HST Info
This is sourced directly from the BC Governement's website addressing HST and Real Estate in BC.
To read more see: http://www.gov.bc.ca/hst/faq.html
New Housing Rebate
Q. Will there be a rebate for new housing?
B.C. will provide a rebate for new housing purchased as a primary residence. The government announced on Nov. 19, 2009 that the threshold for the new housing rebate will be increased to $525,000 from $400,000.
The new housing rebate will ensure that, on average, purchasers of eligible new homes up to $525,000 will not pay any more provincial tax due to harmonization than is currently embedded as PST in the price of a new home.
Purchasers of new homes above $525,000 will be eligible for a rebate of $26,250 (i.e., a rebate on the first $525,000 or value).
The rebate will be available whether the new housing is to be owner occupied or rented.
Q. If the point of the rebate is to ensure that no additional tax is paid on new housing, why isn’t it 100 per cent?
Under the current PST system
New housing is not directly subject to PST (i.e., a purchaser of a new home does not pay PST on the purchase price).
However, builders have to pay PST on most construction materials (e.g., wood, cement, plaster, nails, etc.) that are used to build a home. This PST is part of the cost of building the home and is included (or “embedded”) in the total selling price of the home.
It is estimated that the embedded PST in new homes in British Columbia is-on average-equal to about 2 per cent of the price (i.e., equivalent to a PST rate of about 2 per cent).
New HST system
Unlike the PST, under the HST there will not be embedded tax in the cost of new homes because builders, like most other businesses, will recover HST they pay on their materials through input tax credits.
Without a rebate, the provincial tax on new homes would effectively increase from about 2 per cent on average (current embedded PST) to 7 per cent (provincial portion of HST).
To ensure purchasers of eligible new homes up to $525,000 will pay no more tax on average than under the current PST, B.C. will provide a new housing rebate.
The rebate will be 71.43 per cent of the provincial HST paid, up to a maximum rebate of $26,250.
Rebate rate calculation: 7 per cent HST payable minus 2 per cent PST embedded in price / 7 per cent HST
Examples of 7 per cent Provincial Portion of HST Payable on New Homes
|
Price of New Home |
Current 2 per cent Embedded PST |
After Harmonization |
|
|
$200,000 |
$4,000 |
HST (7 per cent provincial portion) |
$14,000 |
|
$400,000 |
$8,000 |
HST (7 per cent provincial portion) |
$28,000 |
|
$525,000 |
$10,500 |
HST (7 per cent provincial portion) |
$36,750 |
|
$800,000 |
$16,000 |
HST (7 per cent provincial portion) |
$56,000 |
Q. Why is the maximum rebate $26,250?
B.C. will provide a partial rebate for new housing purchased as a primary residence to ensure that purchasers of new homes up to $525,000 do not, on average, pay any more tax due to harmonization than is currently embedded as PST in the price of a new home.
Purchasers of new homes above $525,000 will be eligible for a rebate of $26,250 (i.e., a rebate on the first $525,000 of value).
The $525,000 threshold is above the average price of new housing in B.C. in 2008.
Q. Which types of new home are eligible for the rebate?
New housing rebates will be available for the provincial component of the HST paid for all types of housing eligible for GST new housing rebates. Qualifying housing will generally include the following types of newly constructed and substantially renovated homes used as a primary place of residence by an individual or qualifying relation of the individual:
- purchase of new houses together with land;
- purchase of new houses together with leased land;
- purchase of new mobile homes and floating homes;
- houses acquired through the purchase of qualifying shares in a housing co-op; and houses constructed or substantially renovated by the owner who is an individual (i.e., owner-built homes).
The new housing rebates will be subject to the same eligibility conditions as new housing rebates under the GST.
[Additional information about the new housing rebate]
Q. How will the HST apply to the sale of new homes where construction begins before the HST is implemented on July 1, 2010?
Transitional rules relating to the application of the HST on new housing were released on November 18, 2009.
Generally, sales of newly constructed or substantially renovated homes will be grandparented – that is not subject to the provincial portion of the HST – if the written agreement of purchase and sale is entered into on or before November 18, 2009 and both ownership or possession of the home is transferred after June 2010.
Sales of new homes where ownership or possession of the home is transferred before July 1, 2010 will not be subject to the provincial portion of the HST.
[More information on the transitional rules for residential real property]