Every supply by way of sale of real property is a taxable supply unless specifically exempted under Schedule V, Part I of the Excise Tax Act. A lawyer who represents a client in a real property transaction must consider whether or not the sale of the real property is partially or fully a taxable supply.1
Subject to certain exceptions2, the obligation to collect and remit HST rests with the seller3 regardless of whether the seller is an HST registrant.4
A buyer may rely upon a certificate from the seller stating that the real property is an exempt supply provided that the buyer does not know or ought to know that the sale of real property is a taxable supply.5
Where the buyer is an HST registrant and is required to self-assess, the lawyer representing the seller must verify the buyer’s registration status with Canada Revenue Agency.6 Where the buyer is required to self-assess for the HST, it is still advisable for the lawyer representing the seller to obtain from the buyer an affidavit, statutory declaration or certificate confirming the buyer’s registration status.
A lawyer who represents a client must recognize when to seek expert advice including expert tax advice and should consider whether such advice should be obtained from another lawyer or from experts in non-legal fields.7 In considering whether to obtain expert advice from a non-lawyer, the lawyer must consider whether there is a need to maintain solicitor-client privilege in the circumstances.8
1. Excise Tax Act, R.S.C. 1985, c. E-15, s.123 (please refer to the definitions of “commercial activity”, “supply”, “taxable supply” and “real property”) and s. 165
2. Excise Tax Act, R.S.C. 1985, c. E-15, s. 221(2)
3. Excise Tax Act, R.S.C. 1985, c. E-15, s. 221(1)
4. Excise Tax Act, R.S.C. 1985, c. E-15, s. 238(2)
5. Excise Tax Act, R.S.C. 1985, c. E-15, s. 194.
6. To search for registration status please contact Canada Revenue Agency, Business Inquiries – 1-800-959-5525 or www.cra.gc.ca/esrvc-srvce/tx/bsnss/gsthstrgstry. See also Franklin Estates Inc. v. Canada  G.S.T.C. 64 (T.C.C.); and Hutton, Malof & Henriksen v. R.  G.S.T.C. 115 (T.C.C.)
7. Nova Scotia Barristers’ Society, Code of Professional Conduct, Halifax: Nova Scotia Barristers’ Society, 2012: Chapter 3 “Relationship to Clients” and section 3.1 “Competence”
8. Nova Scotia Barristers’ Society, Code of Professional Conduct, Halifax: Nova Scotia Barristers’ Society, 2012: Chapter 3 “Relationship to Clients” and section 3.3 “Confidentiality”
R. Daren Baxter, “Real Property Transactions and HST”, CBA Nova Scotia Real Property Section Meeting (November 4, 2010).
Melinda Fleming & Teresa Gannon, “To AirBNB or not AirBnB? Tax Considerations” (October 2018)
Robert G. Kreklewetz and Steven Raphael, “Get tax advice on real estate purchases” (November 15, 2018)
Wayne Mandel, “GST/HST and Real Property Transactions”, Wolters Kluwer (November 20, 2014)
John F. Oakey, “HST and Real Property Issues”, Real Estate Lawyers Association of Nova Scotia (RELANS) Annual Real Estate Conference (December 9, 2014)
David M. Sherman, “What’s in a name? The GST/HST new housing rebate, for one“, CBA Real Property, (June 2015)
David M. Sherman, “How not to get sued over the GST” (2007)
Mark Singer, “What Real Estate Lawyers Want to Know”, CBA Nova Scotia Real Property Section Meeting (February 26, 2015)
There are also real property exemptions available under Schedule V, Part V.1 (charities) and Schedule V, Part VI (public sector bodies other than charities). In addition, a supply by way of sale of real property which is otherwise a taxable supply for HST purposes may also be exempted if the buyer has an applicable constitutional or aboriginal tax exemption. In addition to considering whether or not the sale of the real property is partially or fully a taxable supply, the lawyer should consider; 1) whether the sale of any tangible personal property (that is not a fixture), intangible personal property or services sold in conjunction with the real property is a taxable supply, 2) if there is uncertainty in the application HST, which party is to bear that risk, 3) the applicable HST rate for each supply, 4) whether applicable HST is included or in addition to the purchase price of the real property and 5) which party is required to remit any applicable HST to the Receiver General for Canada.
The buyer may be obligated to self-assess and remit applicable HST if the seller is a non-resident of Canada or if the buyer is registered and is not an individual purchasing a residential complex or a cemetery plot (or place of burial, entombment or deposit of human remains or ashes). These rules may not apply to any tangible personal property; intangible personal property or services sold by the seller to the buyer in conjunction with the real property, and thus applicable HST must be collected and remitted by the seller in respect of such supplies.
The purpose of the certificate confirming an exempt supply is to protect the buyer in the event that it is later determined that the sale is a taxable supply. Should this happen the effect of the certificate is to deem the sale of the real property to include the applicable HST which shifts the HST risk and burden to the seller. The certificate may not apply to the supply of personal property or services supplied in conjunction with the real property.
Where the buyer is required to self-assess for the HST, the seller should obtain satisfactory evidence from the buyer confirming that the buyer is in fact an HST registrant. Usually this will take the form of an affidavit, statutory declaration or a certificate from the buyer (an officer or director of a corporate buyer) affirming that the buyer is an HST registrant and providing the HST registration number. Should the affidavit, statutory declaration or certificate prove to be incorrect and the buyer is not in fact an HST registrant, the seller will be liable for the uncollected HST. There is no due diligence defence available to the seller in such a situation. Accordingly, the lawyer who represents a seller should ensure that the affidavit, statutory declaration or a certificate from the buyer contains a representation that the buyer is registered together with the HST registration number, an acknowledgement of the buyer that the seller is relying on the representations of the buyer and an indemnity from the buyer in favour of the seller for any losses and costs (any applicable HST, interest and penalties that may be assessed against the seller) which the seller incurs as a result of the inaccurate representations of the buyer. The lawyer representing the seller should ensure that the Agreement of Purchase and Sale requires the buyer to provide such representations and indemnities and that the representations and indemnities are intended to survive the closing. The lawyer representing the seller should exercise his or her professional judgment with respect to the contents of the affidavit, statutory declaration or certificate as no prescribed form exists. Please refer to the sample forms:
- HST Declaration
- HST Certificate of Exempt Supply (Used Residential)
- HST Certificate of Exempt Supply (Vacant Land)
A lawyer who represents a buyer who is purchasing new residential housing (including new rental units) should be aware of and should communicate to the buyer the existence of any HST rebate programs offered by the federal and provincial governments. (Excise Tax Act, R.S.C. 1985, c. E-15, s. 254; Sales Tax Act, S.N.S. 1996, c. 31, Part IVC)
Approved by Council on June 13, 2015