Calculate input tax credits - Percentage of use in commercial activities


Determine the percentage of use in commercial activities

As a GST/HST registrant, you must determine the percentage of use in your commercial activity. If you have both commercial activities and non-commercial activities (such as exempt supplies), you may have to apportion the GST/HST paid or payable for the property or service between these two activities. You can generally claim ITCs only for the part of the GST/HST paid or payable for the property or service that relates to the consumption or use in your commercial activities.

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

In certain situations there are restrictions on the amount that you can claim as an ITC. These restrictions depend on the type and nature of the expense. The below links explains the restrictions on claiming ITCs for these different types of expenses:

Determine the percentage of use for an operating expense of a passenger vehicle

You may be eligible to claim an ITC for operating expenses of a passenger vehicle that relate to your commercial activities. The percentage used to calculate ITCs on the following common expenses is the same used for most operating expenses:

  • fuel (gasoline, propane, oil)
  • maintenance and repairs
  • licence and registration fees

If you use a passenger vehicle for business and personal use, you can deduct only the GST/HST paid or payable on the portion of the expenses that are related to your commercial activities. 

To determine the percentage of commercial use, see Automobile Benefits Online Calculator.

If you are eligible to claim an ITC, see Operating expenses.

Determine the percentage of use of a business-use-of-home expense

You may be eligible to claim ITCs for your home office expenses only if the work space is:

  • your principal place of business
  • used 90% or more to earn income from your business and used on a regular and continuous basis for meeting your clients, customers, or patients

This restriction for home office expenses is similar to those used for income tax purposes. For more information, see Line 9945 - Business-use-of-home expenses.

If you are eligible to claim an ITC, see Operating expenses.

Determine the percentage of use when there is a change in use, sale, or improvements to capital personal property

The following explains different situations that can occur with the use of capital personal property (including improvements to such property):

Changing the use to more than 50% in commercial activities

Explanation – 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.

Example 1 – Changing the use to more than 50% in commercial activities
Example 1

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 you 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. 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.

Financial institutions have to claim their ITCs for capital personal property based on the percentage of use in commercial activities.

Reporting  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 GST/HST return on line 108 (or line 106 if you are filing on paper).

Changing the use to 50% or less in commercial activities 

Explanation – When you buy capital personal property for use more than 50% in your commercial activities, you may be eligible to 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 your commercial activities, you are considered to have sold the property and to have collected the GST/HST on that later sale.

Example 2 – Changing the use to 50% or less in commercial activities
Example 2

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.

Financial institutions have to claim their ITCs for capital personal property based on the percentage of use in commercial activities.

Reporting – 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 GST/HST return on line 105 (or line 103 if you are filing on paper).

Sale of capital personal property

Explanation – 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.

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

Reporting – This amount has to be included in your GST/HST return on line 105 (or line 103  if you are filing on paper).

Improvements to capital personal property

Explanation – 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.

If the improvement is to a passenger vehicle or aircraft, you can add the cost of improvement to the adjusted cost base of the passenger vehicle or aircraft. You cannot include any amount for improvement to a passenger vehicle that will make the adjusted cost base exceed the capital cost limitation.

Reporting – 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. This amount has to be included in your GST/HST return on line 108 (or line 106 if you are filing on paper). The last acquisition could be an actual acquisition or an acquisition you were deemed to have made for GST/HST purposes.

Determine the percentage of use when there is a change in use, sale, or improvements to capital real property – rules apply to corporations and partnerships

The following explains different situations that can occur with capital real property. These rules apply to corporations and partnerships that are registrants based on their ITC eligibility.

If you are a public service body, 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.

If you are a financial institution, the change-in-use rules for real property that apply to you are similar to those that apply to corporations and partnerships. However, there are some differences. For more information, see GST/HST Memorandum 19.4.2, Commercial Real Property – Deemed Supplies.

Beginning use in commercial activities

Explanation – 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.

The same rule applies if you become a registrant on the same day that you begin to use the property in your commercial activities.

Example 1 – Beginning use in commercial activities for corporations and partnerships
Example 1 – Corporations and partnerships

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
Empty space for value
= ($25,000 – $0) × $550,000/$500,000
Empty space for value
= $25,000 × 1 (maximum)
Empty space for value
= $25,000
ITC allowable:
= $25,000 × 60%
Empty space for value
= $15,000

Reporting – 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.

This amount has to be included in your GST/HST return on line 108 (or line 106 if you are filing on paper).

Increasing use in commercial activities

Explanation – When you increase the percentage of commercial use of capital real property 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.

Example 2 – Increasing use in commercial activities for corporations and partnerships
Example 2 – Corporations and partnerships

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, they can claim an additional ITC calculated as follows:

Basic tax content
= (A – B) × C
Empty space for value
= ($25,000 – $0) × $600,000 /$500,000
Empty space for value
= $25,000 × 1 (maximum)
Empty space for value
= $25,000

To calculate the ITC allowable for the increase in commercial activities, multiply the basic tax content by the percentage of increase in commercial use:

A × B

Additional ITC
= $25,000 × 20%
Empty space for value
= $5,000

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

This amount has to be included in your GST/HST return on line 108 (or line 106 if you are filing on paper).

Decreasing use in commercial activities

Explanation – When you decrease (without stopping completely) the commercial use of capital real property by 10% or more, you are considered to have sold the real property to that extent, and you have collected GST/HST on the part of the property that you are no longer using for commercial activities.

Example 3 – Decreasing use in commercial activities for corporations and partnerships
Example 3 – Corporations and partnerships

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
Empty space for value
= ($25,000 – $0) × $550,000/$500,000
Empty space for value
= $25,000 × 1 (maximum)
Empty space for value
= $25,000
GST collected:
= $25,000 × 50%
Empty space for value
= $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.

Reporting – 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.

This amount has to be included in your GST/HST return on line 105 (or line 103 if you are filing on paper).

Stopping use in commercial activities

Explanation – 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, you are considered to have sold the property and, unless the sale is exempt, to have collected the GST/HST on this sale.

Example 4 – Stopping use in commercial activities for corporations and partnerships
Example 4 – Corporations and partnerships

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
Empty space for value
= ($25,000 – $0) × $650,000/$500,000
Empty space for value
= $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.

The corporation may be eligible to claim an ITC to recover the tax it previously paid on the property but was not entitled to recover.

Reporting – The GST/HST that you are considered to have collected is equal to the basic tax content of the property.

This amount has to be included in your GST/HST return on line 105 (or line 103 if you are filing on paper).

Improvements to capital real property

Explanation – 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).

Reporting – The ITC you can claim for an improvement to capital real property is based on the percentage of use of the real property in your commercial activities at the time you last acquired the real property or portion of it. This means the ITC is based on the use of the real property in your commercial activities, not on the use of the improvement itself in your commercial activities.

This amount has to be included in your GST/HST return on line 108 (or line 106 if you are filing on paper).

Your last acquisition of the real property could be an actual acquisition, or an acquisition you were deemed to have made under the self-supply rules.

Determine the percentage of use when there is a change in use, sale, or improvements to capital real property – rules apply to individuals

The following explains different situations that can occur with capital real property. These rules apply to individuals that are registrants based on their ITC eligibility.

  • Beginning use in commercial activities
  • Increasing use in commercial activities
  • Decreasing use in commercial activities
  • Stopping use in commercial activities without changing the use to primarily personal use – Individuals
  • Improvements to capital real property
  • Changing the use of the property to primarily personal use – Individuals
  • Changing the use of property to exclusively (90% or more) personal use – Individuals

Beginning use in commercial activities

Explanation – 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.

The same rule applies if you become a registrant on the same day that you begin to use the property in your commercial activities.

Example 1 – Beginning use in commercial activities for individuals
Example 1 – Individuals

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 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
Empty space for value
= ($15,000 – $0) × $400,000/$300,000
Empty space for value
= $15,000 × 1 (maximum)
Empty space for value
= $15,000
ITC allowable:
= $15,000 × 60%
Empty space for value
= $9,000

Reporting – 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.

This amount has to be included in your GST/HST return on line 108 (or line 106 if you are filing on paper).

Increasing use in commercial activities

Explanation – 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.

Example 2 – Increasing use in commercial activities for individuals
Example 2 – Individuals

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 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
Empty space for value
= ($25,000 – $0) × $600,000/$500,000
Empty space for value
= $25,000 × 1 (maximum)
Empty space for value
= $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%
Empty space for value
= $5,000

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

This amount has to be included in your GST/HST return on line 108 (or line 106 if you are filing on paper).

Decreasing use in commercial activities

Explanation – 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.

 Example 3 – Decreasing use in commercial activities for individuals
Example 3 – Individuals

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
Empty space for value
= ($25,000 – $0) × $650,000/$500,000
Empty space for value
= $25,000 × 1 (maximum)
Empty space for value
= $25,000
GST collected
(A × B) – C
Empty space for value
= ($25,000 × 40%) – $0
Empty space for value
= $10,000

Reporting – 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, then subtract 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.

This amount has to be included in your GST/HST return on line 105 (or line 103 if you are filing on paper).

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

Explanation – 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.

Example 4 – Stopping use in commercial activities for individuals
Example 4 – Individuals

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
Empty space for value
= ($25,000 – $0) × $650,000/$500,000
Empty space for value
= $25,000 × 1 (maximum)
Empty space for value
= $25,000
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.

Reporting – The GST/HST that you are considered to have collected is equal to the basic tax content of the property.

This amount has to be included in your GST/HST return on line 105 (or line 103 if you are filing on paper).

Improvements to capital real property

Explanation – 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).

However, if you are an individual, you cannot claim an ITC for an improvement to capital real property if the real property is primarily for your personal use and enjoyment or that of a relative, either individually or in combination, at the time the tax in respect of the improvement became payable.

Reporting – The ITC you can claim for an improvement to capital real property is based on the percentage of use of the real property in your commercial activities at the time you last acquired the real property or portion of it. This means the ITC is based on the use of the real property in your commercial activities, not on the use of the improvement itself in your commercial activities.

This amount has to be included in your GST/HST return on line 108 (or line 106 if you are filing on paper).

Your last acquisition of the real property could be an actual acquisition, or an acquisition you were deemed to have made under the self-supply rules.

Changing the use of the property to primarily personal use – Individuals

Explanation 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 – Individuals
Example 5 – Individuals

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).

Reporting This amount has to be included in your GST/HST return on line 105 (or line 103 if you are filing on paper).

Changing the use of property to exclusively (90% or more) personal use – Individuals

Explanation – 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 the use of property to exclusively (90% or more) personal use – Individuals
Example 6 – Individuals

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.

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
Empty space for value
= $25,000 – $35,000
Empty space for value
= $0

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.

Since the result of this calculation is negative, the amount you are considered (under the second provision) to have collected for stopping the use in commercial activities is equal to $0.

Reporting – This amount has to be included in your GST/HST return on line 105 (or line 103 if you are filing on paper).

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