GST/HST on Real Estate Transactions

Introduction
Understanding GST/HST on real estate transactions is essential for buyers, sellers, builders, contractors, investors, developers, flippers and assignment sellers across Canada. Real estate is one of the most heavily audited sectors by the CRA and Revenu Québec because the GST/HST impact depends on the property type, the purpose of the purchase, and the nature of the transaction. Misclassifying a property as residential vs commercial, misunderstanding builder rules, or mishandling assignment sales can lead to major tax assessments. Whether you are purchasing a new home, flipping properties, renting units, or buying commercial real estate, this guide explains everything you need to know about GST/HST on real estate transactions.

Legal and Regulatory Framework
GST/HST on real estate transactions is governed by the Excise Tax Act, the New Housing Rebate rules, and Québec’s Taxation Act (for QST). The GST/HST treatment depends on:

1. Residential vs Commercial Property

• Resale residential homes → usually exempt from GST/HST
• Newly built homes → taxable (GST or HST applies)
• Commercial properties → always taxable
• Short-term rentals (Airbnb) → may trigger commercial property classification

2. Purpose of the Property

• primary residence → usually exempt
• long-term residential rental → exempt, but restrictions apply
• short-term rental → taxable
• flipping / assignment → taxable in many cases
• commercial rental → taxable

3. Nature of the Transaction

• purchases
• sales
• leases
• assignment sales
• builder constructions
• conversion of use
• substantial renovations

Each scenario has different rules for GST/HST on real estate transactions.

GST/HST on New Residential Properties
Newly constructed or substantially renovated homes are generally taxable, unless:

• purchased for long-term rental
• buyer qualifies for the New Housing Rebate
• builder correctly applies self-supply rules

Key points:

• GST = 5% (plus QST in Québec)
• HST applies in participating provinces
• buyers may qualify for a New Housing Rebate

Builders must charge GST/HST unless the self-supply rules require them to pay tax themselves instead of the buyer.

GST/HST on Assignment Sales
Assignment sales are one of the most misunderstood real estate areas. CRA generally considers assignment profits taxable, not exempt. GST/HST may apply to:

• the assignment profit
• the original deposit payments
• the entire transaction depending on structure

Since 2022, most assignment sales of residential real estate are taxable, even if the underlying property is exempt.

GST/HST on Commercial Real Estate
All commercial real estate transactions are taxable, including:

• office buildings
• industrial warehouses
• retail spaces
• mixed-use buildings
• farmland (in specific situations)

The buyer may need to:

• self-assess GST/HST
• file a GST60 form
• claim Input Tax Credits (ITCs) if eligible

In Québec, QST applies separately.

GST/HST on Rental Properties
GST/HST on real estate transactions depends on rental type:

• long-term residential rental → exempt (no ITCs)
• short-term rental (Airbnb, less than 30 days) → taxable (GST/HST applies)
• commercial rental → taxable (ITCs allowed)

Flipping a rental property may trigger GST/HST if CRA considers it a business activity rather than a capital investment.

Key Court Decisions
Courts have issued major rulings affecting GST/HST on real estate transactions:

• taxpayers cannot avoid GST/HST by calling a flip “personal use”
• assignment sale profits are business income, not capital gains
• substantial renovations must meet strict tests to be considered “new housing”
• self-supply rules are applied strictly to builders
• mixed-use properties require correct apportionment of tax
• QST rules apply separately and may differ from GST rules

Québec courts aggressively enforce QST on real estate, especially in construction and rental conversions.

Why CRA and Revenu Québec Target This Issue
GST/HST on real estate transactions is one of the top audit targets because:

• flipping is common and often unreported
• assignment sales generate misclassified GST/HST
• buyers often misunderstand rebate eligibility
• commercial buyers frequently misapply ITCs
• new home builders sometimes apply incorrect tax classifications
• Airbnb-style rentals blur residential vs commercial classification

Audit triggers include:

• multiple property purchases and sales
• short holding periods
• large assignment profits
• failure to claim rebates properly
• mismatched GST filings
• incorrect use of self-supply rules

Mackisen Strategy
Mackisen CPA provides a complete, strategic approach to GST/HST on real estate transactions:

• determining whether GST/HST applies to a specific property
• handling assignment sale tax calculations
• reviewing builder self-supply obligations
• calculating New Housing Rebates and New Residential Rental Property Rebates
• determining commercial vs residential classification
• preparing GST/HST and QST filings
• supporting clients in CRA and Revenu Québec real estate audits
• advising rental property owners on short-term vs long-term tax implications

We also advise investors on structuring property deals for optimal tax efficiency.

Real Client Experience
Many real estate clients come to Mackisen after CRA or Revenu Québec challenges:

• A condo buyer flipped multiple units and was reassessed for GST self-supply. Mackisen corrected filings and negotiated reductions.
• An assignment seller failed to charge GST on assignment profits. CRA issued a large assessment. We recalculated proper GST and filed adjustments.
• A Québec builder misapplied QST rules on new residential units. Revenu Québec issued penalties. Mackisen corrected the QST filings and assisted through the audit.
• A landlord converted long-term rentals to Airbnb. CRA considered it a commercial activity, triggering GST/HST obligations. We restructured tax filings and advised on future compliance.

These examples show how critical proper advice is when dealing with GST/HST on real estate transactions.

Common Questions
• Do I pay GST/HST on a resale home?
No—resale homes are generally exempt.

• Do I pay tax on new homes?
Yes—GST/HST applies unless a rebate is available.

• Does GST apply to assignment sales?
Usually yes—especially since 2022 rule changes.

• Are Airbnb rentals taxable?
Yes—short-term rentals are commercial for GST/HST.

• Can I claim ITCs on rental property expenses?
Only for commercial rentals—not residential.

• Does Québec have different rules?
Yes—QST applies separately and has its own audits.

Why Mackisen
With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses and real estate investors stay compliant while recovering the taxes they’re entitled to. Whether you're filing your first GST/QST return, claiming a housing rebate or managing complex real estate classifications, our expert team ensures precision, transparency and protection from audit risk. When navigating GST/HST on real estate transactions, Mackisen provides full compliance, audit defense, rebate support and strategic planning.