GST on Real Estate transactions
How does G.S.T. apply to used residential housing?
It does not. Used residential housing is’ not subject to G.S.T.
How does G.S.T. apply to new residential housing?
G.S.T. is payable on the purchase price of newly constructed or substantially renovated residential homes. Substantially renovated is defined in the legislation as the removal or replacement of most of the house construction components except for the foundation, external walls, interior supporting walls, floor, roof and staircase.
What is the tax rate for G.S.T.?
5%, subject to any rebates, discussed below.
Are there any rebates if the new home is to be the primary place of residence?
First, let us define primary place of residence. This means a home that you own, jointly or otherwise, that you intend to live in on a permanent basis. To be eligible, the intent to use the home as the primary place of residence must be evident at the outset of buying the home. A recreational cottage, an investment property or a property you might retire to in the distant future do not qualify.
If the Purchaser (or a certain related family member) is planning to reside in the new home as their primary place of residence, they may be eligible for a G.S.T. New Housing Rebate. This rebate equals 36% of the G.S.T., but only applies for homes under a certain price point.
Assume the purchase price of a new home is $350,000 excluding G.S.T. The gross G.S.T. is $17,500 (5% of $350,000). The G.S.T. New Housing Rebate is 36% of $17,500, which is $6,300. Thus, the applicable G.S.T. is $17,500 less $6,300, which equals $11,200.
The full G.S.T. New Housing Rebate is available for new homes priced up to $350,000. There is no G.S.T. New Housing Rebate on homes valued at over $450,000.00 so the full 5% will be paid.
For homes valued between $350,000.00 and $450,000.00, the rebate is gradually reduced and is calculated by using the following formula (get ready to brush up on your high school math):
$6,300 x [$450,000 - the purchase price] / $100,000
For example, assume the purchase price of a new home is $400,000 excluding G.S.T. The G.S.T. New Housing Rebate is
$6,300 x [$450,000 - $400,000.00] / $100,000
which equals $3,150. The gross G.S.T. would be 5% of $400,000.00, which equals $20,000.00, less the partial G.S.T. New Housing Rebate of $3,150.00, for a net tax of $16,850.00.
Please note that the Developer may agree in the Contract to credit the Purchaser on completion for the rebate, but not all Developers allow this. If they do not, the Purchaser will have to pay the full 5% G.S.T. on completion and will then have to apply directly to C.R.A. for the G.S.T. New Housing Rebate after closing. This means the Purchaser will have to ensure that they have additional funds to cover the 5% G.S.T. on completion. Note the G.S.T. New Housing Rebate is not available to a corporation or a partnership.
Are there any rental rebates?
If a Purchaser is planning to rent out the new home, they may be eligible for a G.S.T. New Residential Rental Rebate (“G.S.T. NRR Rebate”).
Like the G.S.T. New Housing Rebate, the full G.S.T. NRR Rebate is only available on new homes priced up to $350,000. A partial G.S.T. NRR Rebate is available for homes priced between $350,000 and $450,000. The actual rebate calculations are identical to rebate calculations for the G.S.T. New Housing Rebate.
To be eligible for the G.S.T. NRR Rebate, the Purchaser must meet certain conditions which include:
-the Purchaser must not be entitled to claim input tax credits in respect of any part of the tax payable on the acquisition of the rental unit.
-the rental unit must be a “qualifying residential unit” which means the person applying for the rebate must be the owner of the unit and -the unit must be a self contained residence as defined in the Excise Tax Act;
-the unit must be held by the owner for the purpose of making exempt supplies (for example, a residential tenancy);
-the unit must be used as a primary place of residence by the tenants and must be so used for at least one year and the Purchaser will have to provide a copy of the tenancy agreement showing a term of at least one year.
Please note that the Developer is not allowed to credit the Purchaser on completion with the G.S.T. NRR Rebate. This means the Purchaser will have to pay the full 5% G.S.T. on completion and then claim the G.S.T. NRR Rebate afterwards directly from C.R.A.. The Purchaser will have to ensure that they have the necessary funds to cover the 5% G.S.T. on completion.
What is the Transition Tax?
Where the purchase of a new home is between April 1, 2013 and April 1, 2015, AND the property is at least 10% constructed as at April 1, 2013, Purchasers will pay a temporary transitional provincial tax of 2% on the full purchase price. This tax will not apply if the closing is after March 31, 2015 OR if the construction is not 10% complete as at April 1, 2013. There are no rebates for this tax.
Does G.S.T. apply to new mobile homes and floating homes?
Yes, for a purchase of a newly constructed or substantially renovated mobile home or floating home, 5% G.S.T. will apply on the purchase price of the mobile home or floating home. The Purchaser will be able to claim the various rebates, as applicable.
Does G.S.T. apply to the sale of vacant land by an individual?
Examples of when G.S.T. would be applicable include:
1) the sale of land that is capital property that had been used primarily in a business;
2) the sale of land in the course of a business; and 3) the sale of a parcel of land created by subdividing another parcel into more than two parts
3) the sale of land by an individual that had been kept for personal use would be exempt from G.S.T.
Where can I obtain more G.S.T. information?
For more information on G.S.T. phone Ministry of Finance at 1-877-388-4440 and see and/or phone the C.C.R.A. line 1-800-959 5525 or 1-800-959 8287 specifically for questions about transitional rules and G.S.T. rebates.