The Applicability of HST on the Sale of Vacant Land in Ontario

Generally,  Sale of Vacant Land in Ontario , HST is applicable on the purchase of property in four instances:

(a) where the property is residential property and is a new construction build or has been substantially renovated;

(b) where the property is a residential property but contains a portion of non personal use vacant land;

(c) where the property is a commercial property and

(d) on various services associated with the purchase of the property such as real estate broker commission fees and home inspections.

In this blog post, let’s examine the applicability of HST to vacant land. 

Largely, the applicability of HST to vacant land hinges on whether the use (prior to the sale transaction) was personal or business-related.

Here are situations when the sale of vacant land will be subject to HST:

However, there are certain situations when the sale will be HST exempt:

So, what happens when you are purchasing a house that is situated on a large portion of vacant land?

HST will be exigible only on the non-personal use portion of the vacant land. That is, where a sale of vacant land includes a residence or house, the sale is viewed as two separate sales as follows:

  1. the portion that includes the house, plus the land that is necessary for the use and enjoyment of the house, and
  2. the remaining portion of land.

HST is exigible on the portion of vacant land, even if it includes residential property, only where the vacant land was not used personally by the owner of the property.  If the vacant land portion can be demonstrated to have been used by the seller personally, then no HST will be exigible on its portion.

The test for personal use of vacant land for exemption from HST looks to the use of the land prior to the purchase, not the proposed use after the purchase. Therefore, the purchaser would look to the seller’s use of the land prior to its sale to determine if HST is exigible.

In terms of the actual mechanics of paying, collecting and remitting HST:

RPL is experienced in helping clients purchase, sell and refinance their properties, including vacant land with residential properties attached thereto. Contact us for a free consultation.

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