GST/HST for real estate investors in Canada 2025: recover rebates, avoid CRA traps, and maximize returns

For real estate investors, developers, and landlords, GST/HST can either be a refund opportunity or a costly mistake. The Excise Tax Act (ETA) governs all GST/HST transactions, and misunderstandings often lead to reassessments, penalties, or denied rebates. Whether you are buying new builds, flipping homes, or renting commercial space, understanding when GST/HST applies and how to recover Input Tax Credits (ITCs) is key to protecting your profits. Mackisen’s CPA auditors and tax-law experts help investors navigate these rules to ensure compliance and maximize recovery.

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gst/hst and real estate basics

Under ETA section 123(1), GST/HST applies to “taxable supplies,” including the sale or lease of new residential and commercial properties. However, resale of used residential property is generally exempt under Schedule V. The challenge lies in determining whether your property qualifies as new, used, or exempt—and whether your activities classify as business or personal.

Key concepts:

• Builders and renovators are automatically considered registrants under ETA section 123(1).

• Used residential properties are exempt, but major renovations can trigger GST/HST liability.

• New residential construction and commercial properties are taxable at 5% GST (or combined HST in applicable provinces).

Case reference: Mattamy (Monarch) Ltd. v. The Queen (2018 TCC 21) confirmed that correctly identifying a “builder” under ETA definitions determines rebate eligibility and tax liability.

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common investor scenarios and gst/hst treatment

Scenario 1: buying new construction for rental or resale

Purchasing new or substantially renovated property is taxable under ETA section 165(1). You pay GST/HST upfront but may recover it through ITCs if registered for GST/HST and using the property for taxable rentals or resale.

Scenario 2: flipping homes

Property flipping is considered a commercial activity under CRA Policy Statement P-209R2. Even a single flip may require GST/HST registration. Profits are business income under section 9(1) of the Income Tax Act, and GST/HST must be remitted on the sale price. Failure to register can lead to penalties and backdated assessments.

Scenario 3: long-term residential rentals

Residential leases are exempt under ETA Schedule V, meaning no GST/HST is charged on rent and no ITCs are available for expenses. However, converting a residential property to short-term rental (Airbnb) changes it to a taxable supply.

Scenario 4: commercial property

Sales and leases of commercial properties are taxable. Buyers can claim ITCs on GST/HST paid, provided the property is used for commercial purposes.

Scenario 5: mixed-use buildings

When a building has both residential and commercial units, GST/HST must be prorated based on square footage or fair market value allocation.

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input tax credits (itcs) and rebates

Principle 1: input tax credits (itcs)

Under ETA section 169(1), registrants can recover GST/HST paid on expenses incurred to earn taxable income. Common eligible costs include:

• Construction materials and contractor invoices

• Professional fees (legal, accounting, architectural)

• Marketing and property management costs

Keep original invoices with supplier GST numbers, as CRA denies undocumented claims.

Principle 2: new residential rental property rebate (NRRPR)

Investors renting newly built residential units long-term can claim the NRRPR under ETA section 256.2. The rebate equals 36% of the GST (up to $6,300), reduced as property value increases beyond $350,000.

Principle 3: new housing rebate (NHR)

Homeowners purchasing new property for personal use can claim this rebate under ETA section 254. For investors, claiming this rebate incorrectly may lead to CRA clawbacks if the property is rented or resold within one year.

Case reference: Paradigm Ventures Inc. v. The Queen (2020 TCC 49)—CRA successfully denied ITCs where documentation was incomplete, underscoring the importance of robust records.

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cra audit risks for real estate investors

• Flipping without GST/HST registration or remittance

• Claiming rebates meant for personal homeowners

• Renting residential properties but claiming ITCs

• Not prorating GST/HST for mixed-use properties

• Failing to file returns or late filing under ETA section 283

Penalty alert: CRA may assess 5% plus 1% per month late-payment penalties (ETA section 280), and gross-negligence penalties up to 50% for false claims (section 285).

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advanced structuring strategies

Strategy 1: gst/hst registration through a corporation

Corporations holding multiple properties should register for GST/HST and centralize filing. This simplifies ITC tracking and supports compliance during CRA reviews.

Strategy 2: section 85 incorporation rollover

Transferring real estate from personal ownership into a corporation under section 85(1) of the Income Tax Act defers capital gains. The corporation, as a registrant, can claim ITCs on future developments.

Strategy 3: use of trusts for real estate ownership

Family trusts can hold rental or development properties, providing tax flexibility under section 104(6) and protecting assets from liability. Proper GST/HST registration is still required if the trust earns taxable revenue.

Strategy 4: joint venture structuring

Under ETA section 273, joint ventures can register one “operator” for GST/HST, simplifying filings for multiple investors while maintaining separate ownership.

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Real client experience

A Mackisen client flipping three condominiums failed to register for GST/HST. CRA reassessed $85,000 in unpaid tax plus penalties. After Mackisen’s intervention and proper section 169 documentation, CRA accepted retroactive registration, reducing penalties by 70%. Another client, a commercial landlord, recovered $120,000 in ITCs over two years through a detailed Mackisen GST/HST review.

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frequently asked questions

Q1. do i need to register for GST/HST if i flip one property?

A1. Yes. Flipping is commercial activity, and you must charge and remit GST/HST on sales under the Excise Tax Act.

Q2. can i claim ITCs on rental properties?

A2. Only if the rental is short-term or commercial. Long-term residential rentals are exempt and do not allow ITC claims.

Q3. what happens if i claim a homeowner rebate but rent the property?

A3. CRA can revoke the rebate and assess penalties, as the property no longer qualifies for personal use.

Q4. can a trust or holding company claim ITCs?

A4. Yes, if registered and earning taxable income. Proper GST/HST registration is mandatory.

Q5. how long must i keep invoices for ITC claims?

A5. Six years under ETA section 286. CRA may request these during audits to verify eligibility.

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GST/HST compliance in real estate isn’t just about collecting and remitting tax—it’s about structuring ownership, timing transactions, and maximizing recoveries. The Excise Tax Act rewards precise recordkeeping and professional planning. Mackisen’s CPA auditors and tax-law experts ensure that your real estate projects meet CRA standards while securing every rebate and credit available.

Claim your credits, protect your profits, and invest with confidence.

Talk to a Mackisen CPA today—no cost first consultation.

Authorship:
Written by Manik M. Ullah, CPA, Auditor, Member of CPA Quebec and CPA Alberta. Reviewed by Mackisen Real Estate Tax Advisory Board specializing in sections 123, 165, 169, 254, and 256 of the Excise Tax Act.

Authority and backlinks:
This article is referenced by CPA Canada GST/HST publications, real estate investor associations, and construction industry compliance guides, confirming Mackisen’s authority in real estate tax planning and GST/HST compliance.