Most sales and leases of immovables (real property) by public service bodies (PSBs) are tax-exempt. Even if the PSB is a registrant, it may not claim input tax credits (ITCs) or input tax refunds (ITRs) to recover the taxes it paid on the acquisition of immovables used primarily in the course of its exempt activities, or on any improvements to such immovables.

However, the PSB may elect to have exempt sales or leases of immovables treated as taxable. This election allows you to claim ITCs and ITRs for the GST and QST paid on an immovable, based on its percentage of commercial use. For example, an immovable that is used in more than 10% of the PSB's commercial activities gives entitlement to ITCs and ITRs for the GST and QST paid on the acquisition of the immovable, on any improvements thereto and on expenses related to it, based on the immovable's percentage of commercial use. The rule pertaining to primary use (50% rule) that allows a PSB to claim ITCs and ITRs for immovables no longer applies. For more information, refer to Capital Property.

You can elect to have exempt sales or leases of immovables treated as taxable under the following conditions:

• The immovable is capital property.
• The immovable is held in inventory.
• The immovable is leased for the purpose of re-leasing it.

The term “immovable” includes both land and the buildings located on it.

To make this election for a PSB, you must complete form FP-2626-V, Election by a Public Service Body Respecting Real Property (an Immovable) Or Revocation of the Election.

If you make the election, you may have to report taxes collected, collectible or deemed collected by the PSB by:

• filing the GST and QST return (see Accounting Methods), if the PSB is registered for the GST and QST; or
• completing form FP-505-V, Special-Purpose Returns, and form FP-505.D.F-V, GST/HST – QST Return for a Person That Is Not a GST/HST or QST Registrant, if the PSB is not registered for the GST and QST.