Commercial rent in Ontario is subject to 13% HST, made up of the 5% federal GST and the 8% provincial portion. The landlord collects the tax on top of the rent and remits it to the Canada Revenue Agency, and the charge applies to base rent as well as most additional amounts a tenant pays under the lease. Tenants who are registered for GST/HST can generally recover the tax through input tax credits, so for most businesses it flows through rather than sitting as a permanent cost.
What the 13% HST Applies To
The Excise Tax Act requires every person making a taxable supply to collect the applicable GST/HST from the recipient.1Department of Justice Canada. Excise Tax Act RSC 1985 c E-15 – Section 221 Renting out commercial real property is a taxable supply, so every office, retail unit, industrial warehouse, or commercial portion of a mixed-use building leased in Ontario attracts 13% HST on each payment.2Canada Revenue Agency. Commercial Real Property – Sales and Rentals
The tax runs for the full lease term. It applies to scheduled rent escalations, to percentage rent tied to a tenant’s sales, and to any renewal period. Written and oral leases are both caught. A tenant who signs an offer at $25 per square foot should expect the actual monthly invoice to be roughly 13% higher, and it is worth building that into cash-flow projections from the start.
Additional Rent, TMI, and CAM
Base rent is rarely the only line on a commercial invoice. Most leases require the tenant to reimburse the landlord for property taxes, building insurance, and maintenance, and these amounts, often grouped as “additional rent” or “TMI,” are treated as part of the consideration for the rental supply. They are therefore subject to HST.2Canada Revenue Agency. Commercial Real Property – Sales and Rentals That is true even where the underlying cost, like municipal property tax, is not itself subject to HST when the landlord pays it. Once it’s passed through as rent, it becomes taxable.
Common area maintenance charges work the same way. Fees for hallway lighting, elevator service, landscaping, and security get bundled into the taxable amount. Utilities like heat and electricity that the landlord bills as additional rent also attract HST. The invoice adds base rent, operating cost recoveries, and any utility pass-throughs together, then applies 13% on the full total. Budgeting only for base rent plus 13% understates the real monthly outlay.
When a Landlord Doesn’t Have to Charge HST
Not every landlord charges HST. A landlord whose total worldwide taxable revenues, including rent, do not exceed $30,000 over four consecutive calendar quarters qualifies as a small supplier and is not required to register for a GST/HST account.3Canada Revenue Agency. When to Register for and Start Charging the GST/HST An unregistered landlord has no authority to collect HST at all. This mostly affects individuals renting out a single small commercial unit at a modest rate.
Once the landlord crosses the $30,000 threshold, timing depends on how quickly it happened. If revenue exceeded $30,000 in a single calendar quarter, the landlord must register and charge HST on the very supply that pushed them over. If the threshold was crossed over four quarters instead, the landlord stops being a small supplier at the end of the month following the quarter in which it happened, and must register no later than the day of the first supply made after that date.3Canada Revenue Agency. When to Register for and Start Charging the GST/HST Registration must be completed within 29 days of the effective date.
Verify your landlord’s registration status early. If the landlord is not registered, no HST can be charged and there is no input tax credit for you to claim. If the landlord is registered, ask for the nine-digit business number, because you will need it to support your credits.
Recovering the HST Through Input Tax Credits
For most commercial tenants, HST on rent isn’t a final cost. Tenants registered for GST/HST can recover the tax by claiming input tax credits on their regular returns, offsetting HST paid on rent against HST collected on their own sales.4Canada Revenue Agency. Input Tax Credits
The credit is available only to the extent the space is used for taxable commercial activities. A tenant using part of the space to make exempt supplies, like a medical clinic providing HST-exempt health services, can claim only the portion attributable to taxable activities. A tenant that isn’t an HST registrant at all has no recovery mechanism, and the tax becomes a hard cost.
Documents You Need to Keep
The CRA requires specific supporting documents before an ITC can be claimed, and the requirements scale with the invoice amount.5Canada Revenue Agency. Documentary Requirements for Claiming Input Tax Credits Because commercial rent invoices almost always exceed $150, tenants need the top tier:
- The landlord’s name and GST/HST registration number.
- The date, a description sufficient to identify the supply, the terms of payment, and the total amount paid.
- Either the HST amount shown separately, or a statement that tax is included along with the applicable rate.
- The tenant’s name or trade name.
Missing any of these can result in the CRA denying the credit on audit. The documents don’t have to be filed with the return, but they must be retained and available on request.
The Four-Year Claim Window
Most registrants have four years to claim an ITC from the end of the reporting period in which the credit first became available.4Canada Revenue Agency. Input Tax Credits That sounds generous, but it passes quickly. Claim ITCs on the return for the period in which the rent was paid rather than letting them accumulate.
Residential Rent Is Different
If you’re wondering why your apartment doesn’t attract HST but your office does, the Excise Tax Act exempts the lease of a residential complex or unit where an individual occupies it as a place of residence for at least one month.6Department of Justice Canada. Excise Tax Act RSC 1985 c E-15 – Schedule V, Part I Commercial leases receive no such exemption. In a mixed-use building, the landlord must apply HST to the commercial portion and leave the residential portion exempt; getting the split wrong is a frequent audit trigger.
Lease Termination and Surrender Payments
When a tenant pays a landlord to terminate a lease early, or a landlord pays a tenant to surrender the space, the payment is typically not subject to HST. The CRA treats these amounts as the settlement of a claim rather than as consideration for a supply.2Canada Revenue Agency. Commercial Real Property – Sales and Rentals A tenant negotiating an early exit does not need to budget an extra 13% on the termination fee, and a landlord receiving a surrender payment does not collect tax on it. If the payment is structured as compensation for remaining rent instead of as a clean break, the CRA could characterize it differently, so how the termination clause is worded matters.
Renting From a Non-Resident Landlord
If your landlord is not a Canadian resident, a separate federal obligation sits alongside HST. Under the Income Tax Act, a 25% withholding tax applies to rent paid or credited to a non-resident person, and the duty to withhold and remit falls on the tenant or the property manager, not the landlord.7Department of Justice Canada. Income Tax Act RSC 1985 c 1 (5th Supp) – Section 212 If you’re paying a non-resident landlord and no one is withholding, you may be personally liable for the unpaid tax.
A non-resident landlord can reduce the withholding from 25% of gross rent to an amount calculated on net rental income by filing Form NR6 with the CRA, which must be received before January 1 of the tax year or before the first rental payment is due, whichever comes first.8Canada Revenue Agency. NR4 – Non-Resident Tax Withholding, Remitting, and Reporting The withholding is separate from HST. If the non-resident landlord is also an HST registrant, the same rent payment attracts 13% HST and the 25% (or reduced) income-tax withholding, remitted through different processes.
What Happens if a Landlord Doesn’t Remit
Landlords who collect HST but don’t remit on time face both penalties and interest. The late-filing penalty is 1% of the amount owing, plus 0.25% for each complete month the return is overdue, up to a maximum of 12 months.9Canada Revenue Agency. GST/HST Filing Penalties Interest also runs on overdue amounts at a prescribed rate of 7% for 2026.10Canada Revenue Agency. Interest Rates for the Second Calendar Quarter The CRA does not charge a late-filing penalty when no balance is owing, but that is rare for a landlord who has been collecting HST throughout the year.