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GST/HST REGISTRATION FOR CONDO CORPS

WHEN TO REGISTER, TAXABLE STATUS OF SUPPLIES, CAN BE TRICKY QUESTIONS

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Property managers and board directors of condominium corporations (“Condo Corps”) often assume that registration for GST/HST under the Excise Tax Act (“ETA”) is not required because supplies made to residential condominium units are exempt of GST/HST.

While this may be true for some Condo Corps, it is important to think about what other distinct supplies the Condo Corps make to determine which are technically “taxable supplies”.

Where a Condo Corp makes taxable supplies, it may be required to register for GST/HST purposes under the ETA, and collect and remit GST/HST on those supplies, once it exceeds the applicable small supplier threshold.

In this Indirect Tax Report we provide auditors, property managers, and directors of Condo Corps with a general introduction to the GST/HST registration rules and what to look out for.

Registration Requirement & Exceptions

Under s. 240(1) of the ETA, a person (which includes a Condo Corp) who makes taxable supplies in Canada in the course of a commercial activity is generally required to register for GST/HST purposes unless an exception applies. The principal exception for Condo Corps is the one for “small suppliers”.

The small supplier threshold is generally $30,000 in taxable supplies over the relevant period. However, a higher $50,000 threshold may apply where the person is a public service body. For many Condo Corps, the $50,000 threshold may be the relevant threshold, but this should be confirmed on a case-by-case basis.

The small supplier thresholds have not been revised since their introduction in 1991. Thirty-five years of inflation means that some Condo Corps which were formerly small suppliers are now making sufficient taxable supplies that they are required register for GST/HST. They also have to start charging, collecting, and remitting GST/HST in respect of their taxable supplies.

Supply Status & Failure to Register

The question of whether GST/HST registration is necessary is further complicated by the fact that some supplies made by a Condo Corp may be exempt, while others may be taxable.

Accordingly, auditors, property managers and directors need to identify and consider the tax status of each distinct supply made by the Condo Corp. Depending on the circumstances, this may require review of the Condo Corp’s declaration and by-laws, contractual agreements, CRA rulings, and even Tax Court decisions.

If a Condo Corp fails to register for GST/HST and fails to charge, collect, and remit GST/HST, it may be subject to an assessment including interest and possibly penalties. Where there is uncertainty about the tax status of supplies or registration requirements the Condo Corp should consult with Indirect Tax Counsel.

Takeaways

Auditors, property managers, and directors of Condo Corps should be proactive in monitoring taxable supplies and assessing whether registration under the ETA is required. Where a Condo Corp may have unknowingly exceeded the small supplier threshold in the past, Indirect Tax Counsel can assist in confirming whether registration is required, whether past non-compliance exists, and what options might be available to minimize potential interest and penalties.

For help with Condo Corp GST/HST Issues, please click here.