GST Returns to Real Estate in British Columbia

On April 1, the HST (Harmonized Sales Tax) ended in British Columbia, replacing the HST with PST (Provincial Sales Tax) and GST (Goods and Services Tax).

New home sales are now subject to the federal government’s 5% GST but there are transition rules and exceptions that may apply.

The transition rules that have been set up determine whether the 12% HST or 5% GST will apply to new housing contracts that start before April 1, 2013 but conclude some time after that date.

Both the federal and provincial governments have their own transition rules.

Generally, the 12% HST applies if the seller transfer either possession or ownership of a new home to a buyer before April 1, 2013 and the 5% GST applies if the seller transfers both possession and ownership of a new home on or after April 1, 2013.

The same rule above applies for stratas except where the strata plan has not been registered as a condominium by the date possession is transferred. In that case, the tax payable is based on the earlier of:

  • when the seller transfers ownership (the completion date), or
  • 60 days following the date the strata plan is registered.

Although the PST will not be charged on property as of April 1, 2013, the provincial government may collect a temporary transition tax of 2% if certain conditions are met:

* HST does not apply to the sale, the construction or substantial renovation of the new housing is at least 10% complete before April 1, 2013, and
* either ownership or possession of the new housing transfers before April 1, 2015.

Real estate commissions payable on or after April 1, 2013 will be subject to only the 5% GST.

Frequently Asked Questions - PST Transition Rules

  1. Why are transition rules necessary?

  2. When does HST apply, and when does GST apply?

  3. Generally, when does the tax become payable?

  4. Generally, when does the tax become payable when the transaction involves a strata unit?

  5. Who will be responsible for paying the GST?

  6. Does the PST apply to real property?

  7. How does the temporary transition tax work?

  8. How can I determine the percentage of completion of a new home?

  9. Will the transition tax apply more than once to a particular property?

  10. Who pays the temporary transition tax?

  11. How does the temporary transition tax work when the transaction involves a strata unit?

  12. Are there any rebates for sellers related to the temporary transition tax?

  13. How will the transition affect the way I prepare or counter a standard form Contract of Purchase and Sale?

  14. What methods can be used to provide the buyer with the addendum?

  15. Is there a penalty for builders who don’t make the required disclosures during the transition period?

  16. Does the PST apply to real estate commissions?

  17. When does commission become payable?

  18. For pre-sales, where 50% of the commission (and 50% of the applicable tax on commission) has already been paid by the developer to the REALTOR®, but the sale won’t complete until April 1, 2013 or later, what tax rate applies on the remaining commission?

  19. Are there any special rules for commercial property?

Brian and Myles have taken specialized training in how GST, PST and transitional HST applies to new construction and are happy to email you answers to these frequently asked questions. They can walk you through the entire process and provide you with a definitive figure as to what your home will cost. They can provide you with the tax forms, and advise you as to whether or not you qualify for a rebate (if you purchase a new home to live in, or acquire a new construction for rental purposes - you qualify for a rebate. If you purchase a new secondary residence or recreational property - you do not). Let McCullough Marketing assist you with your new construction needs.