Are you thinking of renting out a Home in the Kelowna or Central Okanagan Area using Airbnb or some other source? Then you need to read this article about potential GST implications, when Buying and Selling the Home, from our Guest Blogger, Brian Stephenson, of Pushor Mitchell Lawyers in Kelowna!
News outlets in Kelowna have recently reported on the illegality of Airbnbs being operated within the City and have noted City Council’s upcoming review of municipal policies governing such short term rental services. From a legal perspective, the rules and regulations which address services like Airbnb are continually evolving, any advice given to those buying or selling property that has been Airbnb’d will be very fact dependent.
Speaking generally then, when working with clients who are buying or selling property that has been Airbnb’d it is important that the clients be made aware of the potential for Goods and Services Tax (“GST”) to be chargeable on the sale of the property due to the commercial nature of such short term rentals. Even if only a room or two of the property has been used for short term rentals, GST maybe charged on a total property percentage-use basis. If the seller’s income from Airbnb exceeds $30,000.00 they will be required to become a GST registrant, and if the seller has claimed input tax credits (as a GST registrant, a seller can claim an input tax credit to recover GST paid or payable on purchases and operating expenses related to the services they provide as an Airbnb) then as far as the CRA is concerned there ought to be GST charged and remitted on the sale of the property.
Further, due to current regulations in Kelowna, if a property that is being listed for sale is also being Airbnb’d then the Property Disclosure Statement likely should reflect the fact that there is “unauthorized accommodation” on the property with an explanation included in the comment section as to the nature of that accommodation. This is due to the fact that while municipalities such as the City of Vancouver may be contemplating giving Airbnb providers the option of obtaining a business license to operate, municipalities in the Okanagan do not recognize Airbnb accommodation as “authorized”.
Ultimately, if you come across a property that may be involved in Airbnb be sure to bring it to the attention of your client and give your favourite lawyer at Pushor Mitchell LLP a call! The legal and tax consequences of short term rentals constituting commercial use is an interesting, grey, and continually evolving area; however, at the end of the day you want to ensure you are informed of the risks of a property having been used for unauthorized accommodation and the potential for the CRA to come knocking post-transaction.
This is provided as information ONLY; it should NOT be construed as legal advice. You should consult with a lawyer to provide you with specific advice for your own situation.
Our thanks to Brian for this interesting article. For more information on Real Estate Law and to discuss your specific circumstances, please feel free to contact Brian at (250) 869-1295 or firstname.lastname@example.org.
Trish and Tanis Real Estate Group