Executive Guide to GST/HST in Real Estate Development
Real estate construction and commercial leasing involve intricate GST/HST rules where minor missteps lead to substantial CRA assessments and unrecoverable tax liabilities.
This publication provides property developers, builders, and commercial landlords with practical guidance to protect project margins and maximize tax refunds.
1. The Residential Rental Self-Supply Rule (Section 191)
When a developer builds a multi-unit residential rental building, no GST/HST is charged to long-term residential tenants. However, under Section 191 of the Excise Tax Act:
- Self-Supply Event: The developer is deemed to have sold and re-acquired the building at Fair Market Value (FMV) upon substantial completion or first tenant occupancy.
- Tax Liability: The developer must remit 5% GST (plus applicable provincial HST) calculated on the full FMV of the completed building.
2. Input Tax Credit (ITC) Optimization
Ensure construction soft costs (architectural, legal, engineering, marketing) are properly documented with registered GST numbers to support full ITC recovery against construction cash flows.