How to Close a GST/HST Account in Canada
Close a GST/HST account in Canada: when you can deregister, the one-year rule for small suppliers, Form RC145, the final return and two reporting periods, and the tax on property still held at closing.
GST/HST on Rental and Commercial Property in Canada
GST/HST on rental and commercial property in Canada turns on the supply: long-term residential rentals and sales of used housing are exempt, while commercial rentals, new housing sales, and short-term accommodation are taxable.
Applies in: across Canada
GST/HST on real property does not follow the building. It follows the supply: what is being sold or rented, to whom, for what use, and for how long. The same building can produce an exempt supply on one floor and a taxable supply on another, a taxable supply when it is first sold as new housing and an exempt supply when it is resold after occupation, and a deemed taxable supply when the person who built it first occupies or leases it. The questions in this guide are the ones that separate those outcomes, in the order the CRA's guidance presents them. The guide describes the general rules only; it does not advise any person on the treatment of a specific property, and a transaction with a large tax amount at stake should be confirmed with the CRA or a tax professional before the supply is made.
Step 1: Name the supply
Every analysis starts by naming the supply precisely. A sale of real property, a lease of real property, a licence to occupy, a supply of accommodation, and a supply of a service connected with real property are different supplies, and the Excise Tax Act treats them differently. A lease of a commercial unit is a taxable supply of commercial real property. A lease of the same space as long-term residential accommodation is an exempt supply. A hotel room is a taxable supply of short-term accommodation, even though the guest sleeps in it. A property management service supplied to a landlord is a taxable service, even when the rents the manager collects are exempt. Naming the supply correctly is not paperwork; it is the step that decides the rate, the registration consequence, and the input tax credit consequence that follow.
Step 2: Ask whether the use is residential and long-term
Long-term residential accommodation is the core exemption in this area. The CRA's type-of-supply list states it without qualification: long-term rentals of residential accommodation of one month or more, and residential condominium fees, are exempt. The one-month line is the boundary. A tenancy of a month or more is exempt; accommodation supplied for less than a month, including hotel accommodation, is taxable. The exemption covers the rent itself. Services supplied with the accommodation can carry their own treatment, and a charge that is really a service, such as a separately charged amenity or service fee, should be checked on its own terms rather than assumed to follow the rent.
The exemption also explains why a landlord whose only activity is long-term residential renting may not be engaged in a commercial activity for GST/HST purposes at all. The CRA's registration guidance states that many supplies such as long-term residential rents and sales of used housing are exempt, and therefore excluded from the definition of commercial activity. An excluded activity does not count toward the small-supplier threshold, and the tax paid on purchases used to make exempt supplies is not recoverable as input tax credits. A landlord with both exempt residential rents and taxable commercial rents is engaged in commercial activity for the taxable part, and the two parts are accounted for separately.
Step 3: Ask whether the use is commercial
Sales and rentals of commercial real property are taxable. The CRA states the rule in both its type-of-supply list and its home-construction guidance, and it applies whether the property is an office, a retail unit, a warehouse, or a mixed-use building's commercial portion. A registered commercial landlord charges GST/HST on rent at the rate for the province where the property is situated, and generally claims input tax credits for GST/HST paid on purchases used in the commercial rental activity, such as maintenance, utilities, and management services. A commercial tenant that is a registrant generally claims input tax credits for the tax charged on the rent.
Mixed-use property is split, not averaged. Where a building is leased partly for long-term residential use and partly for commercial use, the CRA treats a later sale as two separate sales, one of the residential part and one of the commercial part, with tax applying to the commercial part and the residential part generally exempt. The same splitting applies to construction and renovation accounting. A landlord should keep the residential and commercial portions of a building accounted for separately — floor areas, lease schedules, and expense allocations — because the split is made on the facts of use, and a single blended figure will not support either treatment on audit.
Step 4: Ask whether the housing is new or substantially renovated
Sales of new housing are taxable. The CRA's home-construction guidance lists sales of newly constructed or substantially renovated residential real property among taxable supplies, alongside sales and rentals of commercial real property, construction services, construction materials, and equipment rentals. Sales of previously occupied residential housing are exempt in most cases, including a sale of housing last used by an individual as a place of residence, and certain sales of real property by individuals and personal trusts are also exempt.
Substantial renovation is the term that decides the boundary, and it is defined in the CRA's home-construction guide by the extent of the work, not by its cost alone. A renovation that replaces or renews most of the building's interior, structure, or systems can amount to a substantial renovation, while cosmetic work and repairs do not. A seller who has renovated a house and is unsure whether the work amounts to a substantial renovation should confirm the position before marketing the property as an exempt sale, because a taxable sale marketed as exempt leaves the seller owing the tax whether or not it was collected. New housing rebates exist for buyers of new or substantially renovated housing, and for new residential rental property, but this guide states no rebate amount, threshold, or phase-out figure, because none was verified on a CRA page at the time of writing; the rebate guides and forms are the source for the current figures.
Step 5: Check self-supply and change of use
A self-supply is the rule that stops a builder or renovator from escaping tax by leasing or occupying instead of selling. A person who builds or substantially renovates a building and then leases it, or is the first to occupy it, is considered to have made a taxable supply of the property to themselves, and to have paid and collected GST/HST on its fair market value at that time. The CRA's home-construction guide states the rule for the mixed-use case explicitly: where part of a building is leased for long-term residential use and part for commercial use, the self-supply applies only to the residential part, calculated on the fair market value of that part, and no input tax credit can be claimed for the tax on the residential part where 90 percent or more of it is used for long-term residential rentals.
Change of use produces the same kind of consequence in the other direction. A property that moves from taxable commercial use to exempt residential use, or from exempt to taxable, changes the input tax credit entitlement that attaches to it, and the adjustment is calculated when the use changes. The election in the next step is the formal mechanism a public service body uses to manage one direction of that change. For any other owner, a change of use should be identified at the time it happens, with the fair market value and the use percentages recorded, because the return for the period of the change is where the adjustment is reported.
Step 6: Check registration and input tax credits
Registration follows taxable supplies. A person whose activities are entirely exempt supplies is not engaged in a commercial activity for those supplies and is not required to register for them. A person with taxable supplies above the small-supplier threshold must register, and once registered must charge tax on taxable supplies and file returns. Input tax credits follow the same split: tax paid on purchases used in commercial, taxable activities is generally recoverable, and tax paid on purchases used to make exempt supplies is not, subject to the specific rules for capital property, real property, and change of use.
Public service bodies have an additional tool. A public service body can elect, on Form GST26, to have an exempt supply of real property treated as a taxable supply. Once the election is in effect, a registrant body may claim input tax credits for tax paid on the property and on related purchases such as utilities, and where the election takes effect after the property was bought, the body is deemed to have made a taxable sale of the property just before the election and to have repurchased it on the effective date, with tax on the deemed sale equal to the basic tax content of the property and an input tax credit for that amount. Long-term residential accommodation supplies stay exempt even under the election where the property is used more than 10 percent in those activities. The election is a formal filing, and its effective date and consequences should be confirmed before it is made.
Related guides:
Deciding the GST/HST treatment of a property supply, in six steps
- Name the supplyA sale, a lease, a licence, and a service are different supplies. The tax treatment follows the supply as made, not the building as a whole.
- Ask whether the use is residential and long-termLong-term rentals of residential accommodation of one month or more are exempt, and residential condominium fees are exempt. Short-term accommodation is taxable.
- Ask whether the use is commercialSales and rentals of commercial real property are taxable. A building with both residential and commercial parts is treated as two supplies on a sale.
- Ask whether the housing is new or substantially renovatedSales of new housing and of substantially renovated residential real property are taxable. Sales of previously occupied residential housing are generally exempt.
- Check self-supply and change of useBuilding or substantially renovating and then leasing, or changing a property's use between exempt and taxable, can create a self-supply on which GST/HST is calculated on fair market value.
- Check registration and input tax creditsExempt supplies are excluded from commercial activity, so input tax credits do not follow them. Taxable supplies support registration and input tax credits under the normal rules.
Questions people ask
Is rent on a long-term residential apartment subject to GST/HST?
No. Long-term rentals of residential accommodation of one month or more are exempt, and residential condominium fees are exempt, in the CRA's type-of-supply list. The exemption follows the supply of the accommodation, not the landlord's registration status: a registered landlord does not charge GST/HST on exempt long-term residential rent, and does not claim input tax credits for the tax paid on purchases used to make that exempt supply. Rent for a period of less than one month, and hotel and similar short-term accommodation, sits on the taxable side of the same list.
Is rent on commercial property subject to GST/HST?
Yes. Sales and rentals of commercial real property are taxable supplies, in the CRA's type-of-supply list and in its home-construction guidance. A commercial landlord who is a GST/HST registrant charges GST/HST on the rent at the rate for the province where the property is situated, and can generally claim input tax credits for GST/HST paid on purchases used in the commercial rental activity. A commercial tenant that is itself a registrant generally claims input tax credits for the tax charged on the rent, under the normal rules. Where a landlord is not registered and is a small supplier, the registration question turns on taxable supplies, and exempt residential rents do not count toward it.
Is GST/HST charged when a house is sold?
It depends on whether the housing is new. Sales of new housing are taxable, and sales of newly constructed or substantially renovated residential real property are taxable. Sales of previously occupied residential housing, described by the CRA as a sale of housing last used by an individual as a place of residence, are exempt, and most sales of previously occupied residential housing are exempt. Certain sales of real property by individuals and personal trusts are also exempt. The distinction is new versus used housing, not the price or the seller's occupation, and a sale that is exempt does not become taxable because the seller is registered for other activities.
What is a self-supply, and when does it apply to a builder or landlord?
A self-supply is a deemed supply: a person who builds or substantially renovates a building and then leases it, or first occupies it, is considered to have made a taxable supply of the property to themselves and to have paid and collected GST/HST calculated on its fair market value. The CRA's home-construction guide applies the rule to mixed-use buildings by splitting it: where part of a building is leased for long-term residential use and part for commercial use, the self-supply applies only to the residential part, and no input tax credit can be claimed for the tax on that part where 90 percent or more of it is used for long-term residential rentals. A builder who is an individual and who first lives in a house built or substantially renovated may also be considered to have made a taxable self-supply on the fair market value of the house. Rebates for new housing exist, but this guide states no rebate amount or threshold, because none was verified on a CRA page at the time of writing.
What happens when a property changes use between residential and commercial?
A change of use can trigger a deemed supply or a change in input tax credit entitlement, and the property is accounted for as two supplies where its uses split. The CRA's mixed-use example makes the point on a sale: a corporation selling a ten-storey building with apartments on nine floors leased for long-term residential use and businesses on the main floor is considered to have made two separate sales, one of the residential part and one of the commercial part, with GST/HST applying to the commercial part and the residential part generally exempt. The same splitting applies to a self-supply on construction or renovation. A landlord converting a commercial space to long-term residential use, or the reverse, should confirm the change-of-use treatment with the CRA before the conversion, because the tax consequence is calculated at the time of the change, not at the next return.
Can a public service body elect to make an exempt property supply taxable?
Yes, in defined cases, by election. A public service body can elect, on [Form GST26](https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/gst26.html), to have an exempt supply of real property treated as a taxable supply. The election can allow the body to claim input tax credits for tax paid on the property and on related purchases, and where the election takes effect after the property was bought, the body is considered to have made a taxable sale of the property just before the election took effect and to have repurchased it on that date, with GST/HST on the deemed sale equal to the basic tax content of the property. Certain supplies stay exempt even when the election is in effect, including supplies of long-term residential accommodation used more than 10 percent in those activities. The election is a formal filing with an effective date, and its consequences should be confirmed before it is made, because it changes the treatment of the property from that date forward.
Sources
- Canada Revenue Agency, Type of supply — sales of new housing taxable, sales and rentals of commercial real property taxable, hotel accommodation taxable, sale of housing last used as a place of residence exempt, long-term rentals of residential accommodation of one month or more and residential condominium fees exempt, most property and services of charities and public institutions exempt —
- Canada Revenue Agency, GST/HST and home construction — taxable and exempt supplies in construction, sales of new and substantially renovated housing, long-term rentals, self-supply for mixed-use property —
- Canada Revenue Agency, Guide RC4052, GST/HST Information for the Home Construction Industry — self-supply for mixed-use real property, sale of mixed-use real property as two supplies, 90 percent long-term residential use bar on input tax credits —
- Canada Revenue Agency, Required registration (GST/HST Memorandum 2-1) — long-term residential rents and sales of used housing as exempt supplies excluded from commercial activity —
- Canada Revenue Agency, Election or Revocation of an Election by a Public Service Body to Have an Exempt Supply of Real Property Treated as a Taxable Supply (Form GST26) — election mechanics, deemed sale and repurchase, basic tax content, long-term residential accommodation exception —
Where a figure could not be verified on a Canada Revenue Agency page at the time of writing — new housing rebate amounts and thresholds, new residential rental property rebate amounts, and the definition's full detail for substantial renovation — this guide states no figure and points to Guide RC4052 and the rebate forms instead. The treatment of any specific property, conversion, or sale should be confirmed with the CRA before the supply is made, because the tax consequence is calculated on the facts of use at the time of the supply.