The following information is provided by BDO Canada LLP and outlines important considerations regarding GST treatment for commercial property purchases. If you are acquiring a property that has been used for short-term rentals, understanding your GST obligations is crucial. Read on for insights from BDO’s tax experts, including key guidelines and implications for deferring or paying GST based on your property’s usage.

If you are purchasing an existing “commercial property”, meaning it has been in the rental pool and the vendor confirms it has been used for commercial purposes, then you have the option of continuing with short-term rentals and deferring the GST or removing it from short-term rentals and using it for your own personal use and paying the GST. You need to decide prior to the completion date to defer all or none of the GST because the vendor’s lawyer will request either your GST Business Number or payment of the GST to complete the transaction.

If you decide to defer the GST and register for an account with the CRA, the the next step is to ensure your unit is being rented as you can only claim 100% deferral of the GST based on your percentage of commercial rental.

THE GST ACT STATES AS FOLLOWS:

• If you are over 90% commercial use, you claim a full credit and the GST is fully deferred.
• If you are at 80% commercial use and 20% personal use you are required to repay 20% of the original GST deferred at the time of purchase for the year the personal use occurred. This is a one-time payment and you can use your unit 20% going forward.
• If you are under 50% commercial use, the property is considered to be primarily a residential property and you would be required to repay the full amount of GST originally deferred.
• The above commercial usage/versus personal usage is determined when you file your first GST return after the calendar year.
• Up until 2007, our office was using 365 days as a calendar year. 10% personal use was 36.5 days and the balance was considered rental or available for rental. In March 2007 the Canada Revenue Agency (CRA) put out a document which stated their position that vacant days could not be as- sumed to be “business”. In other words having it available for rent is not considered in the equation of commercial versus personal use.
• The CRA formula is based on actual rental nights plus personal use days = GST Registrants calendar where the personal use percentage is = personal use days/GST Registrants calendar.