Is HST Charged on Rent in Ontario? Residential vs Commercial

Whether HST shows up on a rent cheque depends mostly on what is being rented and for how long. A tenant in an apartment and a business renting a storefront are treated very differently, and so is a guest in a short stay.

This article explains the usual rules in Ontario, where HST has a federal part and an 8% provincial part. It is general information, not advice on your particular lease or business.

The short answer for residential rent

Long-term rentals of residential accommodation, meaning rentals of one month or more, are exempt from GST/HST. In practice, a landlord does not add HST to the monthly rent of an apartment, house or similar home that a tenant lives in for the long term.

The exemption applies to the rent itself. It does not mean the landlord is free of all tax questions. Rental income is still reported for income tax purposes, and the rules for that are separate from GST/HST. The CRA encourages landlords to report rental income and expenses on Form T776, Statement of Real Estate Rentals, although it also accepts other financial statements. Rental income is reported for the calendar year, January 1 to December 31.

What exempt means for the landlord

Exempt is different from zero-rated or taxable. Because the rent is exempt, the landlord does not charge GST/HST and generally cannot claim input tax credits on the costs related to that rental. Input tax credits are the way a registered business normally recovers the HST it pays on its own expenses.

So a residential landlord usually bears the HST paid on repairs, services and supplies as a cost of doing business. That is one reason new residential rental projects get their own rebates, which are covered in a separate article.

In brief, the rebates for new rental housing work like this:

• A landlord who bought a newly built or substantially renovated rental property may recover part of the GST or the federal part of the HST, but none is available for a unit with a fair market value of $450,000 or more.
• In Ontario, a rebate of part of the 8% provincial part of the HST is available, subject to a maximum amount, whatever the unit's fair market value.
• These rebates are claimed on Form GST524, and a purchaser-landlord must apply within two years after the end of the month in which tax first becomes payable on the purchase.
• The unit's first use must be as a primary place of residence for at least one year, or an equivalent period for certain other arrangements.

These rebate rules have been changing, so how they apply to a particular building depends on the facts and is worth confirming with an accountant.

Commercial rent is different

Sales and rentals of commercial real property are taxable. A commercial landlord who is registered for GST/HST generally charges it on the rent.

Commercial leases often make the tenant pay property taxes on top of base rent. For commercial leases, property taxes the tenant pays are treated as part of the rent and are subject to GST/HST in the same way. When you read a commercial lease, look closely at every amount the tenant pays, because several of them may carry HST.

Short stays and other exceptions

The one-month line matters. GST/HST must be charged on rooms rented for less than one month. It is not charged when the same individual rents the room as a residence for a continuous period of one month or more. There is also a low-rent rule: units rented for $20 or less per day are exempt whatever the rental period.

Mixed situations, such as a building with both apartments and shops, or a host who rents out a unit for varying periods, can be harder to sort out. Those depend on the facts and are worth confirming with an accountant.

What to do next

• Check the length of each stay or lease: one month or more, or less.
• Check whether the space is used as a home or for business.
• As a tenant, review your lease to see which payments are described as rent and which as extra charges.
• As a landlord, keep records of the rent and the expenses for each property separately.
• Ask an accountant or lawyer before you register for, or stop charging, GST/HST.

If you are unsure how your rental is classified, a short conversation with a lawyer or accountant before you sign or start charging rent is usually cheaper than correcting it later.

Frequently asked questions