New GST/HST Rules for Airbnb Properties Come into effect July 1, 2022
The New GST/HST Rules
As a result of changes to the GST/HST legislation, Airbnb is going to adjust how it handles GST/HST effective July 1, 2022. Under these new rules, GST/HST will apply to all short-term rentals made through the Airbnb platform. Where the Airbnb Host is registered for GST/HST (and has provided their registration information to Airbnb) the Host will be responsible to report the taxes collected to the Canada Revenue Agency (‘CRA’). Where the Host is not registered, Airbnb will remit the GST/HST collected directly to the CRA.
There will also be a change to the GST/HST status of the service charges collected by Airbnb from Hosts. Normally, Airbnb services charges are subject to GST/HST. As of July 1 2022, however Airbnb will not be required to collect GST/HST on service charges billed to non- registered Hosts.
Requirement to Register for GST/HST
It is important to remember that Hosts have always been required to register for GST/HST if their taxable revenues exceed $30,000 in a 12-month period. Hosts can not simply ignore the HST and ‘let Airbnb report the tax for them’. Where a host does not meet the minimum requirements to be required to register for GST/HST they can voluntarily choose to do so.
Registering for GST/HST will entitle Hosts to claim input tax credits (‘ITCs’) to recover some, and perhaps all, of the GST/HST paid with respect to operating costs and capital purchases associated with their rental property. The rules relating to input tax credits have not changed because of the new rules.
Registering for GST/HST will allow Hosts to reduce costs by claiming ITCs. However, it is important to note that claiming ITCs may impact how GST/HST applies should you choose to change the use of the property at a future point in time.
Long Term GST/HST Implications
Should a Host decide at to reduce, or stop renting the property, GST/HST could apply to this ‘change in use’ of the property. Depending on how the property was used, whether ITCs were claimed (on the property or renovations to the property) and whether the property is a ‘residential complex’ for tax purposes, the liability could be as much as 15% of the fair market value of the property on the date of the change in use.
Get Help from an Experienced Canadian Tax Lawyer Today
Property owners who would like to assistance understanding how GST/HST will apply to their Airbnb properties can contact me at at 902-403-7201 or contact us online . I am happy to provide practical and helpful tax advice.
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