition rebate must generally be filed no later than two years after the due date for the GST/HST return in which the 2% British Columbia transition tax had to be reported. To apply for this rebate, send us a completed Form RC7004-BC, British Columbia Transition Tax Rebate.

For more information on the British Columbia transition tax and the British Columbia transition rebate, see:

Transitional rebate for the 2006 and 2008 GST/HST rate reductions

Effective July 1, 2006, the GST rate was reduced from 7% to 6% and the HST rate from 15% to 14%. Effective January 1, 2008, these rates were further reduced to 5% and 13%.

Along with the changes to the tax rates, special rules for determining which rate of tax applies to the sale of new housing also came into effect. Under these rules, certain taxable sales of new housing will still be subject to the GST/HST at one of the previous tax rates (6%, 7%, 14%, or 15%).

In such a case, a GST/HST transitional rebate may be available to the purchaser to give the benefit of the reduction in the tax rate(s). For more information, see Form GST192, GST/HST Transitional Rebate Application for Builders of New Housing on Leased Land, and Form GST193, GST/HST Transitional Rebate Application for Purchasers of New Housing.

Note

As the builder, you cannot pay or credit the GST/HST transitional rebate to the purchaser. The purchaser has to apply to us directly using Form GST193.

Also, in certain limited situations, a GST/HST transitional rebate may be available to a builder of a new house if the builder sold the new house and leased the related land to the purchaser under the same agreement, and the transaction straddled the effective date(s) of the reduction(s) in the tax rates. For more information, see Form GST192, GST/HST Transitional Rebate Application for Builders of New Housing on Leased Land, which is also available at Forms and publications for GST/HST.

For more information on which rate of the GST/HST applies to the sale of new housing, see Which tax applies - the GST or the HST?

Rebate for a taxable sale of real property by a non-registrant

If you are a non-registrant and you make a taxable sale of real property, you may be entitled to claim a rebate for the GST/HST that you paid when you last acquired the property (for example, when you purchased it or were last considered to have made a taxable self-supply of it) and on improvements you made to it since you last acquired it if you were previously unable to recover that tax. For more information, see Guide RC4033, General Application for GST/HST Rebates.

Sales of real property by individuals and personal trusts

Generally, a sale of real property by an individual is exempt if the individual's only use of the property was personal use (for example, the sale of a house the individual used only as their own place of residence, or the sale is a non-commercial hobby farm).

Note

For purposes of this section, an "individual" includes a personal trust.

However, the following are some examples of sales of real property that are taxable when made by an individual:

  • a sale of land that the individual had subdivided or severed from another parcel of land. However, the land will remain exempt as long as none of the other exclusions listed below apply and:
    • the original parcel was only subdivided or severed into two parts and the individual had not subdivided or severed that parcel from another parcel of land (a severance or subdivision due to an expropriation does not count in this case); or
    • the purchaser is a related individual or former spouse or common-law partner who is purchasing the land for their own personal use and enjoyment;
  • a sale of an unoccupied new or substantially renovated house by an individual who is a builder of the house;
  • a sale of real property that is capital property of the individual used primarily (more than 50%) in a business they carried on with a reasonable expectation of profit;
  • a sale by a GST/HST registrant of real property that is capital property of the individual used primarily (more than 50%) in a business of renting the property on a taxable basis even if the rental business does not have a reasonable expectation of profit;
  • a sale of real property made in the course of the individual's business (for example, the property was inventory of the business); or
  • a sale of real property made in the course of an adventure or concern in the nature of trade where the individual has filed an election to treat an exempt sale of that real property as taxable. An individual may want to file this election for example, to be able to claim an ITC or a rebate for the tax they paid on the purchase of the property. For more information, see Form GST22, Real Property - Election to Make Certain Sales Taxable.

For more information on sales of real property by individuals and personal trusts, see GST/HST Memorandum 19.5, Land and Associated Real Property.

Doing business with a public service body

A public service body (PSB) is a non-profit organization, a charity, a municipality, a school authority, a hospital authority, a public college, or a university.

Supplying property or services to a PSB

If you make a taxable supply to a PSB, you have to charge the GST/HST, and you can claim ITCs in the usual way. If the PSB is not entitled to claim an ITC, they are generally entitled to claim a GST/HST rebate to recover part of the GST/HST they paid. For more information on the rebate that PSBs can claim, see Guide RC4034, GST/HST Public Service Bodies' Rebate.

Acquiring real property from a PSB (other than a municipality)

Most sales and long-term leases of real property made by a PSB, other than a municipality, are exempt from the GST/HST. This means that if you purchase such property from a PSB or enter into a long-term lease for such property with a PSB, you may not have to pay the GST/HST. For more information on municipalities, see Acquiring property and services from a municipality.

However, in some instances, a PSB can elect, on a property by property basis, to treat certain exempt sales and leases of real property as taxable. A PSB may do this to be able to claim ITCs for the GST/HST it paid when it purchased, or was considered to have purchased, the property and for tax paid on expenses relating to the property.

If you purchase or lease real property from a PSB and the PSB has filed an election for that real property, you will generally have to pay the GST/HST. However, certain supplies of real property will remain exempt even when this election is in effect, such as a lease of housing for long-term residential use by an individual and most sales of previously occupied residential housing.

Note

Charities have their own rules for determining whether a supply of real property is taxable or exempt. For more information, see Guide RC4082, GST/HST Information for Charities.

For more information on how the GST/HST applies to supplies made by non-profit organizations and charities, see the following guides:

Acquiring property and services from a municipality

You will have to pay the GST/HST on most sales, leases, and other supplies of real property made by a municipality. However, examples of supplies that are exempt when made by a municipality include:

  • certain licenses and permits;
  • installing, repairing, maintaining, or interrupting water distribution, and sewerage and drainage systems;
  • municipal services, such as street lighting, that a municipality provides on a non-optional basis to owners or occupants of real property in the municipality;
  • garbage collection, including the collection and delivery of recyclable materials;
  • installing, replacing, repairing, and removing street or road signs, barriers, street or traffic lights, or property similar to any of the foregoing;
  • removing snow, ice, or water;
  • removing, cutting, pruning, treating, or planting vegetation;
  • repairing or maintaining roads, streets, sidewalks, or similar or adjacent property;
  • installing accesses or egresses;
  • fire protection; and
  • law enforcement.

Municipalities may charge a development fee, sometimes called a lot levy. This fee is charged to developers of new housing or other new land developments in the municipality to offset the extra costs the development will create for the municipality. That is, extra costs, both present and future, that will arise as a result of the need to provide water, sewerage, drainage, roads, and recreational facilities. These development fees are not subject to the GST/HST when charged by a municipality.

However, if you are a land developer or builder and you recover the cost of any development fee that you had to pay by including it in the amount you charge your customer for a taxable supply, you have to collect the GST/HST on the total amount you charge to your customer for that taxable supply, including the amount you included to recover the development fee you had to pay. This applies even if the development fee is separately identified.

For more information on taxable and exempt supplies made by municipalities, see Guide RC4049, GST/HST Information for Municipalities.

Doing business with a government

Construction work for a provincial, territorial, or federal government

The governments of the participating provinces (see definition for participating province) have agreed to pay the GST/HST on their purchases of taxable supplies of property and services. In addition, all British Columbia, Nunavut and Quebec government departments and agencies pay the GST/HST on their taxable purchases. Therefore, you have to charge the GST/HST on taxable supplies of property and services you make to the departments and agencies of the participating provinces as well as to the departments and agencies of Quebec, British Columbia, and Nunavut. All other provincial and territorial governments, including all of their government departments or ministries and some of their Crown corporations, boards, commissions, and agencies, do not have to pay the GST/HST on their taxable purchases.

Therefore, when a provincial or territorial entity provides sufficient documentation to support its entitlement to purchase property and services on a tax-free basis, you do not charge the GST/HST on taxable sales you make to the entity. For audit purposes, you have to keep a record of the supporting documentation, including a certification clause, for any contracts you enter into with a provincial government.

You can claim ITCs for any GST/HST paid or payable on purchases you used to sell or provide taxable property and services to provincial or territorial governments.

Our tax services offices can confirm whether a particular government department, ministry, Crown corporation, or other entity qualifies for this treatment.

This exception to the normal rules does not apply to contracts with the federal government.

Grants and subsidies

Grants, subsidies, contributions, or other similar payments, often called transfer payments, may be made for many different reasons (for example, a charity or a corporation may provide funding for the construction of housing for individuals in distress). Such payments may be made by any person, such as a government, public service body, commercial organization, or an individual.

Generally, transfer payments made in the public interest or for charitable purposes will not be subject to the GST/HST. However, if you receive a transfer payment in return for providing a taxable supply, the transfer payment may be subject to the GST/HST. For more information, see Technical Information Bulletin B-067, Goods and Services Tax Treatment of Grants and Subsidies, and Policy Statement P-061, Extension of Transfer Payment Policy.

Subsidized housing

There are special self-supply rules for builders who receive, or can reasonably expect to receive, government funding to build or substantially renovate housing or to build an addition to multiple unit housing, if at least 10% of the residential units in the housing are intended to be supplied, for example, to seniors, youths, students, individuals with a disability, individuals in distress or in need of assistance, or to individuals whose eligibility for a unit is based on a means or income test.

Note

These special self-supply rules also apply to a builder that is a government or municipality. In this case, the builder does not need to receive, or expect to receive, government funding.

For purposes of the special rules for subsidized housing, government funding means an amount of money paid or payable in respect of the housing by a grantor (or paid or payable by another organization that received the money from a grantor) to a builder of the housing (or addition) for the purpose of making residential units available to the individuals mentioned above. Government funding can include a forgivable loan from a grantor. The funding must be measurable and identified in your financial statements as government funding.

A grantor can be from any level of government—federal, provincial, and municipal. It also includes Indian bands and bodies established by federal, provincial, or municipal governments or bands, if one of the main purposes of the band or body is to fund charitable or non-profit activities. However, federal and provincial Crown corporations whose activities are substantially all (90% or more) commercial activities are not grantors.

During the construction phase, you can register for the GST/HST and claim ITCs for the property and services you buy that relate to the construction of the housing.

Special rules for the self-supply of subsidized housing

If you are considered to have both made and received a taxable supply of subsidized housing, that self-supply is considered to have occurred on the later of the day the construction or substantial renovation is substantially completed and the day you first give possession or use of a unit in the housing to an individual under a lease, license, or similar arrangement entered into for its use as a place of residence.

For more information on when a self-supply is considered to have been made, see Self-supply when you lease the new house.

Old rule

The amount of GST/HST that you are considered to have paid and collected on the self-supply of the subsidized housing is equal to the greater of:

  • the amount of the GST/HST calculated on the fair market value of the housing at the time of the self-supply; and
  • the total amount of all of the GST/HST payable on the acquisition of the land, the construction of the building, and any other improvements to the property.
New rule

Under recent changes, the amount of GST/HST that you are considered to have paid and collected on the self-supply of subsidized housing is equal to the greater of:

A the amount of the GST/HST calculated on the fair market value of the housing at the time of the self-supply; and

B the total amount of all of the GST/HST that would have been payable on the acquisition of the land, the construction of the building, and any other improvements to the property (collectively, the housing inputs) if the GST/HST rate that applied to those housing inputs had been the same GST/HST rate that applies to the self-supply of the housing. See Calculating B, for more information.

This new rule applies to self-supplies of subsidized housing that occurred on or after April 1, 2013. However, if the construction or substantial renovation of the subsidized housing began on or before April 8, 2014, a transitional rule applies. See If construction began on or before April 8, 2014, for more information.

Calculating B

To calculate B, you will need to know the total amount of the GST/HST that was payable on all of the taxable housing inputs. Generally, taxable housing inputs refers to all housing inputs other than exempt housing inputs, zero-rated housing inputs, housing inputs supplied to you by a non-registrant, and housing inputs supplied to you before the GST came into effect.

Generally, the calculation of B is equal to the total amount of all of the GST/HST that was payable on all of the taxable housing inputs if all of those taxable housing inputs were:

  • supplied to you in the same province where the housing is situated; and
  • subject to the same rate of GST/HST that applies to the self-supply.

However, the calculation of B is different if any of the taxable housing inputs were:

  • in the case where the housing is situated in a participating province, supplied to you before the HST came into effect in that province;
  • in the case where the housing is situated in British Columbia, supplied to you at a time when the HST was in effect;
  • subject to a different rate of GST/HST than the rate that applies to the self-supply; or
  • acquired, imported, or brought into a participating province where you did not have to pay the GST/HST only because the housing inputs were acquired, imported, or brought into the participating province for consumption, use, or supply exclusively in the course of your commercial activities.

If you have any such taxable housing inputs (which we refer to as adjustable housing inputs) complete the following calculation:

B = C - D + E

where:

C is the total amount of all of the GST/HST that was payable on all of the taxable housing inputs;

D is the total amount of all of the GST/HST that was payable on all of the adjustable housing inputs; and

E is the total amount of all of the GST/HST that would have been payable on all of the adjustable housing inputs if they had been subject to the same GST/HST rate that applies to the self-supply.

Calculate E as follows:

Step 1 – Add the amounts (for example, the purchase prices excluding the GST/HST) of the adjustable housing inputs. Where the housing is situated in a participating province, for the purposes of Step 1, do not include any adjustable housing inputs that were supplied to you before the HST came into effect in that province.

Step 2 – Multiply the total you calculated in Step 1 by the GST/HST rate that applies to the self-supply. If the housing is not situated in a participating province, the resulting amount is the amount calculated for E.

Step 3 – If the housing is situated in a participating province, add the amounts (for example, the purchase prices excluding GST/HST) of all of the adjustable housing inputs that were supplied to you before the HST came into effect in that province, and multiply the total by the rate of the federal part of the HST that applies to the self-supply. Add the resulting amount to the amount calculated in Step 2. The resulting amount is the amount calculated for E.

If construction began on or before April 8, 2014
If the construction or substantial renovation of subsidized housing began on or before April 8, 2014, the amount of GST/HST that you are considered to have paid and collected on the self-supply of the subsidized housing is equal to the greater of:

  • the amount of the GST/HST calculated on the fair market value of the housing at the time of the self-supply; and
  • the lesser of:
    • the total amount of all of the GST/HST payable on the acquisition of the land, the construction of the building, and any other improvements to the property under the old rule; and
    • the amount calculated for B under the new rule.
Example

On August 19, 2007, a corporation that is a registrant for GST/HST purposes bought land in Ontario for $100,000 to build multiple-unit housing. It paid GST in the amount of $6,000 on the purchase of the land since the GST rate of 6% applied at the time of the purchase. The corporation received government funding to assist with the construction costs of the housing. At least 10% of the units in the housing are for lease to seniors. The corporation constructed the housing during 2014 and 2015. In 2014, the corporation purchased construction materials in a non-participating province for $5,000 and it brought those materials into Ontario for consumption, use, or supply exclusively in the course of its commercial activities (in other words, the construction of the multiple unit housing). As a result, the corporation had to pay only the 5% federal part of the HST (in other words, $250) and not the 8% provincial part of the HST on those construction materials. In the same year, the corporation purchased additional construction materials and services in Ontario for $80,000 and paid 13% HST in the amount of $10,400. In 2015, the corporation purchased construction materials and services in Ontario for $190,000 and paid 13% HST in the amount of $24,700.

Summary of Housing Inputs
Year Housing Input Consideration GST/Federal Part of HST Rate GST/Federal Part of HST Amount Provincial Part of HST Rate Provincial Part of HST Amount
2007 Land $100,000 6% $6,000 N/A $0
2014 Construction $5,000 5% $250 8% $0
2014 Construction $80,000 5% $4,000 8% $6,400
2015 Construction $190,000 5% $9,500 8% $15,200
    $375,000   $19,750   $21,600

The construction of the multiple-unit housing was substantially completed on August 11, 2015. On September 5, 2015, the corporation gave possession or use of a unit in the housing to an individual who was the first to occupy a unit in the housing as a place of residence.

The corporation is considered to have made a self-supply of the multiple unit housing on September 5, 2015 (the later of the day construction was substantially completed and the day possession or use of a unit in the housing is given to the first individual to occupy a unit in the housing as a place of residence). The fair market value of the multiple unit housing (including the related land) on September 5, 2015, was determined to be $400,000.

In this particular case, the new rule applies given that the self-supply of the multiple-unit housing occurred on or after April 1, 2013.

If the construction of the multiple unit housing began after April 8, 2014, the amount of GST/HST that the corporation is considered to have paid and collected on the self-supply of the housing is $52,000, which is equal to the greater of A (in other words, $52,000) and B (in other words, $40,750) which are calculated as follows:

A = $400,000 × 13% = $52,000

B = C - D + E

C = $19,750 + $21,600 = $41,350

D = $6,000 + $250 = $6,250

E = ($5,000 × 13%) + ($100,000 × 5%) = $5,650

B = $41,350 - $6,250 + $5,650 = $40,750

If the construction of the multiple-unit housing began on or before April 8, 2014, the amount of GST/HST that the corporation is considered to have paid and collected on the self-supply of the housing is still $52,000, which is equal to the greater of:

  • $52,000 (in other words, the amount of the GST/HST calculated on the fair market value of the housing at the time of the self-supply); and
  • the lesser of $41,350 (in other words, the total amount of all of the GST/HST payable on the housing inputs) and $40,750 (in other words, the amount calculated for B).

Also, as a registrant, the corporation can claim ITCs for the tax paid to purchase the land and construct the multiple-unit housing. The corporation may be entitled to claim a new residential rental property rebate to recover part of the tax that it paid on the self-supply of the multiple-unit housing using Form GST524, GST/HST New Residential Rental Property Rebate Application.

Note

For more information on the new residential rental property rebate, see Guide RC4231, GST/HST New Residential Rental Property Rebate.

Special situations

Joint ventures

Generally, a joint venture is an agreement between two or more parties to contribute resources, such as money, property, or skills, to a specific business undertaking, usually over the course of a set period of time. A joint venture does not include a partnership. A joint venture is not a person for GST/HST purposes and cannot register for the GST/HST separately from its participants. Generally, each of the joint venture participants has to register and account separately for the GST/HST in respect of the participant’s joint venture activities.

However, where there is a written joint venture agreement and the activity of the joint venture is in respect of certain activities, the participants may make an election to have one of the participants be the operator of the joint venture for GST/HST purposes. Under the election, the operator will generally account for the GST/HST on behalf of the other participants who have made the election.

The specified joint venture activities for which an election can be made include:

  1. the construction of real property, including feasibility studies, design work, development activities, and the tendering of bids, undertaken for the furtherance of the construction; and
  2. the exercise of the rights or privileges, or the performance of the duties or obligations, of ownership of an interest in real property, including related construction or development activities, the purpose of which is to derive revenue from the property by way of sale, lease, licence, or similar arrangement.

Where a particular written joint venture agreement is in respect of activities under a) or b) above, an election may be made provided the operator is either:

  • a person who, under a joint venture agreement evidenced in writing, makes an investment by contributing resources and takes a proportionate share of any revenue or incurs a proportionate share of the losses from the joint venture activities; or
  • a person, without a financial interest, who is designated as the operator of the joint venture under an agreement in writing and is responsible for the managerial or operational control of the joint venture.

Note

The acquisition of real property is not an eligible joint venture activity.

Further, a bare trust or bare trustee, including a nominee corporation acting as a bare trustee, does not have managerial or operational control of a joint venture and cannot make the election to be the operator of the joint venture. For further information, see GST/HST Notice 284, Bare Trusts, Nominee Corporations and Joint Ventures.

To make the joint election, the operator and participants have to complete Form GST21, Election or Revocation of an Election to Have the Joint Venture Operator Account for GST/HST.

For more information on the joint venture election, see Form GST21 and GST/HST Policy Statement P-106, Administrative Definition of a Participant in a Joint Venture.

Seizure and repossession

As a GST/HST registrant, you do not pay or charge the GST/HST when you seize or repossess real property to satisfy a debt or obligation. However, if you later make a taxable sale of the property you have to charge the GST/HST, or if you are later considered to have made a taxable self-supply of the property, you have to account for the tax on the self-supply. The normal rules apply to determine if the later sale or self-supply is taxable.

If you decide to keep the property for your own use instead of selling or leasing it, you are considered to have sold the property. If that sale is taxable, you are considered to have paid and collected the GST/HST calculated on the fair market value of the property and you have to account for that tax by filing a GST/HST return. For more information, see How do you account for the tax on a self-supply?

You may also be entitled to claim an input tax credit for the GST/HST you are considered to have paid on the sale.

For more information on seizures and repossessions, see Policy Statement P-102, Seizures and Repossessions, Policy Statement P-175, Costs that Fall within the Scope of Subsection 183(2), and Policy Statement P-226, Application of the GST/HST to Supplies Made Pursuant to Various Creditor Remedies.

Transfers of security interest

You do not charge or pay the GST/HST when you transfer property to someone else under an arrangement to secure payment of a debt. Additionally, you do not charge or pay the GST/HST when that person transfers the property back to you to discharge the security interest according to the law or the agreement. For example, no GST/HST applies to transfers of legal ownership or an interest in real property between a mortgagor and a mortgagee for purposes of securing the mortgagor's debt.

Remote work sites

A work site is generally considered to be remote if the nearest established community of 1,000 people or more is at least 80 kilometres away, using the most direct route normally travelled in the circumstances.

Normally, when you first give possession or use of new or substantially renovated housing, or a residential unit in multiple unit housing, or an addition to such housing, under a lease, licence, or similar arrangement for use by an individual as a place of residence or lodging, you are considered to have made a self-supply of the housing or addition, and you have to account for the GST/HST calculated on the fair market value of the housing, or addition, at that time.

However, if you build, substantially renovate, or convert housing to residential use, or build an addition to multiple unit housing that is located at a remote work site, you may be able to elect to defer the application of the GST/HST on the self-supply of the housing or addition until you either sell the housing or until you begin to lease it primarily (more than 50%) to persons who are not eligible individuals.

Note

Eligible individuals generally mean your employees, contractors, and subcontractors who are required to be at the remote work site to perform their duties, and also their relatives.

Online services

GST/HST electronic filing and remitting

You have several options for filing your GST/HST return or remitting an amount owing electronically. For more information, go to Filing a GST/HST return or see GST/HST returns.

Handling business taxes online

Use the CRA’s online services for businesses throughout the year to:

  • make payments to the CRA by setting up pre-authorized debit agreements in My Business Account or by using the My Payment service
  • file a return, view the status of filed returns and amend returns online
  • send documents to the CRA
  • authorize a representative for online access to your business accounts
  • register to receive email notifications and to view mail from the CRA in My Business Account
  • change addresses
  • manage direct deposit information
  • file an election
  • view account balance and transactions
  • calculate a future balance
  • transfer payments and immediately view updated balances
  • send account related enquiries and view answers to common enquiries
  • send an enquiry about your audit

To log in to or register for the CRA's online services, go to:

For more information, go to E-services for Businesses

CRA BizApp

CRA BizApp is a mobile web application for small business owners and sole proprietors. The application offers secure access to view accounting transactions, pay outstanding balances, and more.

For more information, go to Mobile apps.

Receiving your CRA mail online

Sign up for email notifications to get most of your CRA mail, like your notice of assessment, online.

For more information, go to Email notifications from the CRA – Businesses.

Authorizing the withdrawal of a pre-determined amount from your Canadian bank account

Pre-authorized debit (PAD) is a secure online, self-service, payment option for individuals and businesses. This option lets you set the payment amount you authorize the CRA to withdraw from your Canadian chequing account to pay your tax on a specific date or dates you choose. You can set up a PAD agreement using the CRA’s secure My Business Account service at My Business Acccount. PADs are flexible and managed by you. You can view historical records, modify, cancel, or skip a payment. For more information, go to Payments to the Canada Revenue Agency  and select “Pay by pre-authorized debit.” 

Electronic payments

Make your payment using:

  • your financial institution’s online or telephone banking services
  • the CRA's My Payment service
  • your credit card through one of the CRA's third party service providers
  • pre-authorized debit at My Business Account

For more information, go to Make a payment to the Canada Revenue Agency.

For more information

What if you need help?

If you need more information after reading this guide, go to GST/HST or call 1-800-959-5525.

Direct deposit

Direct deposit is a fast, convenient, reliable, and secure way to get your CRA payments directly into your account at a financial institution in Canada. To enrol for direct deposit or to update your banking information, go to Direct deposit.

Forms and publications

To get our forms and publications, go to GST/HST related forms and publications or call 1-800-959-5525.

Teletypewriter (TTY) users

If you have a hearing or speech impairment and use a TTY, call 1-800-665-0354.

If you use an operator-assisted relay service, call our regular telephone numbers instead of the TTY number.

GST/HST rulings and interpretations

You can request a ruling or interpretation on how the GST/HST applies to a specific transaction for your operations. This service is provided free of charge. For the mailing address or fax number of the closest GST/HST Rulings centre, see Guide RC4405, GST/HST Rulings – Experts in GST/HST Legislation, GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, or call 1-800-959-8287.

Service-related complaints

You can expect to be treated fairly under clear and established rules, and get a high level of service each time you deal with the CRA. See the Taxpayer Bill of Rights.

If you are not satisfied with the service you received, try to resolve the matter with the CRA employee you have been dealing with or call the telephone number provided in the CRA’s correspondence. If you do not have contact information, go to Contact information – Canada Revenue Agency.

If you still disagree with the way your concerns were addressed, you can ask to discuss the matter with the employee’s supervisor.

If you are still not satisfied, you can file a service complaint by filling out Form RC193, Service Feedback. For more information and how to file a complaint, go to Submit a service feedback.

If the CRA has not resolved your service-related complaint, you can submit a complaint with the Office of the Taxpayers’ Ombudsman.

Formal disputes (objections and appeals)

If you disagree with an assessment, determination, or decision, you have the right to register a formal dispute.

Reprisal complaint

If you have previously submitted a service-related complaint or requested a formal review of a CRA decision and feel that, as a result, you were treated unfairly by a CRA employee, you can submit a reprisal complaint by filling out Form RC459, Reprisal Complaint.
For more information about complaints and disputes, go to Reprisal Complaints.

Tax information videos

We have a tax information video series for new small businesses that provides an introduction to topics such as registering a business, GST/HST, and payroll. To watch our videos, go to Businesses video gallery.

Cancel or waive penalties or interest

The CRA administers legislation, commonly called the taxpayer relief provisions, that gives the CRA discretion to cancel or waive penalties or interest when taxpayers are unable to meet their tax obligations due to circumstances beyond their control.

The CRA’s discretion to grant relief is limited to any period that ended within 10 calendar years before the year in which a request is made.

For penalties, the CRA will consider your request only if it relates to a tax year or fiscal period ending in any of the 10 calendar years before the year in which you make your request. For example, your request made in 2017 must relate to a penalty for a tax year or fiscal period ending in 2007 or later.

For interest on a balance owing for any tax year or fiscal period, the CRA will consider only the amounts that accrued during the 10 calendar years before the year in which you make your request. For example, your request made in 2017 must relate to interest that accrued in 2007 or later.

To make a request, fill out Form RC4288, Request for Taxpayer Relief – Cancel or Waive Penalties or Interest. For more information about relief from penalties or interest and how to submit your request, go to Taxpayer relief provisions.

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