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The Goods and Services Tax
What does GST mean?
GST stands for the “Goods and Services Tax” and is a federal tax for Canada. In terms of new construction such as presales, the GST remains at 5%. Even when a presale property has completed construction, the 5% GST still applies.
GST is also known as a value-added tax. In summary, a value-added tax means that the final ending value is taxed. It is critical for the buyer to confirm whether GST will be included, or if it will be added on top of the purchase price.
When do I pay GST?
In summary, if applicable, GST may apply to a new property. However, exceptions can exist, and it is critical to receive expertise legal and accounting advice regarding GST.
A real-life example of a GST calculation:
Let’s assume that GST is not covered in the listing price of $900,000 for a brand-new property. 5% GST on the listing price of $900,000 is equal to $45,000. Hence, the total payment would increase to $945,000.
Is GST applied for Renovation?
GST can be applied to substantial renovation costs in some situations. For example, let’s assume the fair market value of a property is $450,000 and a substantial renovation is made at an expense of $300,000. GST may be applied to the $300,000 substantial renovation cost. It is critical to receive further advice and clarification on what can be considered a substantial renovation.
Are there any GST tax recovery options?
Yes, the GST/HST new housing rebate is available if qualified. An individual may be considered to be eligible for the rebate if they had purchased or substantially renovated property from a builder, or their own property which would be used as a primary residence.
What is the GST/HST new housing rebate?
The GST/HST rebate can be made either in whole or in parts for some qualifying real property transactions. New housing rebates can be used by eligible buyers acquiring a home with a price less than $450,000 in order to recover a portion of the GST paid.
In many cases, buyers qualifying for the rebate may be required to file an application form with CRA within two years of the property purchase. Although the rebate is named the “new housing rebate”, individuals who substantially renovate their homes may also be eligible to claim the rebate.
Is there HST on top of GST?
In some Canadian provinces, HST is required. However, in British Columbia, there is no HST applicable on newly built properties.