An investor acquires a commercial retail unit in Ottawa that has been previously used for commercial purposes for less than 5 years. The agreement specifies the purchase price as $1,200,000 plus HST. The investor plans to lease the unit to a tenant for their business. Which of the following best describes the HST implications for this transaction?

Question: An investor acquires a commercial retail unit in Ottawa that has been previously used for commercial purposes for less than 5 years. The agreement specifies the purchase price as $1,200,000 plus HST. The investor plans to lease the unit to a tenant for their business. Which of the following best describes the HST implications for this transaction?

Answer options: ✅ The investor must pay HST on the purchase price, but can recover it as an Input Tax Credit (ITC) if registered for HST.

• The sale is exempt from HST because it is a commercial property.
• The investor must pay HST on the purchase, and this HST is a non-recoverable cost that adds to the property's basis.
• HST is not applicable as long as the property has been used commercially for any period prior to the sale.

Correct answer: The investor must pay HST on the purchase price, but can recover it as an Input Tax Credit (ITC) if registered for HST.

Explanation: The sale of a commercial property by a registrant is generally subject to HST. An investor who acquires such a property for commercial activities (like leasing it out) and is an HST registrant can typically claim an Input Tax Credit (ITC) to recover the HST paid on the purchase, effectively making the HST cost-neutral.