A Comprehensive Guide to GST on Real Estate in Canada
When dealing with real estate transactions in Canada, understanding the implications of Goods and Services Tax (GST) is crucial. Whether you are buying, selling, or renting a property, GST can significantly impact your costs and financial planning. This guide breaks down the essential GST rules for different types of real estate transactions.
1. GST on New Residential Properties
If you purchase a newly built or substantially renovated home, GST at 5% applies. However, you may qualify for a GST New Housing Rebate to reduce the amount you pay:
For homes priced at $350,000 or less, buyers can receive a 36% rebate on the GST paid.
For homes between $350,000 and $450,000, the rebate gradually reduces.
Homes over $450,000 are not eligible for the rebate.
To qualify, the home must be intended as your primary residence.
2. No GST on Resale Homes
Unlike new homes, previously owned (resale) residential properties are exempt from GST. This means that when you buy a used home, you do not need to pay GST on the purchase price.
However, if you purchase vacant land separately and then build a new home, GST may apply to the construction costs and possibly the land, depending on how it was acquired.
3. GST on Commercial Real Estate
The sale of commercial properties (such as office buildings, retail spaces, or warehouses) is subject to GST. However, how GST is handled depends on whether the buyer is a GST registrant:
If the buyer is a GST registrant (such as a business), they do not pay GST to the seller. Instead, they self-assess the GST and can claim an input tax credit.
If the buyer is not registered for GST, the seller must collect GST from them at the time of sale.
4. GST on Rental Properties
Long-Term Residential Rentals (GST-Exempt)
If you rent out a home, condo, or apartment on a long-term basis (one month or more), the rental income is exempt from GST.
Because of this exemption, landlords cannot claim GST input tax credits for expenses like renovations, repairs, and management fees.
Short-Term Rentals (GST Applies)
If a property is rented for less than 30 days at a time (such as Airbnb or vacation rentals) and earns over $30,000 per year, the owner must charge GST on rental fees.
Owners can also claim input tax credits for property-related expenses.
If the rental income is under $30,000 per year, GST does not need to be charged, but input tax credits cannot be claimed.
5. GST on Farmland
The sale of farmland may be exempt from GST if the land was primarily used for farming and is being sold to a related family member who will continue farming.
If these conditions are not met, GST applies. However, a buyer who is a GST-registered farming business can claim an input tax credit to recover the GST paid.
If the land is being purchased for development or non-farming commercial purposes, GST almost always applies.
6. GST on Real Estate Commissions
When selling a property, the real estate commission paid to your agent is subject to GST (or HST, depending on the province).
For example:
If an agent charges a 5% commission on a $500,000 home, the commission would be $25,000.
GST at 5% would be $1,250, making the total $26,250.
In provinces with HST (e.g., Ontario, Nova Scotia, New Brunswick, PEI, Newfoundland), the higher HST rate applies.
Final Thoughts
GST can significantly impact real estate transactions, whether you’re buying, selling, or renting a property. Understanding when GST applies—and when exemptions or rebates are available—can help you make informed decisions and save money.
If you’re unsure about how GST affects your real estate transaction, consult a tax professional or accountant to ensure compliance with Canadian tax laws.
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