Recent Tax Court Ruling: HST Applied to Sale of Short-Term Rental Properties

If you regularly rent out your home on Airbnb or other short-term rental platforms, you may be subject to HST (13% of the sale price) when you sell it.

The Tax Court of Canada recently ruled that owners who rent their property on a regular basis as short-term rentals on sites such as Airbnb will have to pay 13% HST when they sell the property. This applies to the total sale price and can be a significant amount.

The case involved a condo owner in Ottawa who sold his home after putting it up for rent on Airbnb. Between 2008 and 2017, the owner leased the condo for long-term rentals. However, from 2017 to 2018 he rented out the property through a series of short-term leases on Airbnb. In 2018, he sold the property without paying HST. After the sale, the Canadian Revenue Agency assessed that the sale was subject to HST, because the property use had changed from residential to commercial use. An appeal of the decision was dismissed in March 2024.

Generally, residential properties are exempt from HST. However, in this case the court decided that frequent short-term rental of the property prior to the sale, had made the property “similar premises to a hotel, motel, inn, boarding house or lodging house”, which are commercial properties subject to HST.

This ruling will affect investment property owners. Residences used for long-term lease are still exempt from HST when sold.

Author:

Firoozeh Rose Bahrami

Partner

e: rose.bahrami@realtycarelaw.com