Paying HST on Land

Buying or selling land is just as much a part of real estate as buying and selling property is. The difference ultimately lies in a deed that is crafted up and held by its rightful owner. You see, in an attempt to purchase a real estate property, an agreement is made between the buyer and the seller, outlining the specific (mortgage) payments that must be met in order to own the home in full. In a land contract, on the other hand, the land is held by its owner until the full payment of said land has been met. Of course, there are several questions that will naturally arise throughout this process – and that’s okay. We’re here to help you answer them. One of the most common questions? Taxes. More specifically? Harmonized Sales Tax, or “HST”. As such, we’ll start there.

So when, exactly, do you pay the tax man? There are two types of lands sales: taxable and tax exempt. Most (vacant) land sales being sold by an individual fall under the exempt category. Examples of these include:

  • The land for sale had been kept solely for personal use; or,
  • A parcel of land – subdivided by another parcel – is being sold to a relative for their own personal use.

Often times, however, circumstances arise when the sale of a vacant land by an individual, might be taxable:

  • The land is capital property that has primarily been used in/for business-related purposes by more than 50%; or,
  • The sale of land is in the course of a business; or lastly,
  • The sale of a parcel of land which had created by subdividing a parcel into more than two parts.

For more information on HST and vacant land inquires, address your realtor. Educating you on the necessary aspects of real estate, while protecting your assets and providing you with trusted, sound advice, is only a fraction of what we can offer you. For any other queries you may have, refer to such resources as the HST Technical Inquiry Service of CRA.

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