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Published on May 2, 2025
If you earn income from rental property (through Airbnb, for example), do you have to pay taxes? It depends on how the building is used.
The rules for rental property taxation vary according to the property use. You must determine which factors (short-term or long-term rental, housing or hotel, Airbnb or similar platform) apply to your situation.
Do taxes apply to your rental type?
First, it should be mentioned that the application of GST and QST can vary based on the rental duration and asking price so you should determine which factors apply to your situation.
Essentially, the rental of a residential complex for residential or accommodation purposes to the same tenant for a period of continuous occupancy of less than one month and for more than $20 per night is subject to GST and QST.
However, long-term residential rentals are exempt from GST and QST. A long-term rental is a period of continuous occupancy by the same tenant for one month or longer.
Furthermore, the property will not be considered a residential complex if it is used as a hotel, motel, bed and breakfast or other similar accommodation establishment and all or substantially all (90% or more) of the vacation property is rented for periods of 60 days or fewer.
In these circumstances, the rentals are taxable, regardless of the duration of the rental periods, since the building no longer qualifies as a residential complex.
Do you have to register for GST and QST?
An owner who rents out a residential complex on a temporary basis is considered a small supplier throughout a given calendar quarter where the total gross income earned from temporary rentals (and any other taxable supply) does not exceed $30,000 or in the four calendar quarters preceding the given calendar quarter.
Where the property owner exceeds this threshold, they are required to register for GST and QST and to collect taxes on the taxable supplies provided. As a result, you must be careful and ensure that all taxable income earned by individuals associated with the owner is included when calculating the small supplier threshold.
However, property purchasers who are small suppliers may decide to voluntarily register for GST and QST purposes. While this is not required where rental income does not exceed the $30,000 threshold, there are benefits to registering for GST and QST purposes.
Indeed, this may allow taxpayers to claim taxes paid on expenses related to the leased property such as furniture, electricity and management services, depending on the building’s actual usage. Furthermore, the purchaser may claim a portion or all of the GST and QST payable on acquisition, depending on the intended use.
What about the tax on lodging?
An individual offering an accommodation unit for rent in return for payment for a period not exceeding 31 days must also register for the tax on lodging (3.5% of the price of an overnight stay or $3.50 per overnight stay, in certain cases).
In practice, if you only use platforms that have registered for the tax on lodging, you do not have to register. There is no small supplier threshold for this tax and the property manager may act as an agent for the purpose of remitting the tax.
How do the rental platforms remit taxes?
Since July 1, 2021, certain operators of building rental platforms such as Airbnb collect GST and QST where the property owners have not registered.
On the contrary, where the property owner has registered for GST and QST and provided their registration numbers, Airbnb collects the applicable GST and QST and remits the taxes collected to the owner who then remits them to the tax authorities.
Airbnb also takes charge of remitting the tax on lodging on behalf of all owners who rent properties on its platform.
As a result, property owners must proceed with caution and examine the tax treatment applied by the platform operator to determine the amount of tax to remit on rentals managed by the operator.
Has the property’s use changed?
Rental property owners often fail to consider that a change to a rental property’s use can have a significant impact in terms of GST and QST during a subsequent sale in particular.
It’s important to bear in mind that the change in use rules vary depending on whether the property is held by an individual or a corporation.
For properties held by an individual, the change in use rules apply where more than 50% of the building was initially used by the owner for residential purposes and the building was then converted primarily for commercial use.
In this case, the owner may benefit from input tax credits (ITCs) and input tax refunds (ITRs) that correspond to the basic tax content of the property. In short, this represents the taxes paid on acquisition and improvements, less any partial rebates already claimed, multiplied by the commercial-use percentage.
Another important rule regarding a change in the use of a property relates to the conversion of a property used exclusively for commercial purposes to a fully exempt use.
In this situation, the individual will be deemed to have carried out major renovations on their building. The residential complex will be deemed to be a new residential complex and the individual must remit GST and QST on the fair market value of the residential complex following the first exempt long-term rental.
The individual may also be eligible for partial rebates related to the new rental property for the GST and QST paid following their self-assessment.
For movable property used more than 50% in commercial activities and then used more than 50% in exempt or personal activities, the GST and QST to be remitted will be equal to the basic tax content of the property at the time of the change in use.
As a result, being able to determine the rental property’s percentage of commercial use is essential. Accordingly, the tax authorities recommend using the number of actual days of use.
Consequently, where a property is accessible by the owner at all times, the percentage of commercial use corresponds to the number of days of taxable rental use compared to the number of actual days of use during the year.
When it comes to the sale of a property, recent case law highlights that whether a property is subject to taxes depends on its use immediately prior to its sale. Watch out for unpleasant surprises!
Managing property rental requires an in-depth understanding of sales tax obligations. You should be aware of tax remittance rules, the consequences of changes in use and the tax impacts of selling your properties.
Fully understand these sometimes complex rules
Appropriate tax planning and early registration for sales tax purposes can also help you to optimize your tax benefits and avoid administrative complications.
This article was written in collaboration with Alexandre Lecomte, Senior Commodity Taxes Consultant at Raymond Chabot Grant Thornton.