A short-term rental is all or part of a dwelling unit rented out for a few weeks or days in exchange for payment. This includes bed and breakfasts (B&Bs) but excludes hotels and motels. It also excludes other accommodations where there is no payment.
Short-term rental operators are people renting their homes or rooms on a short-term basis.
Transient occupants or guests are defined as people who rent out a place other than their permanent place of residence for a short-term period.
There is no general maximum length of stay in Canada as the maximum number of days of rentals varies from city to city. But it is usually for about 28 days to 30 days.
The city of Toronto restricts the maximum length of stay to less than 28 days while Montreal and Quebec have a maximum length of stay of fewer than 31 days.
There is no national rule regarding short-term rental in Canada instead Canadian law allows local municipalities to restrict short-term rental.
Some cities and other local jurisdictions also regulate short-term rentals in areas such as the type of structure allowed for the rental, registration, permits, taxes, HOA bans, length of stay, etc.
Ensure that you check with your local jurisdiction for the local rules that govern short-term rental in your city.
The income from your vacation rental can either be charged as rental income or business income depending on the service rendered. Usually, you will be considered to have earned rental income when you rent space and provide essential services such as heat, light, parking, and laundry facilities and you will be required to report your income on form T776 (Statement of Real Estate Rentals) and declared on line 12600 of your personal income tax return as passive income but if you fall in this category yet have more than one property as Airbnb, your income is considered as a business income alongside operators who provide additional services such as meals, security, and cleaning. Your income should be declared on line 13500 of form T2125 to the Canada Revenue Agency (CRA) irrespective of the city where you are located.
Rental income is subject to GST/HST. While STR operators whose income is classified as business income and rental income that exceeds $30,000 in four consecutive quarters are required to register for GST/HST, charge their guests for the tax, and remit the tax to the CRA.
Deductible tax expenses that are directly related to the home-sharing such as; cleaning costs, maintenance costs, advertising costs, interest on a mortgage, (although the principal payments cannot be deducted), insurance costs, souvenirs for guests (such as books, snacks, bottles of wine), property tax, gas bills, electricity bills, water bills, STR permit fees, referral fees, etc. are allowed as long as you keep a detailed record that supports the expenses incurred to earn rental income. GST/HST registrants are also allowed to claim GST/HST on expenses (e.g., advertising, referral fees, etc.) and pay GST/HST on a net basis.
Capital Expenses such as the cost of buying a washing machine or refrigerator etc. are spread over the life of that asset and are based on capital cost allowance rates prescribed by the CRA.
There is no national permit, license, or registration for short-term rental owners in Canada, instead, you may be required to apply for tax permits at multiple levels of government and register for host licenses and other licenses in your local jurisdiction.
It is important to check with both state and local authorities for the necessary registrations. Check your sub-national jurisdiction page on this website to access the latest information on the laws and regulations that applies to your short-term rental properties in Canada.
There are quite a number of national short-term rental associations online that you may consider joining but you are not mandated to join any of the associations. The various websites of the national associations are;
Canadian Short-Term Rental Host Association
Short-Term Rental Alliance Directory
For further information, please contact;
Canada Revenue Agency
Canada Tourism Agency
Address: 800 - 1045 Howe Street
Vancouver, British Columbia
Canada V6Z 2A9
Lodge compliance is not a licensed tax or financial advisor. Therefore nothing in the above article should be construed as tax, legal, or financial advice. Contact your local tax office for information regarding your personal circumstance.