HST REBATE BREAKDOWN in BC

HARMONIZED SALES TAX & HOW IT APPLIES TO RESIDENTIAL REAL ESTATE by Stu Bell

Goods and Services Tax (“G.S.T.”) for a single sales tax rate of 12%.On July 23, 2009, British Columbia announced it implemented Harmonized Sales Tax (“H.S.T.”) for B.C. effective July 1, 2010. The H.S.T. is a combination of the 7% Provincial Sales Tax (“P.S.T.”) with the 5% federal.

For consumers, goods and services (with some exceptions) is subject to the H.S.T. in the same manner as they are currently subject to GST. This applies to real estate as well.

For both used and new homes, there are some extra costs for buyers or sellers but these are for the services required to buy or sell, not on the price of the home.

Buyers of used residential real estate can expect to pay H.S.T. on items such as home inspectors, appraisals and other such services. Lawyer fees will not change as they have been forced to charge P.S.T. for years.

Sellers of used residential real estate can expect to pay H.S.T. on realtor commissions, and any other services they may use.

H.S.T. has different implications for used residential real estate and new residential real estate. There are also different rules for commercial properties, mobile homes and other types of real estate. Below is an explanation ofeach situation.

USED RESIDENTIAL REAL ESTATE

There is no H.S.T. on the price of used residential real estate, much like the current rules regarding G.S.T. There are

no extra closing costs on the purchase or sale of a used residential house, subject to the comments above.

NEW HOUSING

H.S.T. will be payable on the sale of new or substantially renovated homes, where the Contract of Purchase and

Sale was entered into after November 18, 2009 and both ownership and possession of the home is transferred after

June, 2010. H.S.T. will not be payable on sales of newly constructed or substantially renovated homes where

ownership or possession of the home is transferred before July 2010, or where the Contract of Purchase and Sale is

dated prior to November 18, 2009.

New Housing Rebate

The Provincial Government is proposing a New Housing Rebate (“the Rebate”) to ensure that purchasers of homes

priced up to $525,000 would pay no more tax, on average, than under the current P.S.T.

The Rebate is 71.43% of the provincial component of the H.S.T. paid, up to a maximum of $26,250.00.

To illustrate this, let’s assume a purchaser is purchasing a new home for $500,000.00.

The old GST tax would be $25,000, now with the 12% HST and the appropriate HST rebate the total tax is $35,000.


Note that in the above example the purchaser is paying about $10,000 more with the H.S.T.

Note also that the maximum rebate is $26,250.00 and all purchase prices will get the $26,500 HST rebate back. However, the extra tax will increase dramatically for homes over $525,000.00. Consider the following example for a home priced at $900,000.00. Total taxes with HST = $81,750 vs $45,000 before with GST.

2% more than under the current G.S.T.

The government states that while sales of new homes in B.C. are not directly subject to the P.S.T., building materials used in the construction of homes are subject to the 7% P.S.T. The total amount of P.S.T., on average, embedded in the selling price of a new home is estimated to be equal to two percent. As a result, the government claims that purchasers of homes priced up to $525,000 would pay no more tax, on average, than under the current P.S.T. This of course assumes that the price of homes drop 2% due to the elimination of P.S.T. on building supplies.

The new housing rebates would be federally administered in a manner similar to the G.S.T. rebates for new housing.Using the above example, the purchaser of a new home priced at $900,000 will pay an additional $36,750.00 with H.S.T.

Individuals would be able to file an application for the rebate directly with the Canada Revenue Agency. However, in the case of homes sold by the builder, similar to the G.S.T. new housing rebates, the builder would have the option of paying or crediting the new housing rebate to the purchaser at the time of purchase.

More clarification for you on the HST rebate. There is also a federal rebate for GST but it is only available to a maximum of 450k.

• Resale homes are exempt from the 5% GST.
• New homes are subject to the 5% GST. New home buyers can apply for a rebate of the 5% GST applicable to the purchase price to a maximum of $8,750 for homes costing less than $350,000 before GST.
• For new homes priced between $350,000 and $450,000 before GST, the GST rebate would be reduced proportionately.
• New homes priced at $450,000 or higher (before GST) would not receive a rebate.

To calculate the total taxes on a purchase you are considering open this link:


http://www.rodfriesen.com/hst-rebate-calculator.html?fmv=265000&newhome=Yes&firstbuyer=No


If you have any questions about Vancouver Real Estate please feel free to contact me anytime at 604.562.0532 or write stu@stubell.com.