HST Transition: More Home, Less Tax

February 17, 2012  |  By
New home development blueprints

Ever since a provincial referendum did away with the Harmonized Sales Tax (HST) in August 2011, BC’s residential construction industry has been urging a quick transition to whatever comes next. Developers, builders, suppliers and new home marketers noted that large numbers of buyers were waiting on their purchases, thinking that the end of the HST might save them considerably on new homes over $525,000.

It will.

BC will return to the PST on April 1, 2013. 

The government has now announced its action plan. It comes with measures to prevent any market upheavals that could result from a sudden switch-over. It also addresses the new market realities of sky-high real estate prices and an uncertain economy outside the major metropolitan areas of Vancouver and Victoria.

Effective now

  • New purchase agreements must not include the transition tax

Effective April 1, 2012

  • New homes up to $850,000 will be eligible for a rebate of up to $42,500
  • New second homes outside Vancouver and Victoria up to $850,000 will be eligible for a rebate. (Note: Homes from Squamish north, from Chilliwack east, the Sunshine Coast and the Gulf Islands are eligible.)
  • New homes over $850,000 will get the full rebate and be taxed 2 per cent on the rest

Here’s how the transition from HST back to PST will affect new home buyers, and all the people who plan and build those new homes for them.

New Housing Transitional Rules

On Feburary 17th, 2012 the Government announced the transitional rules for returning to the PST. Below you will find information as well as the detailed tax information notice on these rules.

The housing transition rules help ensure when people buy a newly constructed home under the PST, whether built entirely under the HST, entirely under the PST, or partly under HST and partly under the PST, they will all pay a consistent and equitable amount of tax. The transition rules provide certainty for new-home construction and sales, particularly during the transition period.

BC Government HST to PST transition rules for new homes

For newly built homes where construction begins before April 1, 2013, but ownership and possession occur after, purchasers will not pay the seven per cent provincial portion of the HST. Instead, purchasers will pay a temporary, transitional provincial tax of two per cent on the full house price. This ensures equitable treatment among purchasers and will help mitigate distortive market behaviour. Builders will receive temporary housing transition rebates to offset PST on materials to help prevent double-taxation on homebuyers.

  • Average amount of embedded sales tax in newly built homes under PST: two per cent.
  • Tax paid by purchasers on an $850,000-newly built home after HST rebate: two per cent.
  • Tax rate on a newly built home during transition: two per cent.

BC HST transition increases rebate threshold to $850K

The B.C. new housing rebate threshold will be increased to $850,000, meaning more than 90 per cent of newly built homes will now be eligible for a provincial HST rebate of up to $42,500. For a new home with a purchase price of $850,000 and above, the purchaser will be entitled to the maximum rebate of $42,500.

It is important to note that the HST does not apply to resale housing.

BC introduces new grant for buyers of new recreational or second homes

 

To help support workers and communities in B.C. that depend on residential recreational development, purchasers of new secondary vacation or recreational homes outside the Greater Vancouver and Capital regional districts priced up to $850,000 will now be eligible to claim a provincial grant of up to $42,500 effective April 1, 2012.

  • B.C.’s portion of the HST will no longer apply to newly built homes where construction begins on or after April 1, 2013. Builders will once again pay seven per cent PST on their building materials. On average, about two per cent of the home’s final price will again be embedded PST.
  • The temporary housing transition measures will be in place for two years, until March 31, 2015. The tax only applies to homes where construction begins before the transition date and ownership and possession occur after.
  • The temporary housing transition tax and the temporary housing transition rebates will be administered by the Canada Revenue Agency on behalf of B.C. The Province is administering the grant for new secondary vacation and recreational homes.

 

Tax Information Notice:
Enhanced New Housing Rebates and Transitional Rules for the Reimplementation of the British Columbia Provincial Sales Tax

More Information

If you have questions regarding eligibility requirements for the enhanced new housing rebates or new rental housing rebates or about the application of the B.C. transition tax or B.C. transition rebate, please call the Canada Revenue Agency at 1 800 959-8287 (English) and 1 800 959-8296 (French) or go to:

http://www.fin.gc.ca/n12/12-017-eng.asp (English)
http://www.fin.gc.ca/n12/12-017-fra.asp (French)

Still have questions?

The British Columbia Real Estate Association consistently updates this HST–PST page on its website.

The Real Estate Board of Greater Vancouver has put together an information sheet in response to questions from its members.