Understanding the closing costs associated with a property purchase is crucial when planning your finances to purchase. It is always a wise idea to clarify your closing costs and taxes with a certified tax specialist or a lawyer, but today I wanted to debrief you on the basics of Goods and Services Tax on the purchase of a home in BC.
“What is the GST on a real estate purchase in BC?”
British Columbia Goods and Services Tax (GST) is a 5% tax you pay on goods or services for personal use and enjoyment. Goods and Services Tax is charged on top of the purchase price of the home. Always be sure to check if your contract included full sales taxes. If taxes are included in your purchase price then GST has already been factored in. Make sure that your lawyer or notary knows this to avoid being double charged.
“In what situations would I expect to pay GST on a real estate purchase”
Purchasing a presale or newly constructed unit
Substantially renovated homes
Sale of vacant land
New mobile homes
A property that is being used for vacation rentals
“Who pays the GST?”
In a residential real estate purchase of a new home in BC, the Buyer is the one who is responsible for paying Goods and Services Tax at the time of completion.
The seller (or developer) does not usually pay Goods and Services Tax on new homes, but in some cases the developer may offer to pay GST as a purchase incentive.
An assignment contract is where the original buyer (assignor) of the presale unit assigns their contract to a new buyer (assignee). In this scenario, the assignee is the one that is responsible for paying GST on the purchase of the property. The assignor would not usually be responsible for GST on the purchase, but would be responsible for paying any capital gains on the profit made from the sale. It is always important to clarify this when negotiating an offer to purchase.
“Define a new or renovated home.”
A “new home” means a building, or portion of a building, that is newly constructed or being constructed and is intended for residential occupancy. It is important to clarify whether the new home is being sold by the developer or if it had already been purchased and had GST paid by the purchaser during the presale process.
A “substantial renovation” is when at least 90% of the interior of a building has been removed or replaced. This is with the exception of certain structural components (the foundation, external walls, interior supporting walls, roof, floors and staircases).
New Home GST Rebates:
- GST New Housing Rebate
- GST New Residential Rental Rebate
GST New Housing Rebate:
New home buyers can apply for a rebate for the 5% GST if the purchase price is $350,000 or less. The rebate is equal to 36% of the Goods and Services Tax to a maximum rebate of $6,300. There is a proportional GST rebate for new homes costing between $350,000 and $450,000. There is no rebate for homes priced at $450,000+.
GST New Residential Rental Rebate
To be eligible for the NRRP rebate:
The fair market value on the qualifying residential unit must be less than $450,000. This is when the tax was payable on the purchase or self-supply of the property. For land or a site in a residential trailer park, the fair market value must be less than $112,500. The rental accommodation or land must be intended for long-term use as a residence.
For more information about GST charged on vacation rentals: please click here
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Speaking to a professional about GST is essential. Please always verify the accuracy of this information through your own due diligence. Nicole McWilliams will assume no responsibility or liability for the accuracy of the information within.
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