HST Accounting for Mixed Comm/Res Property

orei

New Forum Member
Registered
A question for those with a strong (stronger than me) background in accounting:



I understand that when dealing with commercial property owned under a registered corporation you can recoup HST (yes, this is Ontario). For example the HST I pay on renovation, utilities and professional services can be clawed back at tax time.



Assuming the above is correct, what happens with a property is mixed use commercial and residential? For example, I have a property on a main street that has retail on the main floor and a 10 suite apartment above it. From what I understand, I can only recoup HST from the commercial portion of the property. Is this correct? If so, how do I determine what percentage of a invoice is commercial and what portion is residential (eg. redo the roof, it affects 'both' property classes).



Any insight here?
 

navaz

Inspired Forum Member
Registered
Commercial properties have to collect HST/GST from their tenants, deduct all HST/GST paid and remit the difference to CRA. Residential properties CANNOT be registered for HST hence do not collect HST/GST from their tenants and do not get to deduct HST/GST they pay.



Mixed properties- typically retail on bottom and residential on top have to break out between commercial and residental. If commercial is less then $30K per annum, they have the option of not registering for HST which means they will be treated the same as residential property.
 

OurRealtor

New Forum Member
Registered
[quote user=navaz]Commercial properties have to collect HST/GST from their tenants, deduct all HST/GST paid and remit the difference to CRA. Residential properties CANNOT be registered for HST hence do not collect HST/GST from their tenants and do not get to deduct HST/GST they pay.



Mixed properties- typically retail on bottom and residential on top have to break out between commercial and residental. If commercial is less then $30K per annum, they have the option of not registering for HST which means they will be treated the same as residential property.


Is that NOI= $30K per annum after all GST HST deductions?
 

OurRealtor

New Forum Member
Registered
What's the last date for filing business tax return for a corporation in its first year , owned by just an individual , not so much active?

How can its closed to not have any more tax liabilities?



T776 - Statement Of Real Estate Rentals

If its not required then how can we describe equipment additions or dispositions ? Or is it just for other rental and investment properties. How if the properties are located outside, other provinces? Where do we have to file return?
 

Thomas Beyer

Senior Forum Member
REIN Member
[quote user=orei]From what I understand, I can only recoup HST from the commercial portion of the property. Is this correct?


that is correct !



[quote user=orei]If so, how do I determine what percentage of a invoice is commercial and what portion is residential (eg. redo the roof, it affects 'both' property classes).


you aportion according the the commercial/residential value split.
 

orei

New Forum Member
Registered
Thanks for the feedback!



Some further questions:

1) When I determine what portion of a invoice is for commercial/residential, what is the most used convention? Is it based on square footage? Is it based on aportioned income? I can think of several ways that would be more beneficial to me ... but what is correct? Thomas says valuation, for me this means income is the factor that determines the ratio.



2) Why, in this case, is the 10 suite appartment above a store considered residential instead of commerical?
 

Thomas Beyer

Senior Forum Member
REIN Member
[quote user=orei]Is it based on square footage? Is it based on aportioned income?


either is fine .. and is usually related anyway ! I'd use VALUE as this is what you had to decalre on purchase when you paid HST (say you pay $1.2M .. and state $500,000 for commercial and $700,000 for the 10 units) I'd use 5/12 for commercial component for exxpenses .. unless it is only for the commercial unit, say a new floor or new windows !



[quote user=orei]2) Why, in this case, is the 10 suite appartment above a store considered residential instead of commerical?
yes
 

windsorrealestate

New Forum Member
Registered
Question. My client is looking to purchase a mixed commercial/residential building. The main floor is commercial and pays $2300/month, and the residential units pull in $5400/month. HST on closing is based on only the commercial component. How do I figure this out, and at closing is HST written as a separate cheque to the CRA?
 

Thomas Beyer

Senior Forum Member
REIN Member
Question. My client is looking to purchase a mixed commercial/residential building. The main floor is commercial and pays $2300/month, and the residential units pull in $5400/month. HST on closing is based on only the commercial component. How do I figure this out, and at closing is HST written as a separate cheque to the CRA?

It’s usually done by using a commercial appraiser, a tax assessment or an estimate of value for each component. You pay HST on the commercial portion and as such rents matter but only in as far as they are used to estimate at the value of the commercial component vs the residential component.


Thomas Beyer, Asset Manager, Investor, Community Improver, Author, Father, Mentor www.prestprop.com
 
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