As the popularity of short-term rentals such as Airbnb increases, it is important to consider the potential GST/HST implications on such rentals.
Generally, the rental of residential real estate is exempt from GST/HST. However, an exception to this rule is short-term rentals. A rental is considered to be short-term when the occupancy period is less than one month, and the daily rental rate is in excess of $20.
If your worldwide taxable sales (including sales of all associated persons) are equal to or less than $30,000 over the last four calendar quarters, you are considered a small supplier and are not required to register for nor charge GST/HST. However, if you exceed this sales threshold, you must register for and charge GST/HST. A common oversight is not considering associated persons and/or businesses when considering the small supplier threshold. Overlooking this area can result in costly assessments. Analyzing the association rules can be a complicated area that we would be happy to advise on separately.
In situations where you are not required to register for and charge GST/HST, you may want to consider voluntarily registering. Doing so would allow you to claim input tax credits on GST/HST paid on expenses related to the short-term rental. However, you would also be required to charge GST/HST on the rental and file a GST/HST return. The benefits of claiming the input tax credits need to be weighed against the administrative costs of compliance.
For more information, please contact firstname.lastname@example.org or 1 844-GYTD-CPA