An HST-registered investor in Ontario buys a commercial building for $2,000,000 from an HST-registered vendor, to use in the investor's commercial leasing business. What HST applies, and how is it handled?
Correct Answer
A) $260,000; the buyer self-assesses it and may claim input tax credits
A sale of commercial real property is a taxable supply, so 13% HST applies: $2,000,000 x 13% = $260,000. Because the buyer is a registrant, the vendor does not collect the tax (Excise Tax Act s. 221(2)(b)); the buyer self-assesses it in its own return (s. 228(4)(a)) and, since the building is used in commercial activities, can generally claim a matching input tax credit.
Why This Is the Correct Answer
This is correct because 13% HST applies to a taxable sale of commercial real property ($2,000,000 x 13% = $260,000), and when the buyer is a registrant the tax is self-assessed by the buyer rather than collected by the vendor. A registrant using the building in commercial activities can generally recover it as an input tax credit.
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