CRA indicates that post-closing adjustments to a real estate sale price are generally not subject to an obligation to charge GST/HST

On a real estate sale, the parties normally prepare a statement of adjustments whereby, at closing, adjustments are made for expenses pre-paid by the vendor (e.g., lawn mowing or snow removal fees, property taxes, amenities fees) and for revenues of the vendor, e.g., unearned prepaid rents that should be credited to the purchaser. Regarding whether such adjustments should be regarded as being to the purchase price for the real estate, so that normally no GST/HST should be charged on such adjustments (based on the ETA ss. 221(2) and 228(4) self-assessment rule or a residential real estate exemption), CRA treated this as essentially a question relating to an application of the single-supply doctrine, so that “if an obligation is inextricably tied to the real property itself, then it is likely not a separate supply from the sale of the real property and the adjustment likely increases or decreases the value of consideration” for the real estate, whereas “if it is determined that an obligation giving rise to the adjustment is a separate supply from the sale of the real property that is not incidental to the sale of the real property, then the application of the GST/HST to the adjustment depends on the nature of the separate supply itself.”

Other than adjustments for real property taxes, which it accepted were adjustments to the real estate purchase price, it did not pass on which of the typical adjustments satisfied this test.

However, it went on to indicate that it did not make much difference to the application of this distinction whether the adjustments were made at closing or as a post-closing item.

Neal Armstrong. Summary of 27 February 2020 CBA Roundtable, Q.29 under ETA s. 221(2).