HST and RESALE Residential Property
There will be NO HST payable on the sale price of any resale of residential homes.
New Construction Homes
HST rules about new construction homes are a little more complex. HST applies on all new construction homes. However, the provincial and federal governments provide a rebate towards the HST. Large builders factor both the HST and the HST rebate into the purchase price of the home. When a buyer purchases a home from a builder at a purchase price of $400,000, that 400,000 purchase price includes both the HST and the HST rebate.
In order to qualify for the rebate automatically with the builder, the home must be the primary residence of the purchaser or the primary residence of a blood-relative such as a parent, sibling, or child. However, not all family relations will qualify as a blood relative. For example, the automatic rebate will not apply if the home is used as the primary residence of a cousin.
If the purchaser is using the property as an investment property and will be renting the property to a third party, the purchaser will not qualify for the rebate automatically. Instead, the purchaser will have to pay the full amount of the HST on closing. Because the rebate was already calculated into the original purchase price, the purchaser will have to pay the equivalent of the rebate amount in addition to the agreed purchase price to the builder on closing. Then, when the purchaser has a signed one-year lease agreement with a tenant, the purchaser can apply to the CRA directly for the HST rebate.
The difference between the home being a primary residence and an investment property affects the timing of the rebate. When it is a primary residence of the purchaser or a blood relative, the purchaser obtains the rebate automatically. When it is an investment property, the purchaser has to pay the full HST up front and the wait until they have a signed one-year lease to obtain the rebate from the CRA. The following link is the CRA rebate application and some useful information:
HST and Purchase of Vacant Lots
Normally there is 3 scenarios that can take place and they are as follows:
FARMLAND: HST will apply to the price if it is simply land only, however if the land is sold as part of a farming business, it can be treated in a different way. It is best to either verify or consult with an accountant and/or tax professional.
BUILDING LOT: HST will apply if the seller is involved in a commercial real estate activitiy, however it may be exempt if the seller is not engaged in real estate commercial activity. It is best to consult your real estate lawyer, accountant and/or tax professional.
PERSONAL USE OF VACANT LAND: No HST is payable if an individual sells vacant land for personal use.
HST on Vacation Homes and/or Cottage
HST will NOT apply on the purchase price if the property purchased is for personal use only. However if the seller has rented out the subject lands for more than 50% of duration of his ownership than the price will most likely be subject to HST. If this property is part of a rental pool than this too will be subject to HST. Please ensure to contact an accountant and/or tax professional for confirmation.
HST on a Purchase of a Substantially Renovated Home
If the purchase of a home has been renovated more than 90% of the interior of a building excluding foundation, external walls, internal supporting walls, roof, floors and staircases than this should be treated as a purchase by a builder whereas HST will generally apply. See Canada Revenue Agency (CRA) Bulletin B-092. http://www.cra-arc.gc.ca/E/pub/gm/b-092/README.html
HST on Real Estate Commissions
HST is applicable on all real estate commission due on a sale transaction.
HST and Mortgage Broker Fees
HST does NOT apply since mortgage broker services are exempt as part of the financial services industry.
HST on Monthly Condominium Fees and/or Common Association Fees
For residential condominiums HST will NOT apply on monthly common expenses and/or common association fees. HST is applicable to commercial (retail office, industrial) common expenses.
HST and Rent Paid by Tenants
For residential leases and/or tenancies HST will NOT apply to the monthly rental payments. HST will be charged to any commercial leases.
HST on Home Renovations
For any services rendered by a contractor HST will be applicable.
HST on Assignment for an Offer to Purchase
Typically when dealing with a resale of a residential home NO HST is applicable, however there are certain situations where HST can apply. Where a person enters into a purchase and sale agreement with a builder for the construction and sale of a new house, the person may be entitled to assign their rights and obligations under the agreement to another person (an assignee). Generally, the result of the assignment is that the purchase and sale agreement is then between the builder and the assignee. Certain factors determine whether or not HST applies on the assigned purchase price. See Canada Revenue Agency (CRA) GI-120 for detailed information or consult with your real estate lawyer.
HST and Purchase of a RESALE of Multi Unit Residential (Apartment Building)
NO HST is applicable to a resale of a multi-unit residential home, however if part of the building is being used as commercial space than the purchase price must be apportioned between residential and commercial. The commercial component will be subject to HST.
HST and Purchase of Commercial Properties
HST will apply to any purchase of commercial properties.