GST or not on business sale

bestmom7777 · Post by **bestmom7777** » Tue May 01, 2007 9:28 am

I have a question that no one seems to be able to answer with any certainity, so am hoping someone here can help.
Our current situation = living in UK since July last year. We own a property in Canada which is up for sale.
The property is part residence and part commercial. It is split for Municipal tax purposes. (Upstairs is appartment, downstairs is business)

When it sells,
1) are we able to pay the GST (i.e. are we considered resident or non-resident)?
and more important
2) how to we figure out what the GST should be?
The square footage of the building is equally split. The land is used for business and private use. And the business has been closed for a year, so it is just land and buildings that are being sold.
Can we dictate the split if we sign an offer that states the price is excluding any GST? And if so, is there a formula we use to decide how to split the sale price?

Hope that makes sense!

nelsona · Post by **nelsona** » Tue May 01, 2007 10:09 am

You can elect not to have any GST payable on the sale of the business EXCEPT if the buyer is not registered for GST AND you are. All other scenarios are fine. So make sure your buyer is GST registered.

See:
http://www.cra-arc.gc.ca/tax/business/t ... ing-e.html

Most used residences are also GST exempt.

So, there is a good chance that none of your sale will be subject to GST.

bestmom7777 · Post by **bestmom7777** » Wed May 02, 2007 8:25 am

Thank you for the answer and the link. That explains a lot.

One more question if I may? If the buyers won't co-operate in agreeing to no GST, do we have the right to stipulate what the GST is payable on? In other words can we decide how much of the sale price relates to residence and how much relates to the business? That way, we can put the majority through as residential and just a small amount for the business, thus keeping the GST to a minimum. Is there a formula for that?

The other thing that strikes me as strange, is why if we pay the GST, they are allowed to use that amount as a credit or ITC? Seems like they would be beneifitting unfairly.

nelsona · Post by **nelsona** » Wed May 02, 2007 8:52 am

I'm sure your accountant will be able to help you on these issues.

bestmom7777 · Post by **bestmom7777** » Wed May 02, 2007 9:01 am

That's seems to be a problem for us! We don't actually have one over there. We used a Book-keeper when we were there and she doesn't really know the answer. Our lawyer asked another accountant and he came back with a lot of "ifs" and "maybes", we we need to find someone that can help. Happy to pay for the advice, but it's a long way away and not easy to find someone. Any ideas?

nelsona · Post by **nelsona** » Wed May 02, 2007 9:21 am

At this point it is not really a cross-border issue. Small businesses are sold all the time. Your lawyer should be helping you a little better. Contact a rela estate broker, they will have plenty of contacts.