Is the Sale of Vacant Land Subject to HST?

Posted on: Friday, May 25th, 2012

The answer is probably not; but maybe. The situations when the sale will be tax exempt include: if the vendor is an individual and the land was kept by that person for personal use, if the parcel is being created by subdividing another parcel and the vendor is an individual and the land is being sold to a relative (including a former spouse or common-law partner) for their personal use, and finally, 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. In contrast, situations when the sale will be subject to HST include: if the sale of the land is capital property that had been used primarily in a business, or the sale of the land is in the course of business and if the land was subdivided into more than two parts, sales of the severed portions are taxable, unless sold to a relative for personal use.

For additional information review the Revenue Canada bulletin found at:

http://www.cra-arc.gc.ca/E/pub/gi/gi-003/gi-003-e.html

You can read this full article by clicking here. If you have any further questions about this article, I invite you to contact me at shari@elliottlawyers.com.

The content of the articles in this blog are intended to provide a general guide to the subject matter. The information does not constitute legal advice and a solicitor and client relationship is not created.

5 Responses to “Is the Sale of Vacant Land Subject to HST?”

  1. Faye says:

    Hi Shari,
    Would vacant residential lots in a new subdivision being sold by the municipality on a cost recovery basis (ie no profit anticipated) be subject to HST?

    thanks

    • admin says:

      The vendor (municipality) is selling land that was not held for personal use so it is not subject to the exemption. It is a commercial activity and the municipality is an HST registrant so the real question is not will the land be subject to HST, but will the HST be included in the purchase price or in addition to. This is something that should be discussed when drafting the Agreement of Purchase and Sale as there will be a clause related to HST in the agreement. You can also contact the Canada Revenue Agency (CRA) at 1-800-959-8287 and they can help you with any HST questions you may have.

  2. [...] two parts, sales of the severed portions are taxable, unless sold to a relative for personal use.  Read Elliott & Elliott Blog This entry was posted in AdvocateWire, Real Estate and tagged Barrie environment lawyer, Barrie [...]

  3. Shari says:

    You should call the HST Revenue Canada line to obtain specific advice but based on what you have said as long as the 23 acres has never been part of a commercial undertaking and merely a house and surrounding excess land, the property should qualify under two exemptions as HST exempt. Firstly, the house and half hectare of surrounding lands and secondly the balance of lands as personal use vacant land. The only wrinkle is the bit about the parts already severed and sold, for that reason I suggest you call so you know if HST applies before you list. Another factor which supports tax exemption is the fact that your mom is not likely an HST registrant. Best to call Revenue Canada to be sure. The agents at Revenue Canada are very helpful, just give yourself an hour or so to be transferred to a few agents and they will give you the comfort you need. As the vendor you are responsible if a mistake is made so it is important to take the time upfront.

  4. Anonymous says:

    Hi Shari – I’m still a little confused…and hoping you can help clarify. My elderly Mom sits on a 23 acre parcel of land she’s held for ~30 years. The original piece of land was larger but was subdivided and sold off in ~8 parts ~ 20-25 yrs ago. The remaining 23 parcel of land is where my Dad and her built their home and associated outbuildings and kept it as their personal residence untouched and used only for personal use and enjoyment. (they are now divorced and he signed title over to her in tax exempt situation) My Mom is now looking to sell the remaining 23 acres of the original parcel of land. This is her principal residence.
    - Will HST be due upon closing?
    - can we put an estimated valuation for house and outbuildings portion of land (i.e. 90-95% of offer price) and assign an adjacent land value rate at a lower level (remaining 5% of offer price) and expect to only pay HST on adjacent land value?
    - Bottom line we are trying to figure out how to minimize the tax liability given the net proceeds are her only source of retirement income.
    Thoughts on how to proceed? Thanks.

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