Before you sell a commercial property in Canada, it’s worth understanding the tax side, because the cheque you get at closing isn’t what you keep. Two things matter most: capital gains and the recapture of depreciation you’ve claimed over the years. Here’s a plain-English overview.
This is general information, not tax advice. Talk to an accountant about your specific situation.
Capital gains: the 50% inclusion rate
If you sell for more than your adjusted cost base, the profit is a capital gain. In Canada, 50% of a capital gain is included in your taxable income (the proposed increase to two-thirds was cancelled in 2025, so the inclusion rate remains 50%). You then pay tax on that included amount at your marginal rate. On a large commercial gain, this is a meaningful number worth planning for.
CCA recapture: the surprise that catches owners
If you claimed capital cost allowance (depreciation) on the building over the years, selling can trigger recapture. When the sale price brings the building’s value back above its remaining undepreciated capital cost, the CCA you previously deducted is “recaptured” and added back to your income, taxed as ordinary income, not at the lower capital-gains treatment. Owners who depreciated aggressively are often surprised by this.
A simplified example
| Item | Amount |
|---|---|
| Original building cost | $1,000,000 |
| CCA claimed over the years | $200,000 |
| Undepreciated capital cost (UCC) | $800,000 |
| Sale price (building portion) | $1,300,000 |
| Recapture (added to income) | $200,000 |
| Capital gain (50% taxable) | $300,000 |
Illustrative and simplified; land, allocations, and your own numbers change everything.
Don’t forget GST/HST
Sales of commercial real estate in Canada are generally subject to GST/HST. In many deals a registered buyer self-assesses the tax rather than paying it to the seller, but it still needs to be handled correctly at closing. Your accountant and lawyer will structure this.
The bottom line
Between the 50%-inclusion capital gain, CCA recapture taxed as income, and GST/HST, the tax on a commercial sale deserves planning before you sign. Model your net-after-tax number with an accountant so the sale price you accept is the one that actually works for you.
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Frequently Asked Questions
How are capital gains taxed on commercial property in Canada?
50% of the capital gain is included in your taxable income and taxed at your marginal rate. The proposed increase to a two-thirds inclusion rate was cancelled in 2025.
What is CCA recapture?
If you claimed capital cost allowance (depreciation) and later sell above the building’s undepreciated capital cost, the deducted CCA is recaptured and added back to your income, taxed as ordinary income.
Do I pay GST/HST when I sell commercial property?
Generally yes; commercial real estate sales are usually subject to GST/HST, though a registered buyer often self-assesses it. Your accountant and lawyer handle the structure.
How can I reduce the tax on a commercial sale?
Planning matters, from timing to how the price is allocated between land and building. Talk to an accountant well before you sell.
Is a cash sale taxed differently?
No. The tax treatment depends on the gain and recapture, not on whether the buyer pays cash. A faster close doesn’t change the tax, but it does let you plan the timing.
Should I get advice before selling?
Yes. Model your net-after-tax proceeds with an accountant so you know what you’ll actually keep before you accept an offer.