Is there HST on commercial rent and residential rent?

Why commercial rent is fully taxable

Renting out office, retail, warehouse, or other commercial space is an ordinary commercial activity, so a landlord registered for GST/HST charges 13% HST on the rent the same way any other taxable supply is charged. A tenant that is itself GST/HST registered and using the space for its own commercial activity can generally claim an input tax credit on the HST paid on rent, which is why commercial leases usually show HST as a clearly itemized line rather than something buried into the rent figure.

This applies to triple-net leases, gross leases, and month-to-month commercial arrangements alike; the structure of the lease does not change the fact that commercial rent is taxable once the landlord is registered. It also applies to additional rent items commonly billed alongside base rent, such as common area maintenance charges and property tax recoveries, which generally carry the same taxable treatment as the base rent they ride alongside.

A landlord leasing to a tenant that is not itself GST/HST registered, such as a small exempt-supply business, still charges HST on the rent; the tenant simply cannot recover it as an ITC, which is worth factoring into that tenant's own budgeting for the space.

Why long-term residential rent is exempt, and what that costs a landlord

Rent charged for a residential unit under a lease of 30 days or more to an individual using it as a place of residence is exempt from GST/HST. No tax is added to the rent, which sounds like a benefit to the tenant, but the exemption cuts the other way for the landlord: because residential rental is not a commercial activity for GST/HST purposes, the landlord cannot claim input tax credits on the HST paid for renovations, repairs, property management fees, or other costs tied to that unit.

This unrecovered tax becomes a real, ongoing cost embedded in how a residential landlord prices and budgets for a rental property, distinct from the exempt versus zero-rated distinction covered in our answer on zero-rated versus exempt supplies. A landlord planning a major renovation to a long-term rental building should factor this unrecovered HST into the project budget from the start, rather than discovering it once the contractor's invoices arrive, since there is no year-end adjustment that recovers a share of that tax after the fact once the building remains purely residential.

Short-term rentals: taxed like a hotel stay past $30,000

A rental under 30 continuous days, the kind of stay typical of an Airbnb-style listing, is not treated as long-term residential tenancy for GST/HST purposes. Instead, it is taxed more like hotel or short-term accommodation: once a host's short-term rental revenue crosses the same $30,000 small supplier threshold that applies to any other business, registering and charging HST becomes mandatory.

Hosts running a single occasional listing may stay under the threshold for a long time, but a host operating several units, or one unit booked heavily, can cross $30,000 faster than expected, especially once cleaning fees and other charges billed to guests are added to the nightly rate for the calculation. A host who also has a long-term rental unit in the same portfolio needs to keep the two revenue streams separate, since only the short-term revenue counts toward this particular threshold, and mixing the two together in one set of books tends to overstate or understate the threshold calculation depending on which way the error runs. Our tax services for short-term rental hosts page covers tracking this threshold across multiple listings.

Mixed-use buildings and the new residential rental rebate

A building with commercial space on the ground floor and residential units above has to be split for GST/HST purposes: the commercial portion is taxable with ITCs available, and the residential portion is exempt with no ITCs, generally apportioned using a reasonable method such as square footage. Trying to claim a full ITC across the whole building based only on the commercial tenant's lease is a common and costly mistake in these buildings, and it is one that tends to surface during a review rather than get caught early.

Separately, a landlord who pays HST on a newly built or substantially renovated residential rental property may qualify for a new residential rental property rebate, recovering a portion of that HST. The eligibility rules, rebate percentage, and any caps are specific enough, and updated often enough, that they are worth confirming for a particular property rather than assuming a general rule applies, and the rebate application generally needs to be filed within a set window after the property is put into use, so timing matters as much as eligibility.

How we handle this for landlords and property investors

We set up separate tracking for commercial and residential units within the same portfolio, or the same building, so ITCs are claimed only on the taxable portion and exempt residential costs are not mistakenly claimed against. For clients weighing a new rental purchase or a substantial renovation, we walk through whether a rebate is realistically available before the HST is paid, since claiming it after the fact is a very different process than planning for it upfront, and we build the apportionment method into the bookkeeping for mixed-use buildings so it is consistent every filing period rather than reworked each time. Our tax services for commercial real estate investors page covers this in more depth.

Source: CRA — GST/HST for businesses.