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AIRBNB HOMES SALES SUBJECT TO GST/HST

FCA CONFIRMS SALE OF AIRBNB PROPERTIES SUBJECT TO GST/HST

The Federal Court of Appeal (“FCA”) has recently confirmed a Tax Court of Canada (“TCC”), ruling that the sale of a property used for short term rentals on Airbnb are subject to Federal GST/HST.

In the short term, this decision will increase the cost of properties at a time when real estate prices are already deflated across Canada.  We should expect to see that depreciation hit condominiums.

With proper planning, this tax consequence (i.e., GST/HST applied to the sale of Airbnb properties) can be ameliorated, but experienced GST/HST counsel will be required.

TCC Rules Against Taxpayer on “Exempt Supply” Status of Property

In 2024, the TCC issued a decision that was not quite to be believed (i.e. 2024 TCC 37).  That decision confirmed that the sale of properties which have been listed on Airbnb are subject to GST/HST.  The property in question had been owned by a numbered company (the “Corporation”) for about ten years.  For approximately nine of those ten years, the condominium was leased for periods more than 60 days.  When the property was listed on Airbnb for rental periods of less than 60 days, the property was sold and the CRA assessed the corporation GST/HST on the sale.

The TCC found that the property was excluded from the definition of “residential complex” in s. 123 of the ETA.  Namely, the court found that the taxpayer’s property was “a hotel, a motel, an inn, a boarding house, a lodging house or other similar premises” where the rental agreements were shorter than sixty days (s. 123(1) ETA).  A condominium is normally an exempt supply as a “residential complex” so long as the property is not being sold by the builder and the owner has not claimed input tax credits.  The TCC found the taxpayer’s property was excluded from the residential complex exemption because the property counted as “similar premises” to a hotel, motel, inn, a boarding house or a lodging house.

Having found that the property was excluded from the residential complex exemption, the TCC upheld CRA’s finding that GST/HST applied to the sale.

FCA Affirms the Finding that Condo was not “Exempt Supply”

At that time, one wondered whether the case would be ultimately appealed to the FCA.  The answers are now in, and it appears that the FCA has doubled down and confirmed the TCC’s decision.

 Takeaways

When dealing with the sale of real properties that have been used in the GIG economy for short term rentals, it is likely that professional GST/HST advice will be required.  There may be steps which can be taken to avoid GST/HST payable.  A substantial tax burden can await the unwary. 

For help with GST/HST on an Airbnb property, click here.

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