Canada: GST/HST Applicable to the Sale of an Airbnb Rented Property

The Goods and Services Tax (GST) and the Harmonized Sales Tax (HST) are typically not applicable to selling previously occupied property in Canada. However, in a recent ruling, the Tax Court Of Canada (Tax Court) concluded that selling condominium units previously rented out at Airbnb is subject to GST/HST.

In its ruling, 

the Tax Court considered a rather specific circumstance surrounding the sale of these condominium units.

Facts of the Case and Courts Reasoning

Since 2008, when Ontario Inc. bought the condominium units in Ottawa, they have rented them out for nine years through a long-term lease, meaning that they were rented for a period longer than 60 days. This changed in 2017 when Ontario Inc. listed these units on Airbnb, and in the next 14 months, they rented them out for a short-term rental of up to 60 days. Ontario Inc. sold these units in 2018, and neither the seller nor the buyer remitted GST/HST. 

The Minister of National Revenue concluded that Ontario Inc. had to pay GST/HST of CAD 77,079.64, which was collectible on selling condominium units. Ontario Inc. appealed against this decision and raised a question before the Tax Court of whether the sale of condominium units was subject to GST/HST.

The Tax Court decided that since the condominium units were not a residential complex at the time of sale, the transaction was a taxable supply of real property, which means it is subject to GST/HST. Ontario Inc.'s appeal was dismissed, and they are obliged to pay the GST/HST plus additional costs.

Conclusion

This case highlights the importance of understanding the consequences of changing how a property is used when applying GST/HST. The Tax Court's ruling clarifies that properties used for short-term rentals, like those listed on Airbnb, may not qualify as residential property and, therefore, may be subject to GST/HST.

To avoid these situations, property owners should invest additional time before selling their properties to determine how the property's usage is treated and what taxes are applicable.Source: Case - 1351231 Ontario Inc. v. The King, 2024 TCC 37, Canadian Tax Foundation