Did you know that if you’re buying a newly built property to flip, there are steps you must take to avoid paying GST twice?
Here’s the issue: When you buy a new home with the intention to flip it — and not to live in it or rent it out — the Canada Revenue Agency (CRA) considers that a commercial activity.
That means when you go to resell it, the sale is subject to GST.
If you don’t collect the GST from your buyer at the time of resale, the CRA can come after you for it. Since you already paid GST when you first bought the property from the builder, you could end up out of pocket for GST twice.
What’s the fix? You need to register for a GST/HST number and claim back the GST you paid on purchase as an Input Tax Credit. That way, you only collect and remit GST once — at resale.
But consult your lawyer as I am not a tax professional. Your situation may be different.
Canadian tax laws are full of traps like this, so make sure you get proper advice before you flip a property.
