GST ON NEW HOMES IN BC

What you need to know about GST on New Homes in BC

BUYER GUIDE


Do you qualify for the GST new housing rebate in BC?
Do you qualify for the GST new housing rebate?

GST on new homes in BC

If you’ve purchased a pre-sale home, a newly built home, or an assignment to a new home, you should be wondering about the GST. If you are asking whether there are any GST rebates or incentives, then this blog is for you! If you are a first time home buyer and considering a pre-sale or brand new home as your principal residence, you should read on to help you determine whether you qualify for the GST new housing rebate.

What is the Goods & Services Tax (GST) in BC?

In Canada, Goods & Services tax (GST) is a federal government tax of 5% that applies to the cost of all goods & services sold for consumption including real estate in BC. This amount is calculated based on the purchase price that appears on your Contract of Purchase and Sale.  For example, the GST (5%) on a $350,000 home would be $17,500.00 This can be a big chunk of money for many First-time Home buyers and because of this, the government has offered housing incentives such as the GST New Housing Rebate and the New Residential Rental Rebate. In general, it’s important to know that GST applies to all types of brand new or “substantially renovated” homes regardless of whether it is a condo, townhome, single-detached house or even a mobile home! The key qualifier here is “Brand New” or “substantially renovated”.

Does GST apply to used (or resale) homes?

No, it only applies to brand new or substantially renovated homes.

Who pays for the GST?

The GST amount is paid by purchasers to the seller (actually via lawyers/notary during the closing). The lawyers or notaries remit the GST to the government but have to calculate the rebates if any.

Why do the purchasers pay for GST instead of the sellers?

In Canada, the consumer of the goods pays the GST. In other words, the home purchaser pays the GST. The seller “collects” the GST for the government. The seller (via lawyers or notaries) remits money to the government along with the Buyer’s New Housing Rebate application (see image below).

When is GST due?

Unlike property tax that must be paid on a monthly or annual basis, GST on new homes must be paid at the time of closing. This GST amount in addition to other Closing Costs are calculated by your lawyer or notary less any GST rebates that you may qualify for.

Do I qualify for a GST rebate on new homes BC?

Whether you qualify for a GST rebate depends both on the purchase price and on the use of the property – whether it is used as a principal residence or a rental property. This blog will focus on GST rebates on new homes used as principal residence.

Do I qualify for a GST rebate if I rent out my new home?

If you do not intend to use your new home as principle residence but you intend to rent it out as a landlord, you do not qualify for the New Housing Rebate. However, you may be eligible for the New Residential Rental Rebate (NRR Rebate).

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How do I calculate the GST rebate?

You can use our popular GST Rebate Calculator. But, to understand the calculations, we have broken them into 3 different rate scales: Maximum Rebate (purchase price less than $350,000), Partial Rebate (purchase price from $350,000 to $450,000), and No rebate (purchase price greater than $450,000).

36%

Maximum Rebate

If the purchase price of your home is $350,000 or less, and the property is your principal residence (or your relation’s principal residence, then you would be qualified for the full GST rebate, which is 36% of the GST(5%) on purchase price of the home. 
EXAMPLE: Assuming the purchase price of your new home is $299,000 (excl. GST) The gross G.S.T. is $14,950 (5% of $299,000). The full G.S.T. Rebate is 36% of $14,950, which is $5,382. Thus, the net G.S.T. is $14,950 less $5,382, which equals $9,568.

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Partial Rebate

If the purchase price of your home is more than $350,000 but less than $450,000, and the property is your principal residence or your relation’s principal residence, then you would be qualified for a partial GST rebate. 
EXAMPLE Assuming your purchase price is $355,000, which is more than $350,000 and less than $450,000, the GST rebate would be calculated using the following formula (get ready for some high school math):
= $6,300 x [$450,000 – the purchase price]/ $100,000
= $6,300 x [$450,000 – $355,000]/$100,000
= $5,985.00
The gross G.S.T would be 5% of $355,000, which equals $17,750.00 less the partial GST rebate of $5,985.00 for a net tax of $11,765.00

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No Rebate

If the purchase price of your home is over $450,000, and the property is your principal residence or relation’s principal residence, you would not be entitled to claim a rebate. So if you purchased a brand new townhome for $451,500 as your principal residence, because the purchase price is over $450,000, you would have to pay the full 5% GST of $22,575

How do I apply for the GST new housing rebate?

Typically, most big developers like BOSA or Polygon will credit buyers the rebate amount that they may be qualified for at the time of your completion. This adjustment would appear on the Buyer’s Statement of Adjustments and would be dealt with at the lawyer or notary’s office prior to completion date. 

However, there are other developers that may require you as the buyer to pay the full GST on the purchase price on completion and have you apply for the GST rebate directly from Canada Revenue Agency. In this case, it’s important that you work closely with your mortgage professional to ensure that you have sufficient funds to cover the GST on your purchase price. NOTE: Please ensure that your real estate lawyer or notary complete and submit your application on your behalf.

Can I claim GST rebate if the property is a used or resale home?

No.  As mentioned above, GST only applies when buying brand new or substantially renovated homes. Hence, you will not be able to claim GST rebate on a used or resale home because you did not pay any GST when purchasing it.

Can I still claim GST rebate if I substantially renovate my existing home?

Yes, you can claim GST rebate on your existing home so long that it meets the definition of a substantially renovated home according to Canada Revenue Agency. For more information on what is considered substantially renovated, check out our blog on “Everything You Need To Know about GST and Substantially Renovated Homes”

Can I still claim GST rebate if I built my own home?

Yes, you can claim GST rebate if you built your own home. Keep a look out for our next blog on GST and owner built homes or call us with your questions and we’ll be happy to answer them!

Can I claim GST New Housing rebate if I purchased a brand new home for rental use?

No; but you may still be eligible for the New Residential Rental Rebate (NRR Rebate). In simple terms, the NRR rebate is used to offset the GST a landlord pays in obtaining the new home that is not consumer by the Buyer but is “consumed” by the renter. Because rent is GST-EXEMPT (Landlords can not collect GST on rent), the NRR rebate offsets the GST for landlords renting out a brand new home. The NRR rebate is calculated similar to the New Housing Rebate and will be sharing more details in our blog on GST and Rental properties so stay tune!

Where can I get more information?

You can find more information on guides on the GST New Housing Rebate in the link below.

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