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Vancouver regulates Airbnb: What are the new rules and tax implications?

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In Vancouver’s hot housing market, those who are unable to afford homeownership must rely on rental property. But with the vacancy rate currently hovering close to zero, city officials looking to free up long-term supply have focused their attention on short-term rentals.

The City of Vancouver recently enacted new laws to restrict short-term rentals such as Airbnb. Airbnb is a hugely popular, yet controversial, short-term rental platform. It is a trade-off between owner’s rights and changing the fabric of a neighbourhood without community input. Supporters of Airbnb see it as a way to earn supplementary income while critics claim it exacerbates Vancouver’s already problematic rental market.

What’s changing?

Beginning on April 1, 2018, short-term rentals are limited to principal residences and hosts renting out their homes must purchase a $49 annual business license and pay a one-time activation fee of $54.

The license must be displayed on their listing or face a fine of $1,000 per violation. Secondary homes, secondary suites and laneway homes cannot be used for short-term rentals.

What are the tax implications for those offering short-term rentals?

Any income incurred from short-term rentals should be reported to the Canada Revenue Agency (CRA). In the case of Airbnb, there is a great deal of uncertainty on how Airbnb should be taxed for GST purposes.  Airbnb makes the assertion on its website that it always complies with national tax laws. But is that the case when it comes to Canada?

When Airbnb hosts list their property, there is nowhere to list the amount of GST that could be owing.  And from a guest’s perspective, no tax is found anywhere on electronic receipts.  How can GST apply if there is nowhere to account for the tax?

Much of the on-line commentary focuses on a host’s responsibility to charge GST (or to assume that prices are tax included) when total rentals exceed $ 30,000 in any 4 consecutive quarters.  But there is more to the story than meets the eye.  There are obscure rules in the GST legislation differentiating between short-term and long-term accommodation, rules that even some CRA auditors are unaware of.  Do these rules written in 1991 apply to a 2017 Airbnb rental?

The Department of Finance knows that there is a great deal of uncertainty out there.  In response, the CRA plans to release a new GST/HST Info Sheet in the near future to explain the government’s administrative viewpoint on how and when Airbnb rentals will be taxed.

Disclaimer: The information provided in this article is intended for general purposes only. Care has been taken to ensure that information herein is accurate; however no representation is made as to the accuracy thereof. The information should not be relied upon to replace specific professional advice.