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HST and The Purchase of a Recreational Condominium

Posted by Sherry Rioux on February 3, 2014
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hstEven though Harmonized Sales Taxes have been around for 3½ years now in Ontario, HST continues to be a complex area in the matter of some real estate transactions.

Here in the Blue Mountain area, we have a number of condominiums that are located in commercial resort developments.  For example, the condos in the Village at Blue Mountain are privately owned but typically part of a rental pool providing accommodations to tourists.  Mountain Springs Resort is another such example and people often buy these units with the comfort of knowing that some or all of their operational cost can be offset through rental income generated when not in personal use.

Typically, a person buying one of these units will pay HST in addition to the purchase price but, if they are planning to primarily use it for rental, the Buyer may become an HST registrant and claim and input tax credit for the HST they paid.

There are situations where HST may not be applicable in these rental units.  If for example, the current owner (seller) used their unit for short term rentals for less than 50% of the time they owned the unit and, if they did NOT claim an input tax credit for HST, then it may be exempt now upon sale.  Buyers need to be careful;  though because if they are buying with the intention of renting it out more than 50% of the time once they own it, they could trigger HST upon conversion to that use.

Bottom Line:  It is possible that a resort unit could be exempt from HST upon sale but it is also possible that it is not.  For a buyer, HST may be triggered by converting the use and, the percentage of time a unit is rented plays a big factor.  Every transaction of a recreational condo purchase and sale must be examined on a case-by-case basis to ensure there are no costly surprises for the seller or buyer.

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