April 18th, 2024
Building Owner
Generally, the sale of commercial real estate is GST/HST/QST taxable. There are specific procedures for collecting GST/HST/QST on the sale of taxable real estate.
In general, the person who makes a taxable supply of real property must collect the GST/HST/QST payable by the recipient of the supply. However, there are exceptions where the purchaser, and not the supplier, must account for GST/HST/QST on a taxable sale of real property. This occurs in any of the following situations:
- the supplier is a non-resident;
- the purchaser is registered for GST/HST/QST purposes (excluding situations where an individual is purchasing a residential complex, or property that is supplied as a cemetery plot, place of interment, burial, or deposit of remains or ashes).
Recommendations
In order to be relieved of the obligation to collect GST/HST/QST, the seller must ensure the following :
- That the deed of sale indicates the purchaser will pay the GST/HST/QST applicable to the sale of the real property;
- That the purchaser’s GST/QST numbers are indicated in the bill of sale and are valid on the date of sale;
- That a confirmation of the purchaser’s GST/QST numbers at the date of sale, extracted from the ARQ and CRA websites, is kept.
Seller and buyer not registered for GST/HST/QST
If a person’s only business activity is the supply by way of sale of real estate, and if this supply is not made in the course of a business, the person is not required to register even if, as a result of this sale, the person is no longer a small supplier.
In this case, a seller who is a resident of Quebec/Canada in an HST participating province must collect GST/HST/QST, when the sale is taxable and the purchaser is not registered for GST/QST. All GST/HST/QST collected by the seller must be remitted to the tax authorities with forms FP-505 and FP-505.D.F. no later than the last day of the calendar month following the month in which the taxes became payable or were collected.
Reimbursement to a non-GST/HST/QST-registered vendor of taxes payable for acquisition and improvements to the property that was the subject of the taxable sale
An unregistered vendor making a taxable sale (actual or deemed) of real property may claim a rebate if the vendor has been unable to recover the GST/HST paid on the purchase of the property or on improvements to the property.
The seller is entitled to a refund if all of the following conditions are met:
- The seller is a non-registrant;
- The seller has paid GST/HST/QST on the purchase of real property or for improvements to the property;
- The seller has sold the property or is deemed to have sold it (for example, due to the self-supply of a new residential building, the change in use of the property, the appropriation of real property for personal use or the seizure of real property by a creditor), and the sale is taxable or deemed to be taxable;
- Where the property is seized by a creditor, the creditor has not redeemed the property within the redemption period and the time limit for redeeming the property has expired.
In order to obtain the refund, the rebate application must be filed within two years after the date on which the sale price of a supply made by the claimant was paid or became payable, using form FP-2189. In the case of property that was seized by a creditor and was not redeemed by the claimant, the application must be filed within two years after the expiry date of the redemption period.
