Commercial real estate GST/HST and QST audit issues
In this article, we describe goods and services tax and harmonized sales tax (GST/HST) and Quebec sales tax (QST) compliance issues relating to commercial properties as well as mixed-use properties that have a residential component. Our objective is to describe a number of the compliance issues relating to commercial properties we often see in practice. This is not meant to be a conclusive description of all compliance issues that could arise in a particular case. Reference may also be made to our previous article entitled Construction of residential rentals and GST/HST and QST audit issues.
Audit activity by the Canada Revenue Agency (CRA) and the Quebec Revenue Agency (QRA) is again picking up in the areas of the GST/HST and QST. For nearly a year now and at the height of the pandemic, many Canadian tax authorities ceased or greatly reduced their audit activity, unless a business was expecting a refund of GST/HST, QST) or provincial sales taxes. However, refunds have been getting priority for a variety of reasons, yet these indirect tax authorities are taking a much closer look before releasing these refunds than they were over the last 10 months. As such, it may be worthwhile to review potential GST/HST and QST compliance issues that may arise in the course of an audit by CRA or QRA.
Implementing processes to correct potential compliance issues in advance of an audit are always preferred to resolving proposed assessments of tax and the application of interest and penalties. Also, an extended and sometimes more in-depth audit or enquiry may result when significant issues and errors are identified.
For brevity, in the discussion below references to GST/HST and the CRA should be considered synonymous with references to the QST and QRA respectively, as the legislation and the CRA’s and QRA’s administrative policies are generally harmonized.
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Source: RSM Canada LLP
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The information contained herein is general in nature and based on authorities that are subject to change. RSM Canada LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM Canada LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.