Landlords who lease to other businesses (“Commercial Landlords”) face unique commodity tax obligations, including for GST/HST and land transfer tax. Whether you are new to or highly experienced with the acquisition and rental of commercial real estate, it is valuable to ensure you understand your commodity tax responsibilities and opportunities for minimizing tax. Here are 8 GST/HST and land transfer tax considerations that are important for every Commercial Landlord to get right.
GST/HST Considerations
1. Register for GST/HST before Acquiring Commercial Land
Registration for GST/HST should not be taken too lightly as it will affect one’s tax obligations, such as the requirement to file returns or to collect GST/HST on certain supplies that might have avoided tax had the person remained unregistered. Unless the purchaser is registered, the vendor is obligated to charge and collect the GST/HST on the sale of land. If the purchaser of commercial land is registered, the vendor does not have to collect the GST/HST.
Provided that the purchaser would be entitled to input tax credits on the purchase, registration means the purchaser can report the GST/HST and claim the offsetting input tax credits in the return for the period that includes the purchase. The effect on net tax and cash flow will be nil.
Failure to register for GST/HST before acquiring commercial real estate can also lead to major problems on audit. Although some of these problems can be fixed with appropriate professional advice, it is better to avoid these problems in the first place.
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