When it comes to the sale of vacant land in Ontario, the application of Harmonized Sales Tax (HST) can sometimes
become a confusing affair. This tax is typically applied in four scenarios related to property purchases:
1. When the property is residential and is a new build or has undergone substantial renovations.
2. When the property is residential but also includes a non-personal use segment, such as vacant land.
3. When the property is commercial.
4. On various services related to the property purchase, such as broker commission fees and home inspections.
In this article, we’re going to break down the instances when HST applies to vacant land sales in Ontario.
The application of HST on vacant land primarily depends on whether the use of the land, prior to the sale, was for
personal or business purposes.
Here are the situations where the sale of vacant land will attract HST:
While HST applies to many scenarios, there are also certain situations where vacant land sales are exempt from HST:
If you are purchasing a house that sits on a large portion of vacant land, HST will only apply to the non-personal use
portion of the land.
In other words, when a sale of vacant land includes a residence, the sale is viewed as two separate transactions:
The test for exempting vacant land from HST due to personal use considers the use of the land before the sale, not the
intended use after the sale. This means that the purchaser must look at how the seller used the land before it was sold
to determine whether HST applies.
The mechanism of dealing with HST in property transactions varies based on whether the transaction is subject to HST: