Tax specialists are reminding commercial landlords that rent deferrals could have flow-through implications for required GST/HST remittances to the Canada Revenue Agency (CRA). In a recent explanatory memo, Neil Bass, a tax lawyer with Aird & Berlis LLP, reiterates that landlords are obligated to submit GST/HST on behalf of their tenants and should formally address the issue in any rent deferral agreement.
“Properly structured, a rent deferral arrangement will also postpone the day on which GST/HST is payable so that landlords who have agreed to defer collection of rent do not have to remit GST/HST that they do not collect,” he advises.
The conventional April 30 deadline for remitting GST/HST has been pushed to June 30 as part of the Canadian government’s COVID-19 response efforts so short-term rent deferrals won’t necessarily transfer the tax burden to landlords, provided owed rent is paid in full by that date. However, specific arrangements within a rent deferral agreement could be valuable for landlords at a time when cash flow is under pressure.
Under CRA rules, tenants will still be eligible for input tax credits on deferred rent payments. “As a compromise to the GST/HST implications for a mere payment deferral, the landlord can require the tenant to pay the GST/HST at the time the rent is due under the lease even if payment of the rent itself is deferred,” Bass suggests.
In contrast, if the landlord-tenant agreement actually changes the due rate for the rent, this option will be eliminated. “Tenants will also not be eligible to claim an input tax credit for the GST/HST payable on such rent until the new due date,” Bass notes.