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RTG:175 Farming Income

For Historical Reference Only

Effective April 1, 2013, the Province of Prince Edward Island adopted the harmonized sales tax (HST).  HST replaces the former provincial revenue sales tax (PST).  The information provided on the provincial revenue sales tax (PST) is presented for historical reference only. Please refer to the Canada Revenue Agency for assistance with the application of the HST.

 

September 2007
(Revised June 2008)

This guide provides information on the calculation of gross annual income from farming.

PDF Version:
RTG:175  Farming Income

 

LEGISLATION

Revenue Tax (PST)


The Revenue Tax Act provides for an exemption from PST on purchases of machinery and equipment (including parts therefore), as defined by regulation, when purchased

  1. by a farmer who holds a valid Revenue Tax Exemption Permit, and

  2. for farm use, and not for any other commercial operation.

A “farmer” is defined in the Regulations to the Revenue Tax Act, and includes:

  1. an individual, corporation or partnership that is actively engaged in farming or custom agricultural contracting, and earns at least $10,000 or 25 per cent of his or her gross annual income from farming and from custom agricultural contracting, or

  2. an individual, corporation or partnership that is registered in the Future Farmer Program.

Property Tax

A bona fide farmer may qualify for a Farm Assessment pursuant to the Real Property Assessment Act.

A “bona fide farmer” is defined in the Real Property Assessment Act, and includes:

  1. an individual, corporation or partnership that owns a farm, is actively engaged in farming, and earns at least $10,000 or 25 per cent of his or her gross annual income from farming, or

  2. an individual, corporation or partnership that owns a farm and is registered in the Future Farmer Program.

 

DETERMINATION OF GROSS ANNUAL INCOME FROM FARMING

In order to determine if an individual, partnership or corporation meets the above definitions of a farmer, the individual, partnership or corporation must provide Finance, Energy and Municipal Affairs with the most recent income tax return(s), including Schedules and Notice(s) of Assessment and a copy of the most recent financial statements, where applicable.

In those situations where the individual, partnership or corporation does not meet the above definitions of a farmer based on the most recent financial information, Finance, Energy and Municipal Affairs will determine gross annual income from farming based on financial information from the last four years. This is done based on a calculation using average gross annual income and average gross annual income from farming for the last four years. This calculation will determine the gross annual income from farming for the purposes of the definitions above.

In order to perform this calculation, Finance, Energy and Municipal Affairs must be provided with copies of the income tax return(s), including Schedules and Notice(s) of Assessment and copies of the financial statements, where applicable, for the most recent year and the previous three years.

For PST and property tax purposes, income from the following sources are not considered to be income from farming:

  • sale of sand, gravel, and shale

  • sale of harvested wood

  • sale of farm equipment

  • rental of farm equipment without an operator

  • snow removal training, racing, handling, or boarding of horses

  • keeping of riding stables

 

FURTHER INFORMATION:

For copies of the Revenue Tax Act and Regulations and any inquiries regarding this Revenue Tax Guide, please contact:

Taxation and Property Records Division
Finance, Energy and Municipal Affairs
P.O. Box 1330
Charlottetown, PE
C1A 7N1
Telephone:
Fax:
Email:
Website:
(902) 368-4070
(902) 368-6164
taxandland@gov.pe.ca
www.taxandland.pe.ca

This guide is prepared for information purposes only, and should not be considered a substitute for the applicable statutes. Should there be any conflict between the contents of this guide and the statutes, the statutes shall prevail.

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