When a residential complex is renovated, but not “substantially renovated” within the meaning of the Act, its subsequent sale is generally tax-exempt because the complex is not considered new.
However, if, in the course of a business consisting in the supply of residential complexes by way of sale or lease, you renovate or make minor alterations to a residential complex, you may be considered the seller and recipient of the complex and therefore have to remit the tax deemed collected, which are calculated on part of the increase in the value of the complex.
The tax is calculated on the following amounts:
- amounts related to a renovation or alteration;
- amounts that would be included in the adjusted cost base for income tax purposes if the residential complex were capital property and you were a taxpayer;
- amounts paid to acquire non-taxable property and services (such as salaries, wages and fringe benefits paid to employees who participate in the renovation work, as well as the amounts disbursed for the acquisition of tax-exempt supplies or supplies from a non-registrant small supplier), other than those related to interest or other financial services.
Consequently, you must remit the tax deemed collected on the total renovation costs, including the salaries, wages and fringe benefits payable to the employees involved in the renovation work. This also applies to agreements with small suppliers (that is, with non-registrants).