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 you are a person that, in the course of a business consisting in the supply of residential complexes by way of sale or lease, renovates or makes minor alterations to a residential complex, you may be subject to the self-supply rules. In this case, you may have to remit the GST and the QST calculated on a portion 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 report GST and QST 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).