The COVID-19 pandemic has created unique dilemmas or opportunities for all aspects of society. While select businesses are proving to be uniquely successful during the economic downturn, most businesses are in need of assistance in order to continue to exist. Assistance is taking many forms, from government grants to wage subsidies to rent reductions and deferrals.<\/p>\n
Rent reductions or deferrals may however come with GST\/HST complications. The Excise Tax Act <\/em>(Canada) (the \u201cETA<\/strong>\u201d) deems consideration for a supply (in this context, the rental of real property is a supply) to be payable at specific times and the GST\/HST on that consideration (i.e., rent) to be payable at such times. In particular, the ETA states that consideration under a lease, licence or similar arrangement is to be due on the day the lessor\/tenant is required to pay that consideration under an agreement for the same (generally, the rental agreement). In conjunction, the ETA states that GST\/HST is payable on the earlier of the day on which the consideration is due and it is actually paid. Combined in the context of leases of real property, the rent is due on the day on which the tenant is required to pay the same pursuant to the rental agreement and the GST\/HST is payable on that day unless the rent is paid earlier.<\/p>\n A deferral of rent, if not structured appropriately, may not lead to a deferral of the GST\/HST payable on such rent. If the rent becomes due but is deferred, the GST\/HST will nevertheless be payable. While there may be an opportunity to defer the GST\/HST as well, considering that remittances have been deferred, landlords\/lessors may be reluctant to defer the collection given the statutory sanctions for failing to do so.<\/p>\n