In Greater Vancouver Real Estate we know there are many pre-construction, pre-sale home buyers and investors alike. We also know many of these buyers see gains on their property value before the development is built and often sell which is called assigning a contract. It is very important as a Vancouver Realtor to know the GST implications on these situations.
We know that GST is payable on new constructions. The real question is if it is payable in either of the two following situations. First, is it payable on an assignment? Second, is it payable when someone has bought a unit and sells it a month or two later, given that it has been vacant the entire whole time? What happens in these two situations?
Is GST payable on assignments and resale properties?
The answer is that it is totally dependent on the situation at hand.
GST is Payable Depending on Intent of the Seller
Specifically, it depends on the intent of the seller at the time they entered the contract. If they entered into the contract with the intention of moving in, there’s no GST.
But if at that time, they bought the unit with the intention of flipping the home or selling it for a profit, they are deemed to be a builder. As such, the tax is applicable again.
How to Know if GST is Payable on a Property as a Buyer
Only the seller knows what their intent is. Therefore, as a buyer, it is crucial to get some kind of rep or warranty from the seller. This warranty should state whether or not the seller is not a builder. Regardless of whether they are a builder or not, the language in the contract has to be very clear. It should be clear on whether the tax is included or not.
Summary of How to Deal with Payable GST
In summary, GST is payable depending on the intent of the seller when they enter a contract. The seller should give a rep or a warranty stating this intention. As a buyer, do your best to get a rep or warranty with these facts explicitly written in it. Even if the sellers do not provide this, make it clear that tax is included or not. Thus, all the parties involved will know in advance if GST is payable or not before closing the deal.