Gst & Short-term Rentals in Canada

By: Michael Peterson

If you are considering purchasing a short-term or rental condo or property there are a few GST issues that you might want to be aware of. Firstly, due to the fact that you, the owner, will not be occupying the property it is not possible to claim the GST New Housing Rebate at the time of purchase. However, that being said, the GST of 6% is added to the purchase price. This is a expenditure that is easy to gain back. The process becomes even easier if the purchaser is a GST registrant. Provided that the buyer is registered and the property has a 90%+ commercial usage.it is then possible to claim an Input Tax Credit that is equal to the GST that was paid on the original purchase.

Additionally, as these type of properties are run as "hotels, motels" and the like, GST is chargeable on the stays at the property.

One must also be careful not to utilize the property for personal use. Personal use results in the necessity to relegate a percentage of the input tax credits, thereby rendering them unclaimable. In addition if more than 50% of the usage of the property is personal, there is no input tax that can be claimed.

These are thing to be considered carefully before you enter the short-term rentals business. If you are going to have a rental property, it is likely better to just leave it as that, a rental. If you are wanting to use the unit, why not try to arrange to stay in a different condo in the same complex? Perhaps you can work out a trade with one of the other owners. That way you both get to use condos in the building while keeping your tax options open. Why not spend some time talking with an investment or tax specialist so you know what your options are when it comes to tax and properties? Educating yourself is the best assurance that you will get a good deal, and realize a great profit.

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