Where a sale of vacant land includes a residence or house, the sale is viewed as two separate sales:
i. the portion that includes the house plus the land that is necessary for the use and enjoyment of the house, and
ii. the remaining portion of land.
This Info Sheet applies to the sale of the remaining vacant land. We can decide based on purposes and relationships. In general, if the purpose of this land use is more than 50% for commercial/business use, you are required to charge GST/HST; however, if you are selling to your relatives who want it for personal use, you are exempt from GST/HST.
Most sales of vacant land by individuals are exempt. Examples of exempt sales are:
· the sale of land that had been kept for personal use; or
· the sale to a relative (or to a former spouse or common-law partner) for their personal use of a parcel of land created by subdividing another parcel.
However, there are situations when sales of land by individuals may be taxable. Examples of taxable sales include:
· the sale of land that is capital property that had been used primarily in a business;
· the sale of land in the course of a business; or
· the sale of a parcel of land created by subdividing another parcel into more than two parts.
Question 1: I own a parcel of vacant land that I wish to subdivide into parts in order to sell the parts separately. Does the GST/HST apply to these sales?
If you have never previously subdivided or severed your parcel of vacant land from another that you owned and you subdivide the parcel into only two parts, the sale of either of those parts is exempt from the GST/HST.
If you subdivide the parcel into more than two parts, the sale of the parts is taxable.
However, if you sell any part to a relative (or to a former spouse or common-law partner) for their personal use, that particular part is not taxable. The part sold to a relative would not be taxable even if the parcel of land had been previously severed from another parcel or even if the parcel is subdivided and severed into more than two parts.
If you want to resell the land and have concerns, you can file GST22, Real Property – Election to Make Certain Sales Taxable
Question 2: I inherit a parcel of land from his estate and want to resell it to the developer. The land was not used for any business/ commercial use by me or before I acquired it. Do I need to charge GST/HST?
No, you are not required to charge the GST/HST on the sale of the vacant land since it was not capital property used primarily in a business and it is not being sold in the course of a business.
Question 3: I have severed a portion of land that previously formed part of the parcel of land on which my house is located. I have never previously severed any portion of the land, nor have I ever leased any portion of the land or used it for other commercial purposes. Would GST/HST apply to the sale of the severed portion?
No, the sale of the severed portion of vacant land is exempt from GST/HST since it is not capital property used primarily (more than 50%) in a business and it is not being sold in the course of a business.
Yes, you are required to charge the GST/HST if the land was subdivided into more than two parts.
No, if this parcel of land is sold to a relative (or to a former spouse or common-law partner) for their personal use.
Question 4: I own a parcel of vacant land that I have never previously subdivided or severed. I had always used it for my personal use and I now intend to sell it for retirement income. I subdivided the vacant land into six lots and I am selling a lot to each of my two children, one lot to a friend and the remaining three lots to a developer. My children are acquiring their lots for their personal use. Does the GST/HST apply to these sales?
No, The GST/HST does not apply to sales of the lots to your children even though the parcel is severed into more than two parts.
Yes, the GST/HST applies to the sales of one to a friend and three to a developer.
Question 5: I owned a parcel of land, which, in 1992, I subdivided into two separate lots, selling off one of the lots at that time. Since the parcel of land was subdivided or severed into only two parts and since the parcel of land had never previously been subdivided or severed from another parcel, the sale of the lot in 1992 was not taxable. I have now subdivided my remaining lot, which I had been using for my personal use, into two lots and I am selling the lots to people who are not related to me. Does GST/HST apply to the sale of those two lots?
Yes, the GST/HST applies to the sale of the two lots because, even though there was a gap in time between the first subdivision and the second, these two lots were created by the further subdivision of a lot which had itself been subdivided from the original parcel.
In this example, if the particular lot created in 1992 by the first subdivision had not been sold at that time, and instead sold now with the other two lots, the sale of that particular lot would still not be taxable while the other two lots would remain taxable. This is because it had been created by subdividing the original parcel of land into only two parts and because the original parcel had not been previously subdivided from another parcel.
How to remit GST/HST to the CRA (Self-assess)
1. Sell the land to a GST/HST registrant.
The purchaser would remit the tax using either the GST 60, GST/HST Return for Acquisition of Real Property or, if using the land primarily in commercial activities, their regular GST/HST return.
2. Sell the land to a non-registrant and the sales is your only commercial activities.
The seller required to remit the tax yourself using form GST62, Goods and Services Tax/Harmonized Sales Tax (GST/HST) Return (Non-personalized).
3. If the seller is a GST/HST registrant
The seller would remit the tax using your regular personalized GST/HST return, GST34, Goods and Services Tax/Harmonized Sales Tax (GST/HST) Return for Registrants.