HST Treatment of Vacant Land
In the absence of a statutory exemption, the sale is real property is subject to HST pursuant the Excise Tax Act, R.S.C. 1985, c. E-15. Although many people are aware that an exemption exists for vacant land, it can be difficult to locate the statutory authority for said exemption. This mainly stems from the confusing language adopted by Parliament, which is filled with double-negatives and unclear terminology. Rather than specifically addressing the treatment of “vacant land,” the Act and its Schedules adopt a roundabout approach for real property that provides an exemption unless certain criteria are met. More specifically, Subsection 9(2) of Schedule V provides an HST exemption on the sale of real property in all situations “other than” the six circumstances that are listed. These non-exempt transactions include:
- the sale of capital property used primarily in a business carried on by the vendor;
- a sale in the course of a business or in the course of an adventure or concern in the nature of trade;
- the sale of land which was previously subdivided or severed into more than two parts;
- a deemed supply under Section 206 (“capital real property”) or Section 207 (“individual ceasing use in commercial activities”) of the Act;
- the sale of a residential complex; or
- a return sale to the original vendor.
Provided the vendor is an individual or a personal trust, a real property transaction that does not fall into any of the above categories should be subject to an HST exemption. Vacant land that is intended for personal use will usually meet this standard. Where the land has a particular characteristic, such as farmland, the HST treatment is more difficult to predict. Depending on the nature of the land (e.g., does the farmland include structures? Is it a hobby farm?), it may or may not qualify for the vacant land exemption. Where land is unique or otherwise unusual, a professional consultation is especially advisable.
The content of this article is intended to provide a general guide to the subject matter and is not legal advice. Specialist advice should be sought regarding your specific circumstance.