Avoid unintended GST/HST and QST consequences on payment deferrals, where possible
Commercial landlords (or lessors of equipment) that agree to provide deferrals on rent or lease payments should be careful to avoid unintended GST/HST and QST consequences where possible. Those who offer rent or lease deferrals must remember to remit all GST/HST or QST for returns due after March 26 and before June 2020 by June 30, 2020, as set out by the CRA and by Revenu Quebec in their official remittance extensions. Also, commercial landlords and lessors that offer deferrals outside of the official extension period defined by the CRA and Revenu Quebec may want to review their GST/HST and QST obligations related to these deferrals, to avoid any unforeseen cash flow issues.
The CRA and Revenu Quebec announced that businesses may defer GST/HST and QST remittances related to returns due between March 27, 2020 and before June 2020, to June 30, 2020, without interest and penalties being assessed, in light of COVID-19.
Ordinarily, landlords and other businesses must remit GST/HST and QST to the CRA or Revenu Quebec in the reporting period in which their tenants or lessees are required to pay their lease payments, pursuant to their written lease agreements (although the above extension provides a specific, temporary, exception).
Taxes must be remitted regardless of whether landlords or lessors collect lease payments, as these taxes are owed once rent becomes payable by the tenant, independent of when such taxes are actually paid.
Landlords and lessors may want to review their lease agreements to determine whether they can mitigate probable GST/HST or QST cash flow issues brought upon by deferred rent and lease payments. Depending on a situation's specific facts, options may include amending such agreements, or possibly issuing credit notes to address these issues. The question of what constitutes a proper amendment to a lease agreement (and whether a notification to a tenant of a lease reduction would be sufficient) has been put forward to the CRA for guidance.
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Information is current to April 21, 2020. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500
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