Frequently Asked Questions
2. Are there any special tax requirements if my business is located in the downtown Business Improvement Area (BIA)?
3. Are home-based businesses taxed?
4. How is Commercial Realty Tax for commercial property owners calculated?
5. How does the assessment process work for commercial property owners?
6. As a commercial property owner, what happens if I have vacant space in my building?
7. How often are commercial property assessments conducted for the calculation of the Commercial Realty Tax?
8. What are the Commercial Realty Tax rates that I will have to pay?
9. How often do I pay Commercial Realty Taxes and is there a penalty for late payment?
10. Can my business be exempt from any taxes?
11. Where can I get additional information about assessments and taxation?
If you are leasing the space for your business you will not pay commercial tax to the City of St. John’s.
If you are the owner of commercial property in St. John’s you will pay a flat property based tax called Commercial Realty Tax.
If your business is located in the downtown Business Improvement Area (BIA) you will be charged a levy as determined to a maximum of $4,000.
The Downtown St. John’s Business Improvement Area was established in 1989. This area is bounded by Temperance Street in the east to Springdale Street in the west; the Waterfront to New Gower Street; Queen’s Road and Duckworth Street. For more information on the BIA, contact the Downtown Development Commisson.
If your business occupies less than 25 per cent of the area of your home then you will not pay any Commercial Realty Tax and will pay 100 per cent Residential Realty Tax. If your business uses more than 25 per cent of the area of your home it will be considered mixed use property and charged an appropriate percentage of Residential Realty and Commercial Realty Taxes. A Water Tax is also applied at the residential rate of $615.00 per unit per annum.
An assessment process is used to evaluate property for the purpose of calculating taxes. Commercial Realty Taxes are calculated as a percentage of the total assessed value of the property.
Commercial property assessments in the City of St. John's are calculated on the following:
- Cost Approach - Reproduction cost new of the buildings, less depreciation, plus the market value of the land.
- Market Approach - Analysis of sales of comparable properties which have taken place in the market, and application of this data to the subject property.
- Income Approach - Capitalization of the net operating income of an income producing (rental) property, through the analysis of vacancy, rents, expenses and capitalization rates.
After having determined the values arrived by application of each approach, the assessor may correlate all of these approaches in the determination of the final value estimate. Different weight may be given to each approach, depending on the degree of applicability on the basis of the type of property and information available.
The City of St. John’s has designed a vacancy allowance to ensure property owners are not penalized if they have vacant property. Vacancy allowances are based on the leasable area of your property. For example, if an entire property is vacant and being actively marketed you could claim a vacancy allowance for 50 per cent of the total Commercial Realty Tax for the period of the vacancy. Commercial property owners wishing to claim an allowance must complete and submit the Commercial Property Tax Allowance Claim(FIN-1004) on a quarterly basis.
Under normal circumstances, a re-assessment is conducted every three years on all property located within the City. If a supplementary assessment is required in the interim, as a result of a change in value or for another reason that the assessor may deem necessary, it becomes applicable on the effective date indicated on the Notice of Assessment.
Tax rates are commonly referred to as mil rates, a mil represents $1 for every $1,000 of assessed value on property. Tax rates and fees levied by the City of St. John's are available in the Living in St. John's section under City Services - Assessment and Taxation.
Sample Commercial RealtyTax Calculation (for illustrative purposes only)
Commercial Realty Tax is applicable to commercial property owners and is calculated based on a specific formula. For the most general cases the following formula is used: Assessed Value of Property x Mil Rate = Annual Tax Amount
For example, if a property is assessed at a value of $500,000 and the applicable mil rate is 26.20 or 2.62%, the annual tax amount would be $13,100.
$500,000 X .0262 = $13,100
Therefore, a mil rate of 26.20 represents $26.20 for every $1,000 of assessed property value.
Taxes are payable quarterly in arrears, which means you would pay for January through March in April. There is a late payment interest rate of 1.25% per month, compounded. Commercial water tax is also billed quarterly.
Registered charities which own their own building are exempt from Commercial Realty Tax and only pay the Water Tax on their property. Commercial property owners can claim a vacancy allowance if they lease to a registered charity.
Commercial property owners can claim a vacancy allowance if they lease to a daycare. Daycares which own their own building can also claim an allowance.
Commercial property owners wishing to claim a tax allowance must complete and submit the Commercial Property Tax Allowance Claim (FIN-1004).
In addition, Section 8 of the St. John's Assessment Act outlines the properties and businesses that are, or may be, exempt from property taxes. It should be noted that Mobile Vendors, e.g., “fish-and-chip” vans and tables operated at a flea market, are not assessed and, therefore, do not pay taxes. However, they do pay permit fees.
The publication Operating a Business in the City of St. John's: A Guide to Municipal Regulations provides a general overview of the regulations, permits, processes, and taxes as they apply to businesses in St. John’s. The guide is presented in an easy question and answer format.
Further information on municipal taxes is available on the City of St. John's website in the Living in St. John's section under City Services - Assessment and Taxation.