Do you pay GST/HST when buying a farm in Canada?

Under section 165 of the federal Excise Tax Act, the recipient of a taxable supply made in Canada pays GST/HST on it, subject to the rest of Part IX. A farm is not one supply. The land, the livestock, the equipment and the business itself can each be treated differently, so the answer turns on what is being sold and who is selling it. This page covers the federal tax only.

Farmland sold by an individual

The Canada Revenue Agency’s information sheet on sales of farmland by individuals (dated August 2004) says the sale is usually taxable, although there are limited circumstances when it is exempt. Schedule V, Part I, section 10 of the Act exempts a sale by an individual to a related individual, or a former spouse or common-law partner, when conditions are met. One of them is that the buyer acquires the farmland for the personal use and enjoyment of the buyer or an individual related to the buyer. The CRA gives the example of a sale to a daughter and her husband: it would be taxable if they continue the farm business.

Farmland sold by a corporation, partnership or trust

Section 12 of the same Schedule exempts some sales of farmland to an individual, a related individual or a former spouse or common-law partner by a corporation, partnership or trust. It also lists conditions, including that, immediately after the transfer, the farmland is for the personal use and enjoyment of the individual it was sold to or an individual related to them. Read the section itself, or ask an accountant, before assuming a sale qualifies.

Livestock, and buying the whole farm business

Schedule VI, Part IV, section 1 zero-rates a supply of farm livestock (other than rabbits), poultry or bees that are ordinarily raised or kept to produce, or to be used as, food for human consumption or to produce wool. The CRA also says that where farmland is sold as part of a farming business, the seller and buyer may, if certain conditions are met, jointly elect on form GST44 so that no GST/HST is payable on the sale. Ask your accountant whether the conditions are met before you rely on it.

Bookkeeping after the purchase

The CRA’s guide T4002 says farmers may use the cash method for farming income, but must use the accrual method for GST/HST and QST purposes. Quebec’s QST is not covered here; check the rules where the farm is. For the wider question of GST/HST on a business purchase, see GST/HST when you buy a small business.