Q&A: Is HST applicable on a rental property if commercially zoned but all units are residential rentals?

Posted on: January 28th, 2016 by Real Estate Accountants 2 Comments

We are investigating the purchase of a rental property in an Ontario town, and have a quick question about the HST. The property is presently set up as four residential rental units, but it is zoned commercial. From conversations with the city, apparently the property is to include three residential and one commercial unit. If we were to purchase the property through our company, would HST be applicable?

The nature of the property and prior use of the property are what decides whether or not HST is triggered as compared to what it could be used for from a zoning perspective. If it is a used residential property prior to the sale, then typically no HST would be applicable.

Scott MerryScott Merry, CPA, and Senior Manager of Commodity Tax for BDO Canada

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2 Responses

  1. Heidi Morrison says:

    Question: If one leases out a commercial space as a
    retail store, does the lessor have to collect HST on
    the rental income?

    Thanks in advance,


    • Real Estate Accountants says:

      Yes, HST must be collected on the lease of commercial space. Also where property taxes are paid by the tenant as part of the lease, HST must also be collected on that charge.

      Scott Merry
      Partner, Indirect Tax