On April 1, 2013, the Harmonized Sales Tax (HST) was replaced by the federal Goods and Services Tax (GST) and the BC Provincial Sales Tax (PST).

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1 HST t PST: Transitin Rules fr Real Prperty A printable versin f infrmatin fund nline at: Last update: January 7, 2015 On April 1, 2013, the Harmnized Sales Tax (HST) was replaced by the federal Gds and Services Tax (GST) and the BC Prvincial Sales Tax (PST). The fllwing questins and answers are intended t prvide clarity regarding sales f new husing at a high level. Fr advice abut specific transactins and situatins, BCREA suggests individuals seek legal and/r accunting advice, as apprpriate. Fr mre infrmatin, see: Canada Revenue Agency GST/HST Ntices: 270, Eliminatin f the HST in British Clumbia in 2013 Questins and Answers (March 2012): 272, Prpsed Enhancements t the British Clumbia New Husing Rebates and New Residential Rental Prperty Rebates (March 2012): 276, "Eliminatin f the HST in British Clumbia in 2013 Transitinal Rules fr Real Prperty Including New Husing" (May 2013): Canada Revenue Agency GST/HST Inf Sheet GI-156, Eliminatin f the Harmnized Sales Tax in British Clumbia: British Clumbia Transitin Tax n New Husing (March 2013): Frequently Asked Questins - PST Transitin Rules 1. Why are transitin rules necessary? Transitin rules determine whether 12% HST r 5% GST will apply t new husing cntracts that start befre April 1, 2013, but cnclude n r after this date. Bth the federal and prvincial gvernments administer their wn set f transitin rules. 2. When des HST apply, and when des GST apply? HST applies if tax becmes payable befre April 1, GST applies where tax becmes payable after March 31, In additin, the BC transitin tax may then apply where cnstructin r substantial renvatin is at least 10% cmplete n April 1, January 7, 2015 Page 1

2 3. Generally, when des the tax becme payable? Except fr the sale f certain residential strata units, the tax is payable n the earlier f the fllwing dates: when the seller transfers wnership (als knwn as the cmpletin date) f the new hme t the buyer, OR when the seller transfers pssessin f the new hme t the buyer under the Cntract f Purchase and Sale. In summary: The 12% HST applies if the seller transfers either pssessin r wnership f a new hme t the buyer befre April 1, The 5% GST applies if the seller transfers bth pssessin and wnership f a new hme n, r after, April 1, Generally, when des the tax becme payable when the transactin invlves a strata unit? The general tax payable rule will apply fr stratas except where the strata plan hasn t been registered as a cndminium by the date pssessin is transferred. The tax payable is then based n the earlier f the fllwing dates: when the seller transfers wnership (als knwn as the cmpletin date), OR 60 days fllwing the date the strata plan is registered. 5. Wh will be respnsible fr paying the GST? As was the case prir t the implementatin f the HST, the seller is respnsible fr charging GST n the sale t the buyer, and must then cllect and remit the tax t the Canada Revenue Agency (CRA). January 7, 2015 Page 2

6. Des the PST apply t real prperty? N.. Hwever, the prvincial gvernment may cllect a temprary transitin tax f 2% if certain cnditins are met. 7. Hw des the temprary transitin tax wrk?

3 6. Des the PST apply t real prperty? N.. Hwever, the prvincial gvernment may cllect a temprary transitin tax f 2% if certain cnditins are met. 7. Hw des the temprary transitin tax wrk? A temprary transitin tax f 2% may apply n the purchase price f a new hme where: HST des nt apply t the sale (that is, GST applies because tax is payable n r after April 1, 2013), the cnstructin r substantial renvatin f the new husing is at least 10% cmplete befre April 1, 2013, and either wnership r pssessin f the new husing transfers, r a deemed sale f the new husing (fr example, a self-supply f an wner-built rental unit) transfers befre April 1, The temprary transitin tax des nt apply t vacant land, mbile hmes that aren t affixed t land, flating hmes, r t sales f new cmmercial units. 8. Hw can I determine the percentage f cmpletin f a new hme? See the fllwing Canada Revenue Agency GST/HST Inf Sheet: GI-105, Hw t Determine the Percentage f Cmpletin fr Purpses f the Prvincial Transitinal New Husing Rebates and the Transitinal Tax Adjustment in Ontari and British Clumbia (July 2010): Nte that the determinatin f the percentage f cmpletin f the cnstructin r substantial renvatin desn t take int cnsideratin the cst f the land upn which the cmplex is situated, because land is generally nt regarded as being cnstructed r renvated. 9. Will the transitin tax apply mre than nce t a particular prperty? N. The BC transitin tax applies nly nce t the sale f new husing r t the sale f a particular interest in the new husing, and nt t subsequent sales. January 7, 2015 Page 3

4 10. Wh pays the temprary transitin tax? The BC transitin tax is payable by the buyer and cllected by the seller n the same date the GST becmes payable. The seller is respnsible t cllect and remit the tax t the CRA. Buyers may wish t ensure that an apprpriate allcatin f the BC transitin tax and BC transitin rebate is factred int negtiatins between the buyer and seller. 11. Hw des the temprary transitin tax wrk when the transactin invlves a strata unit? The general temprary transitin tax cnditins are applicable t sales f strata units; that is, HST desn t apply, cnstructin is 10% r mre cmplete befre April 1, 2013 and pssessin r wnership transfers befre April 1, Again, if the strata plan is nt registered by the date pssessin is transferred, the temprary transitin tax is payable n the earlier f the fllwing dates: when the seller transfers wnership (als knwn as the cmpletin date), OR 60 days fllwing the date the strata plan is registered. 12. Are there any rebates fr sellers related t the temprary transitin tax? Yes, a transitin rebate is available t recgnize that a seller will nt be able t claim input tax credits n PST paid n cnstructin materials acquired after March 31, The rebate is available where the fllwing cnditins are met: the BC transitin tax applies t the sale f new husing, the PST has been paid n 90% r mre f the PST-taxable materials incrprated int the husing after March 2013, the BC transitin tax has been reprted and remitted, AND cnstructin r substantial renvatin is 90% r less cmplete, befre April 1, The transitin tax rebate fr new husing will be calculated n the degree f cmpletin f the husing as f April 1, 2013: Degree f cnstructin cmplete as f April 1, 2013 Less than 25 per cent Equal t r greater than 25 per cent and less than 50 per cent Equal t r greater than 50 per cent and less than 75 per cent Equal t r greater than 75 per cent and nt mre than 90 per cent Greater than 90 per cent Transitin tax rebate as a percentage f cnsideratin r fair market value 1.5 per cent 1.0 per cent 0.5 per cent 0.2 per cent 0.0 per cent January 7, 2015 Page 4

5 Fr mre infrmatin, see the Canada Revenue Agency s GST/HST Inf Sheet GI-157, Eliminatin f the Harmnized Sales Tax in British Clumbia: British Clumbia Transitin Rebate fr Builders f New Husing (March 2013): Hw will the transitin affect the way I prepare r cunter a standard frm Cntract f Purchase and Sale? The BC gvernment has intrduced disclsure requirements fr builders (i.e., sellers) during the transitin perid t clarify the taxes and rebates that are included in the sale price stated in the Cntract f Purchase and Sale. Agreements entered int frm December 1, 2012 t March 31, 2015 must cntain the fllwing prescribed infrmatin: the value f cnsideratin (i.e., purchase price), disclsure f whether tax is inclusive r exclusive f the price, and a breakdwn identifying the amunt and rate f each tax and/r rebate where applicable; a statement that disclses whether r nt the seller is a freign supplier (essentially, a freign supplier is nt resident f Canada); and if the seller is nt a freign supplier, then the fllwing Ntice t Purchaser If (a) bth wnership and pssessin f newly cnstructed r substantially renvated husing transfer n r after April 1, 2013 and (b) either wnership r pssessin f the husing transfer befre April 1, 2015, then the 7% prvincial cmpnent f the HST and the BC HST new husing rebate fr primary places f residences will nt apply, the 2% BC transitin tax may be payable by the buyer, and the supplier may be eligible fr a BC transitin rebate in respect f the husing. NOTE: An alternate Ntice t Purchaser is required where the seller is a freign supplier. Buyers may wish t ensure that an apprpriate allcatin f the temprary transitin tax and transitin tax rebate is factred int negtiatins between the buyer and seller. T facilitate the disclsure f this required infrmatin, REALTORS have available thrugh WEBFrms the fllwing addendums fr use with the Cntract f Purchase and Sale (CPS) during the transitin perid: BC2064 Rev. 5 Apr Cntract f Purchase and Sale f a New Hme Addendum (Seller is a Freign Supplier) befre April 1, 2015 BC2061 Rev. 5 Apr Cntract f Purchase and Sale f a New Hme Addendum (Seller is Nt a Freign Supplier) befre April 1, 2015 A guide, "Cntracts f Purchase and Sale - New Hme Addendums," is als available n WEBFrms t help REALTORS. January 7, 2015 Page 5

6 Fr examples f builder infrmatin requirements, see the Canada Revenue Agency GST/HST Inf Sheet GI-132: Eliminatin f the HST in British Clumbia: Builder Infrmatin Requirements fr the Transitin Perid" (December 2012): NOTE: Special rules apply where agreements were entered int prir t Nvember 18, 2009 and/r cnstructin/substantial renvatin f hmes began befre July 2010 and wnership and pssessin will transfer after April 1, What methds can be used t prvide the buyer with the addendum? There are fur acceptable delivery methds: in persn, curier r registered mail, fax, r any ther means, including , if written cnfirmatin f receipt by the buyer r the buyer s agent is btained. 15. Is there a penalty fr builders wh dn t make the required disclsures during the transitin perid? Yes. A penalty f up t $10,000 per hme (r ne per cent f the purchase price) can be impsed n a builder wh fails t fully and accurately disclse the required infrmatin. In the case f a builder wh knwingly makes a false statement, a penalty f up t fur per cent f the purchase price may be impsed, t a maximum f $40,000 per hme. 16. Des the PST apply t real estate cmmissins? N. If the cmmissin is payable befre April 1, 2013, then it is subject t 12% HST. Cnversely, if the cmmissin is payable n r after April 1, 2013, then the 5% GST applies. This change t the sales tax applicable t real estate cmmissins affects all real estate cmmissins, whether earned in cnnectin with the sale f new hmes, bare land r previusly ccupied residential prperty. January 7, 2015 Page 6

7 17. When des cmmissin becme payable? The standard Multiple Listing Cntract prvides that a cmmissin is payable n the earlier f the fllwing: cmpletin date under the Cntract f Purchase and Sale, OR the actual date that the sale cmpletes. 18. Fr pre-sales, where 50% f the cmmissin (and 50% f the applicable tax n cmmissin) has already been paid by the develper t the REALTOR, but the sale wn t cmplete until April 1, 2013 r later, what tax rate applies n the remaining cmmissin? Assuming the develper wh paid the first 50% f the cmmissin befre April 1, 2013 specifically identified the HST when the payment was made, the REALTOR must submit the tax that was paid in their GST/HST return that cvers the date in which the payment was made. When the develper pays the remaining 50% cmmissin n r after April 1, 2013, nly 5% GST applies n that prtin. If n tax was paid by the develper (that is, the payment was a depsit) n the first 50% f the cmmissin, which was paid t the REALTOR befre April 1, 2013, and the remaining cmmissin is payable n r after April 1, 2013, then 5% GST is payable n the entire amunt f cmmissin. If a particular situatin differs frm the scenaris utlined abve, then BCREA recmmends an individual r cmpany seek specific tax r legal advice. 19. Are there any special rules fr cmmercial prperty? N, thugh the PST will nt apply t cmmercial leases (that is, n and after April 1, 2013, nly 5% GST will apply t cmmercial leases). Fr general applicatin f the GST/HST t cmmercial real prperty sales and rentals, see this dcument: January 7, 2015 Page 7

GI-050 February Residential Care Facilities and the GST/HST Election to Adjust Net Tax for the Self-Supply of a Residential Complex.

GI-050 February Residential Care Facilities and the GST/HST Election to Adjust Net Tax for the Self-Supply of a Residential Complex. GST/HST Inf Sheet GI-050 February 2009 Residential Care Facilities and the GST/HST Electin t Adjust Net Tax fr the Self-Supply f a Residential Cmplex This inf sheet explains the new electin that can be