We’ll be going to go over what you need to know about your rental property and all-things GST/HST since this is a topic we get a lot of questions on. We recommend reading our post on GST/HST basics before reading this article. If you’ve already read it…welcome! Let’s continue.
Residential Rentals
There’s no better place to start than the most straightforward one. In short, residential rentals make the list for GST/HST exemptions. If you’re unfamiliar with the term, residential rentals are those that exist for longer than one month. With these, you don’t charge GST/HST on the rental income to your tenants and you also don’t get to claim ITC’s (input tax credits) on your purchases.
Vacation Rentals (Short-term rental)
Vacation rentals are a little different. If you own one, you are considered to be providing a taxable supply. Therefore, you’ll have to charge GST/HST on all the services you provide. On the upside, you can claim GST/HST on all of your purchases. Who doesn’t like that?
Quick tip: Don’t forget that in BC, you may also have to register for PST and MRDT (Municipal and Regional District tax). This depends on which online services you use or if you manage your bookings yourself. For example, if you’re using Airbnb, they’ll pay on your behalf.
Mixed-use Properties
This kind of property includes both a residential and a commercial part. For example, you might own a place that has residential apartments above or below a commercial store. In this case, you can only claim ITC’s to the extent that those expenses were used to earn taxable supplies. Let’s say you spent $5,000 to paint the outside of the building where ⅓ of the building is related to the retail space and ⅔ is related to the apartments. For the GST/HST earned, you can claim only ⅓ of the total GST paid.
Change-In-Use
Maybe you have done or want to do a conversion of your rental property. If this is something you’re looking into, it’s good to know that the GST/HST rules change with various conversions.
CONVERTING A NON-RESIDENTIAL PROPERTY TO A RESIDENTIAL COMPLEX
If you’re doing this or have done this without building anything new or doing drastic renovations then the conversion is considered a substantial renovation. In this case, your GST/HST is assessed on the fair market value of the property at the time of the conversion. This means that you’ll be paying GST/HST on the conversion to personal use.
CONVERTING A RESIDENTIAL BUILDING TO COMMERCIAL USE
Here, you can claim the GST/HST that’s paid (if any) on the residential building on the return for the commercial operations.
Quick tip: Many people purchase a property with plans of having a short-term rental in the winter and a long-term rental in the summer. We know this is tempting, however, doing this means a lot of change in use from a GST/HST perspective and is something that we advise against. Instead, our advice is to pick one and stick with it!
This just about covers the basics of your rental property and its relationship with GST/HST. However, there’s always more to it and we are happy to help you with your unique situation.