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Conversion of a Commercial Building into a Residential Complex

Converting a commercial building into a residential complex can affect how the GST and QST apply when the immovable is sold or leased, even if no construction work or substantial renovations were carried out on it.

During the conversion, a person is deemed to have carried out substantial renovations on a commercial building and to have been a builder if the person:

  • acquired the immovable to hold it or use it as a residential complex, or
  • held the immovable for his or her business or commercial activities, and started using it as a residential complex.

If the immovable is sold immediately after being converted into a residential complex, GST and QST must be collected on the sale and remitted to Revenu Québec. However, if the converted immovable is leased for residential purposes, GST and QST must be calculated on the fair market value of the immovable and paid when the immovable is leased.

Note that an individual is not required to collect GST or QST on the sale of a commercial building acquired to be held or used exclusively as the residence of that individual or of a person related to that individual (including a former spouse).

The above-mentioned rules do not apply if a portion of the commercial building was already being used for residential purposes before the conversion.

For more information, see brochure IN-261-V, The QST and the GST/HST: How They Apply to Residential Complexes (construction or renovation).

Under certain circumstances, a person who paid GST and QST can claim a rebate for new or substantially renovated housing or residential rental property. For more information, see brochure IN-205-V, QST and GST/HST Rebates: New or Substantially Renovated Housing, New or Substantially Renovated Residential Rental Property.

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