From 16 August 2012 all rental payable under commercial leases will potentially become liable to GST.
The general rule under the Goods and Services Tax (Jersey) 2007 is that if a landlord is registered or registerable for GST, then GST is chargeable on rental in a lease of commercial property. When the GST law came into effect, grandfathering provisions were agreed which meant that where a lease was entered into before 17 August 2007, rental or other supplies under a lease would not incur a GST liability for a period of five years from that date or until the lease was varied, whichever was earlier.
Therefore, from 16 August 2012, all rental payable under commercial leases will potentially become liable to GST, and this is irrespective of whether the landlord can recover that additional 5% from his tenant or not. The problem is that a lot of leases created before the GST law came into effect are silent as to whether the tenant has a liability to pay any future taxes imposed.
Landlords should, therefore, ensure that their leases are reviewed to see whether they do provide for the recovery of GST, and if there is any doubt they should look to cover the position with their tenants. Failing which, there is the risk that they will have the liability to deduct the GST from the rental and therefore effectively lose 5% of their rental income.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.