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Goods and Services Tax (GST)

Blog by | February 10th, 2007

Goods and Services Tax (GST) is a seven per cent (7%) tax, which applies on the purchase of new construction and on the resale of accommodations, which have been rented out for shirt-term/nightly rentals. The payment of GST can be deferred if the buyer intends to rent the property out for short-term/nightly rentals and becomes a GST registrant. The property should be available for nightly rental at least 50% of the time to defer some of the GST. To obtain a deferral of all the GST the property should be available for nightly rental 90% of the time. Becoming a GST registrant is a relatively straightforward procedure of completing approximately four to six forms. Once you are a GST registrant, you are entitled to claim credits for the GST that you pay, for example, on legal fees, proerty management fees, hydro, cable, telephone. You are then required to charge, collect and remit GST on the nightly rentals, which in some instances may be done through your property manager. You will be required to annually file a GST return.

When you are purchasing new accommodations from a developer for short term/nightly rentals, whether the developer will permit you to self assess the GST depends on the nature of the development. Usually, in townhouse and single family dwelling complexes the developer will only allow a corporation or a partnership to self assess GST. A partnership, can be created by having more than one person on title. The point to note is that if an individual is purchasing the property, even if they intend to have it available for rental 90% of the time, the developer may require them to remit the GST and apply to the Federal Government to obtain a refund, (a lenghty process).