• GST26 - Election or Revocation of an Election by a Public Service Body to Have an Exempt Supply of Real Property Treated as a Taxable Supply

As a public service body (PSB), you can elect, on a property-by-property basis, to treat certain exempt sales and leases of real property as taxable supplies. This property can be capital real property, real property that you hold in inventory, or real property that you acquired by way of lease, licence, or similar arrangement for the purpose of supplying the property in the same way, or for the purpose of assigning the arrangement.

Effect of election

When you make this election for real property, a supply of the property that would normally be exempt will generally be treated as taxable.

If you are a GST/HST registrant, once the election is in effect you may also be entitled to claim input tax credits (ITCs) for GST/HST paid or payable for the property. For example, if you bought or leased the property, you may be entitled to claim ITCs for all or part of the tax paid or payable on the purchase or on your lease payments. You may also be entitled to claim ITCs for all or part of the tax you paid or owe on purchases and expenses, such as utilities, that relate to the property.

Registrants

The following information is for PSBs who are registrants before the day this election takes effect. For more information, see "If you become a registrant on the same day the election takes effect" on page 5.

If you are not a GST/HST registrant, see "Non-registrants" on page 5.

If the election becomes effective on the same day you acquire the real property

If the election becomes effective on the same day that you acquire the real property, you may be entitled to claim ITCs for the property as follows:

• If you bought the real property, you can claim ITCs for the tax paid or payable on your purchase of the property based on the actual percentage that you use the property in your commercial activities. This means that the primary use rule that you would normally use to determine your ITCs for a purchase of real property does not apply.

• If you acquire the real property by way of lease, licence, or similar arrangement, you can claim ITCs for the tax paid or payable on your lease payments, to the extent that you use the property in your commercial activities.

• You can claim ITCs for the tax paid or payable on purchases and expenses (such as utilities) that relate to the real property to the extent that you use the property in your commercial activities.

If the election becomes effective after the day you acquire the real property

If you acquired the real property by way of lease, licence, or similar arrangement, you are entitled to claim ITCs for the tax paid or payable on your lease payments that became due on or after the effective date of the election, to the extent that you use the property in your commercial activities, as long as it is used more than 10% in those activities.

If you bought the real property and the election becomes effective after the day you bought it, you are considered to have made a taxable sale of the property just before the effective date of the election and to have repurchased the property on the effective date of the election. You are also deemed to have paid and collected GST/HST on the deemed sale equal to the basic tax content of the property on the effective date of the election. In this case, the following rules apply:

• Because you are considered to have made a taxable sale of the real property, you can claim an ITC equal to the basic tax content of the property just before the election took effect. This means that you can now claim an ITC for all or part of the GST/HST that you paid, or that was payable, on your last acquisition of the property (for example, when you originally bought, or last self-assessed on, the property), and on any improvements you made to it, that you could not previously recover.

• You have to report the tax you are considered to have collected on your deemed sale on your GST/HST return for the reporting period in which the deemed sale occurred.

• You can claim an ITC for the GST/HST you are considered to have paid on your deemed purchase to the extent that you use the real property in your commercial activities. This is because the primary use rule that you would normally use to determine your ITCs for a purchase of real property does not apply.

• You can claim ITCs for the tax paid or payable on purchases and expenses (such as utilities) that relate to the real property to the extent that you use the property in your commercial activities.

If you sell the property while the election is in effect

If you are a registrant and you make a taxable sale of the property while the election is in effect, you may be entitled to claim an ITC to recover some or all of the GST/HST paid or payable on your acquisition (or deemed acquisition) of the property, and on improvements you made to it, that you could not previously recover. However, special rules may apply to limit the amount of an ITC you can claim in this case. For more information, call 1-800-959-8287.

If you become a registrant on the same day the election takes effect

If you become a registrant on the same day this election takes effect, the rules for claiming an ITC discussed previously do not apply. In this case, you may be entitled to claim an ITC for real property if just before you became a registrant, you were a small supplier and you held the real property for consumption, use, or supply in your commercial activities. The amount of the ITC will be based on the tax you are deemed to have paid, which is equal to the basic tax content of the property on that day, and the extent to which you use the property in commercial activities.

For more information, see Guide RC4022, General Information for GST/HST Registrants.

Non-registrants

If you are not a GST/HST registrant, you cannot claim an ITC to recover any GST/HST payable on the purchase of real property. As a PSB, you may be entitled to claim a rebate for part of that tax. However, you may not be able to recover the total amount of the tax payable.

If you later sell that real property, you may be able to recover the tax you were previously unable to recover if you have filed this election.

In general, when you file this election for real property, a sale of the real property that would normally be exempt will be taxable.

If your sale of the real property is taxable, you can claim a rebate equal to the basic tax content of the property at the time of your sale or the amount of the tax payable by the buyer on your sale, whichever amount is less, using Form GST189, General Application for Rebate of GST/HST.

Basic tax content

Basic tax content of a property generally means the amount of the GST/HST that was payable for the last acquisition of the property, and for any improvements made to the property since that last acquisition, less any amounts that were, or would have been, able to be recovered (for example, by rebate or remission, but not by ITC). The calculation for the basic tax content takes into account any depreciation in the value of the property since it was last acquired (for example, when it was purchased or when it was last considered to have been purchased, whichever occurred more recently).

You may have to calculate the basic tax content of a property if you are a registrant and you increase or decrease your use of the property in your commercial activities. For more information, see Guide RC4081, GST/HST Information for Non-profit Organizations, or Guide RC4082, GST/HST Information for Charities.

Filing the election or revocation

To make or revoke the election, you have to file this form within one month of the end of the reporting period in which the election or revocation becomes effective. You have to file a separate election or revocation for each property for which you are electing or revoking an election.

If you are a GST/HST registrant, your reporting period is the period for which you regularly file your GST/HST returns.

If you are not a GST/HST registrant, your reporting period is a calendar month.

Duration of the election

The election is effective until you revoke it or until you no longer hold the property. If you revoke the election, the revocation is effective on the date you specify in Part F.

Effect of revocation of the election

When you revoke an election, the revocation is effective on the day you specify in Part F, as long as you file the form within one month after the end of the reporting period in which the election stops being effective. For more information, see "Filing the election or revocation".

If you do not stop being a GST/HST registrant on the effective date of the revocation, you are deemed to have done both of the following:

• made a taxable sale of the property and to have repurchased it

• collected and paid GST/HST equal to the basic tax content of the property on the effective date of the revocation

In this case, you have to include GST/HST equal to the basic tax content of the property on the effective date of the revocation in your net tax calculation for the reporting period that includes the effective date of the revocation, and remit any resulting positive amount of net tax.

If you stop being a GST/HST registrant on the effective date of the revocation, you are deemed to have done both of the following:

• made a taxable sale of the property and to have repurchased it

• collected and paid one of the following:

  • where the property is not capital property (for example, if it is inventory) GST/HST calculated on the fair market value of the property on the day you stop being a registrant

  • where the property is capital property (for example, if you held it for use in your commercial activities, but not for resale) GST/HST equal to the basic tax content of the property when you stopped being a registrant

In this case, you must include the applicable amount of GST/HST in your net tax calculation for the reporting period that includes the day you stopped being a registrant, and remit any resulting positive amount of net tax.

You must remit the GST/HST that you are deemed to have collected and must follow the primary use rules to determine whether an ITC can be claimed. When revoking an election, fill out only Part A, B, F, and G.

Where do you send this form?

Send this form to your tax services office (TSO). To get the address of your TSO, go to canada.ca/cra-offices.

What if you need help?

For more information, see guides RC4081, GST/HST Information for Non-profit Organizations, and RC4082, GST/HST Information for Charities, go to canada.ca/gst-hst, or call 1-800-959-5525.

To get our forms and publications, go to canada.ca/gst-hst-pub.