GST can be a confusing bit of government compliance and many farmers and other business people struggle to understand when to charge it and when not to. Today I would like to point out a common problem I have noticed. That is that many farmers fail to charge GST on farmland rentals even though they are required by the Canada Revenue Agency to charge GST. In fact anyone that is a GST registrant and rents land must charge GST on top of the payment whether it is a lump cash payment or paid monthly. The idea that farmland rent is exempt from GST may come from the fact that CRA does allow for an exemption with sharecropping. This is where the rent agreement calls for the landlord to receive a portion of the crop harvested from the rented land as long as the crop is Zero rated for GST purposes. This would include most cereal crops and hay. Aside from sharecropping arrangements GST must be charged. For farmers that are GST registrants which is most everyone in the business of farming the GST is claimed back as an input tax credit. Because of this it may seem unneccesary to charge and pay the GST but so it is. The problem is there is a time limit on claiming GST input credits.
So please charge GST on all land rentals regardless of what you’ve heard and be confident you can pass a GST audit with flying colors!!