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I'm in the process of purchasing our first income properties. One has a commercial space on the main level and two apartments above.

I believe I have to pay HST on the commercial portion of the building but not the residential portion.

I've been looking for details on this and found the quote below.

QOUTE:

"" HST will apply to the purchase price; however, typically, buyers who obtain a GST registration prior to closing (must be registered for GST in the same manner as ownership will be taken) will not need to pay the HST on closing provided:

(a) a GST registration is obtained prior to the closing date, and
(b) the buyer signs an appropriate undertaking in the lawyer's office to become self-assessed. ""


From this and other reading I gather that if I register for the HST before closing and self-assess I can pospone paying the HST at closing until a later date when collected via the tenants lease payments?

Another question is what exactly is "SELF-ASSESSED"?
 

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The caveat to this is you must be earning at least $30,000 income/year, to justify registration for GST/HST. I think this is under the GST bulletin from CCRA.

If you're making more than $30,000/year (and you don't have to register until you reach that amount), then call CCRA for a GST/HST number.
 

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The caveat to this is you must be earning at least $30,000 income/year, to justify registration for GST/HST. I think this is under the GST bulletin from CCRA.
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Not entirely correct, you can register if your revenues are less than $30,000, and you should so you can claim ITC, but you don't have to register, once your revenues exceed $30,000 in a year then you must register.
 

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If he's buying a commercial property, it's almost always best to register regardless of the income level. The commercial property purchase is subject to HST on the buy. You 'avoid' the HST, by being registered and thus claiming it back as an input tax credit.

The 'self assessment' thing is really nothing. Essentially you're promising to report the buy (and thus your obligation to pay HST) on your next HST return, but you then get to claim the HST paid (the amount you just reported) as an ITC -- so it's net zero. Without this process, you'd have to pay the HST to the vendor when you bought, and then get it back when you filed. You'd be in the same overall position -- but you'd be out cash flow (potentially a significant amount) between when you bought and when you got your refund.

Once you're registered, you have to charge on the commercial rent, and file returns. But the amount you charge -- and remit -- is totally independent of the HST on the purchase price.
 

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Charlie:

Thanks. That makes perfect sense, actually, and I stand corrected. I came from a scenario where I converted residential to commercial, but on the commercial properties that I've bought, I've done exactly that, now that I think about it.

Homerhomer: You're also absolutely right.

Thanks for correcting me.
 

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Sorry to sort of revive this thread.

I have just gone through this exact same process myself, and have an HST number registered to avoid paying that HST and report it as part of my remittence. Being new to this, I don't fully understand that process.

Generally speaking, any HST I pay is considered "HST Recoverable", any HST I receive is considered "HST Payable". So I understand that if I paid the HST, I'd get it back later, but this process is in place to help with the cash flow etc. as stated above.

However, how does this reflect in the accounting books for my business? I've not been able to find anywhere to show how it is done.

Normally on the purchase of a property you would Debit Land, Building, HST Recoverable, Credit Cash (Down Payment), Credit Mortgage Note Payable. But since the HST wasn't paid, it's shouldn't really an HST Recoverable.

I imagine there must be a way to show it in the books properly, since it should be in the books as a record for when you go to remit. Any help on this would be great if possible.

Thanks,
 
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