Dealing with GST on Farmland Rent

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 theĀ 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!!

14 thoughts on “Dealing with GST on Farmland Rent

    • Hi Bev
      If the person is what CRA calls a small supplier they would not be required to charge GST if they are not registered. They would not be allowed any GST ITCs either unless they would voluntarily register for a GST number. From that point on they would be required to charge GST on all land rentals and other taxable services. Hopefully this helps
      Greg

  • I rent a residence on farm land but I only rent the residence and the landlord farms the surrounding land. Am I required to pay gst on top of my rent because I rent from a farming company?

    • In short, residential rentals of continuous periods longer than one month are GST exempt. This could include a house, apartment, and the land around it that is reasonably required for the use and enjoyment of the home as a whole. CRA has some info here that may help. Please note posts here should not be relied on as professional advice for specific situations but are general in nature.

    • Typically if the farmland is owned by you as an unincorporated individual the land rent income should be reported on form T776 which is filed together with the T1. You can find more information here on completing Form T776. GST should be charged on the land rent and reported separately on your regular GST return. This could be quarterly or annually depending on the GST reporting period CRA has assigned to you. Hope this helps

  • I have recently become an owner of some farm land that has been passed down through family. The land is rented out. I have nothing to do with farming. How do I get a gst number that I need to give to my renter? I find the government web page confusing.

    • First of all here is where you can register for a GST number on the CRA website https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/register-a-gst-hst-account.html . But before registering for a GST number I would ask a few questions. One, are you actually required to register for a GST number? If you have inherited the farmland, are not involved in farming or another business and your annual household GST taxable sales are less than $30,000 you could be considered a small supplier by CRA as I noted in a previous post. This would be one case where you wouldn’t charge GST on farmland rent. Second, why is the renter requesting your GST number? This would help to understand your situation. Contact us directly at 204-816-8655 or schedule a meeting here and I’d be happy to help you further, Shelly.

  • Hi when farming property is owned as tenants in common, does each party register for a GST number and charge GST on the portion of the cash rent they receive? Or do we just need one GST number and charge the GST on the entire rent and delegate 1 of the tenants in common to remit the GST? Thanks for any answers you have.

    • Hi Cheryl,
      From what I understand of your question I believe both parties would need a GST number. For only one GST number to be used the land would need to be owned in a partnership with the GST number being that of the partnership. This is also subject to the other comments on this thread regarding small supplier rules, etc. Disclaimer: these are general comments only as all facts should be considered in each case

  • Hi Greg. We received a small piece of land (40 acres) from our father. We do not farm it but another family member farms it and gives us rent each year. We thought we needed a GST number so applied for one. It has always been confusing whether we actually had to charge GST as this is a relatively small piece or land and/or rental income. What are your thoughts?

    • Hi Doug,
      Generally speaking, farmland rent is GST/HST taxable. That said there are some exemptions that apply such as the ‘small supplier rule’ . If you have other sales in addition to the farmland, say in another business, you are required to include those in the calculation of your total worldwide sales.

      On the other hand even if your are a small supplier you are allowed to optionally register. So now that you are registered you can simply charge the GST and file and remit it to CRA. The farmer relative will simply pay it to you and include the GST paid as an input tax credit on their GST return which they already file.

      If your specific facts do allow you to qualify as a small supplier according to CRA’s rules you could request to cancel your GST registration. See this link Cancel GST registration . But if you purchased the land and were required to self assess the GST at the time you would likely be liable for GST on the basic tax content of the land on your final GST return. So something to be aware of. Note that this information is general in nature. If you have further questions feel free to give us a call

  • My brothers and I each were gifted some farm land from the family. None of us are farmers and we rent our sections to the same family. We were told that we would each need to set up a GST number and charge GST. Our rental income on the land is less than $30,000 each a year. We have been charging GST for a few years now.

    Could we cancel the GST since we would technically be considered ‘small supplier? Or now that we have done it a few years, would we have to continue charging it? We have also heard that if we decide to sell the land later we would need a GST number. Is this true?

    • Hi Maria,
      First off thanks for your questions and my apologies this post slipped under my radar! That said this is somewhat beyond the scope of this blog due to some of the specifics and professional advice should be retained. Possibly the reason you were advised to register for GST when you acquired the land is that you filed the election to not have GST apply when you acquired the land. For that to work both parties have to have a GST number so often I have seen where people will open a GST number so as not to have to pay GST when acquiring a property. But what isn’t explained very well sometimes is that GST will then need to be charged on the rental income no matter if it is less than $30,000 annually. As well were you to de-register now while still owning the land you would be required to self assess and remit the GST on the ‘basic tax content’ of the land. So you’ve just effectively bumped the GST liability down the road. As you can see, while you aren’t required to have a GST number to sell the land it may possibly be beneficial to you at this point to simply keep charging GST on your land rentals and then when you sell the land you would either charge the buyer the GST or if they were a registrant they could also elect to not have GST apply on the sale.

      Hopefully this helps to answer some of your questions and feel free to give us a call

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