Well, like it or not the HST (Harmonized Sales Tax) is now in effect, as of July 1, 2010. The HST rate will be 12% (5% federal component + 7% provincial component). There’s seems to be lots of confusion around how HST applies to real estate transactions so we have wanted to provide some information here.
Previously under the GST, new housing is taxed while resale housing was not. No housing sales are directly taxed under the PST, although the B.C. Ministry of Finance states that there an average of 2% PST is embedded in the cost of new homes from PST charges on construction materials. Under the HST the full 12% HST would apply only to new housing.
The key points to be aware of are:
- The HST rate will is 12% (5% federal component + 7% provincial component).
- The PST will be eliminated completely.
- The HST only applies to new housing. HST does not apply to resale housing.
- There will be a partial rebate of the provincial portion of the HST of up to $26,250 on new housing.
- Input tax credits will be available for HST in the same manner as under the current GST.
- BC will provide a rebate for new housing purchased as a primary residence to ensure that purchasers of new homes up to $525,000 do not pay any additional tax.
- Real estate services such as real estate commissions and legal fees are now subject to HST.
About the New Housing Rebate
Homes under $525,000 will be subject to a tax 2% higher than the current system. Homes over $525,000 will be taxed at a rate 7% higher than under the current system, less a flat $26,250 rebate (in addition to the GST new housing rebate currently available for homes up to $450,000).
An HST partial rebate (5% of the purchase price up to a maximum rebate of $26,250) will be provided to purchasers on new housing.
The rebate rate was created to ensure that purchasers of eligible new homes priced up to $525,000 do not pay more provincial HST, on average, than under the PST.
Rebate rate: (7% BC HST minus 2% embedded BC PST) / 7% BC HST
Rebate rate = 5/7 = 71.43% of provincial portion of HST paid, to a maximum of $26,250.
Total Sales Tax Payable on New Homes
Total Sales Tax Payable on New Homes
Following are a few links to additional information and resources about the BC HST.
- http://www.bcrea.bc.ca/hst/hstaction.htm
- Canada Revenue Agency’s HST Site for BC
- Provincial Government’s HST Site
If you have any questions about the HST, or anything else regarding real estate, please don’t hesitate to contact Komal or Karn Dodd at 250-744-3301 or email info@KomalDodd.com
