Emergency Assistance From Canada For Commercial Rent And Implications for GST / HST and PST | HillzDealer
As part of Canada's economic response plan to respond to COVID-19, the federal government established Canada Emergency Assistance for Commercial Rent (AUCLC) to support small business tenants in financial difficulty as well as owners of commercial buildings.
For GST/HST purposes, the rent reduction under the Rent Reduction Agreement will be considered a reduction in the consideration for a taxable supply of the leased commercial property. |
Consequently, the rent reduction will reduce the amount of GST/HST payable by the tenant and collectible by the landlord.
Under this program, administered by the Canada Mortgage and Housing Corporation (CMHC), landlords must grant a reduction in rent of at least 75% to be paid by a small business tenant. This means that the tenant should not be required to pay more than 25% of the rent.
As far as the owner is concerned, the latter is entitled to receive an unsecured forgivable loan from CMHC corresponding to 50% of the gross rent for the application period, which means that the owner must assume the difference of 25 %. The forgivable loan can be granted, subject to the terms of the program, for the periods from April to September and the request must be submitted before October 31, 2020. Small tenant businesses are those whose:
- Rents paid under the lease are less than $ 50,000 per month per location.
- Gross annual revenues, calculated on a consolidated basis, do not exceed $ 20 million.
- The drop in income is at least 70% of the income earned before the pandemic.
Did you know that the Canada Revenue Agency has ruled on the applicable treatment of consumption taxes with regard to the AULCLC program?
Grant loan
Owners of commercial buildings are not required to pay GST and PST on forgivable loans granted by CMHC. These forgivable loans should be viewed as the provision of financial services.
Rent adjustment or reimbursement
It should be noted that the rent reduction agreement does not change when the tax becomes payable under the lease agreement. This means that the owner is required to remit the GST / PST on the rent despite the reduction agreement entered into with his tenants.
When a landlord agrees to reimburse or credit rent for which tax has already been collected or agrees to adjust the GST / PST applicable to the rent reduction, the landlord must issue a credit note in favor of the tenant. . It is important to mention that when a credit note is issued, each party, whether it is the owner or the tenant, must adjust their net tax so that the GST / PST represents only 25% of the gross rent actually paid by the small business tenant.
Source: rsmcanada.com
Image: eeltd.ca
