GST Calculations, Rebates, Exemptions & More
When you’re buying a new home, especially if it’s for the first time, there is so much more to consider than just the purchase price of your new home. Knowing closing costs and taxes is an important part of understanding the full home buying process.
This blog goes through everything you need to know about GST on new homes to help you understand what taxes you’re responsible for, as well as any rebates or exemptions that might be applicable to you. We also feature a tax calculator to help you easily calculate any taxes and rebates or exemptions so that you can get a clear picture of what your total purchase price is.
2021 GST on New Homes in BC
British Columbia Goods and Services Tax (GST) is a 5% tax you pay on goods or services for personal use and enjoyment. Much like the GST you pay for the purchase of clothing, the same principle applies to the purchase of a new home in BC.
GST is charged on top of the purchase price of the home, and applies only for new homes in BC. This means that GST is payable on newly constructed properties such as a pre-sale high-rise condo sold by a developer, or an owner builder home. (usually detached) Any property that is not brand new (has been lived in) and has been used for residential purposes in the past are exempt from GST. Essentially, the GST has already been paid for at the first point of purchase.
How much is GST on new home purchases?
When you’re paying GST on new homes in BC the tax rate is 5%, subject to any rebates. The tax rate is calculated as 5% of the purchase price, which means that when you are calculating the final price of a newly built home you have to factor in that it is the purchase price PLUS 5% GST. However, before you assume it is plus GST, make sure to check if your contract of purchase and sale price included full sales taxes. If taxes are included in your purchase price then GST has already been factored in, and you should make sure that your lawyer or notary is aware so that you do not get charged twice.
When is the GST on real estate due?
GST is due at the time of completion, as per the contract of purchase and sale. Your notary or lawyer will calculate this for you when they prepare the statement of adjustments in preparation for completion. Keep in mind that if you qualify for a rebate, this means the Purchaser will have to pay the full 5% G.S.T. on completion and then claim the rebate afterwards.
Who pays GST on new homes in BC?
In a residential real estate purchase of a new home in BC (ie presale condo), the Buyer is the on who is responsible for paying GST at the time of completion. The seller (or developer) does not pay GST on new homes.
GST and Assignment of Contract of New Homes and Presales?
With regards to who is subject to paying GST, this also means that assignment of contract purchased from another investor are subject to BC GST. However, the situation of assignment of contracts on new homes should be clarified.
As assignment of contracts are a situation in which the original buyer (assignor) assigns their contract to a new buyer (assignee). In this situation, the assignee is the one that is responsible for paying GST on the purchase of the property. The assignor would not responsible for GST on the purchase, but would be responsible for paying any capital gains on the profit made from the sale.
What is considered a new home?
While most of the time the definition of a new home is fairly straight forward – being newly built or in the presale phase and sold directly from the developer or builder – there are some grey areas that can get confusing.
Be aware that some homes that are built and move-in ready may still be considered a new home, in which case GST would still apply. Is the new home being sold from a first owner (in which case the GST has already been paid), or still being sold directly from the developer? If the home is being sold directly from the developer and has never been lived in, then GST may not have already been paid for.
GST also applies to homes that are substantially renovated, and to meet this requirement typically 90% of the building that existed before the renovations began must be renovated to a minimum degree. In addition to the 90% method, there are other common methods that include comparisons of the square footage of the floors, walls, and number of bedrooms between renovated and non-renovated.
NEW HOME GST REBATES
There are 2 types of GST Rebates for New Home Purchases. They are:
- GST New Housing Rebate (GST N.H Rebate)
- GST New Residential Rental Rebate (GST N.R.R Rebate)
GST New Housing Rebate
1. Full GST New Housing Rebate: The full GST new housing rebate is 36% of the 5% GST. For new homes in BC that are under $350,000 that a buyer intends on living in as their primary residence, the GST new housing rebate may apply.
2. Partial GST New Housing Rebate: Property purchases between $350,000 and $450,000 have partial rebates at a much lower amount. For homes valued between $350,000.00 and $450,000.00, the rebate is gradually reduced and is calculated by using the following formula:
$6,300 x [$450,000 – the purchase price] / $100,000
Homes over $450,000 receive no GST New Home Rebate at all and are subject to paying the full 5% GST on the new home purchase. If you are claiming the rebate, keep in mind that you will be required to pay GST in full at the time of completion and cannot blend the GST amount in to your mortgage.
Full GST Rebate example:
Assume the purchase price of a new home is $350,000 excluding G.S.T.
Purchase price: $350,000
Full GST of 5%: $17,500
Purchase price with full GST = $367,500
GST New Home Rebate Calculation: 36% of $17,500(5% GST) = $6,300
GST After Rebate: $17,500 – $6,300 = $11,200
Purchase Price + GST – GST Rebate = $361,200
Partial GST Rebate example:
The Partial G.S.T. New Housing Rebate calculation is:
((Full GST Rebate of $6,300) x ($450,000 – qualifying purchase price)) / $100,000
Assume the purchase price of a new home is $400,000 excluding G.S.T.
Purchase price: $400,000
Full GST of 5%: $20,000
Purchase price with full GST = $420,000
GST Partial Rebate Calculation: ((Full GST Rebate of $6,300) x ($450,000 – $400,000)) / $100,000 = $3,150
GST After Rebate: $20,000 – $3,150 = $16,850
Purchase Price + GST – GST Rebate = $416,850
GST New Residential Rental Rebate
An additional rebate for new homes in BC is offered to purchasers that are planning to rent out the new home as an investment property. This rebate is called the GST New Residential Rental Rebate (GST NRR Rebate).
The calculation for both the full and partial exemptions are the same (36% of 5% GST), and similar to the GST New Housing Rebate, the full GST NRR Rebate is only available on new homes priced up to $350,000. A partial GST NRR Rebate is available for homes priced between $350,000 and $450,000.
To be eligible for the G.S.T. NRR Rebate, the Purchaser must meet the following conditions:
- The Purchaser must not be entitled to claim input tax credits in respect of any part of the tax payable on the acquisition of the rental unit.
- The rental unit must be a “qualifying residential unit” which means the person applying for the rebate must be the owner of the unit and the unit must be a self contained residence as defined in the Excise Tax Act;
- The unit must be held by the owner for the purpose of making exempt supplies (for example, a residential tenancy);
- The unit must be used as a primary place of residence by the tenants and must be so used for at least one year and the Purchaser will have to provide a copy of the tenancy agreement showing a term of at least one year.Please note that the Developer is not allowed to credit the Purchaser on completion with the GST NRR Rebate.This means the Purchaser will have to pay the full 5% G.S.T. on completion and then claim the GST NRR Rebate afterwards directly from Canada Revenue Agency.
GST New Home Rebate Calculator
For an easy calculator for taxes including GST, property transfer tax, and foreign buyer tax, in addition to auto-populated rebates, you can check out this tax calculator: BCREA – Tax Calculator