The 411 on Acreages and GST

Acreages and GST

Curious about how GST applies to your acreage? The below article gives you the 411 on what is and isn’t exempt from GST.

Acreages and GST as a Seller

When evaluating an acreage and GST, it is important to know that the first ½ hectare of land is automatically exempt from GST. Additional land may also be exempt if Canada Revenue Agency is satisfied with how the land benefits the seller. In other words, GST on an Acreage is determined by the seller’s use of the land. If the additional land is used for personal enjoyment, then GST may be exempt. However, if the land is being used for farming or commercial purposes, and/or the seller wants to sell subdivided lots, then GST will be set. It is necessary for Canada Revenue Agency to be able to clearly identify which of these purposes the additional land is being used for.

Acreages and GST as a Buyer

If applicable, the buyer of an acreage is obligated to pay GST. Exceptions may apply if the buyer currently is, or is in the process of becoming a GST registrant. In this instance, GST may become relieved.

As a GST Registrant, the buyer should be aware that Canada Revenue Agency is more prone to monitor whether or not they actually have GST taxable revenue. If Canada Revenue Agency believes someone registered as a GST registrant just to avoid payment, a further assessment of the GST on their property purchase is likely to occur.

Overall, to ensure that there is a smooth transition for both the buyer and seller of an acreage, the agreement upon GST terms should be established before the completed transaction. By doing so, both parties can avoid any unexpected bills down the road and feel satisfied with the overall transaction.

If you have any further questions in regards to how GST applies to your Acreage contact your Tax advisor for assistance.