The VAT Treatment of Real and Immovable Property in Canada

Despite its complexity and the harsh reception the Canadian Goods and Services Tax (GST/HST) was greeted with at its inception in the early 1990s, the story emerging from Canada’s value-added tax (VAT) experience is mostly a happy one. Indeed, a majority of the provinces will soon have replaced their retail sales taxes (RSTs) with harmonized VAT systems – a positive sign of acceptance and the recognition that VATs are economically superior to RSTs and that having parallel but incompatible – in practice, that is – sales tax systems makes little sense from the perspective of economic efficiency and compliance and administrative costs. This paper explains that the tax treatment of real property under Canada’s VAT systems is far from being straightforward. Nevertheless, this paper attempts to summarize the most important features of the design of the systems and their administration, as well as identify the legal issues that most frequently land in the Tax Court of Canada (and beyond). If nothing else, the complexity of the relevant Canadian law demonstrates and underscores the inestimable value of comparative work in this area, particularly to policymakers in jurisdictions considering imposing VAT on real property transactions