Homebuyers of new or presale homes for real estate in BC may be wondering about the GST New Housing Rebate. Questions like, “Who pays the GST?” or “Do I Qualify for GST New Housing Rebate” come to mind when buying new or presale homes.
This blog post answers these questions and more on the topic of the GST New Housing Rebate. Before delving into the topic any further, here is a review of what GST is exactly and how it applies to Real Estate in BC.
What is GST?
According to Investopedia, the Goods and Services Tax (GST) is “a value-added tax levied on most goods and services sold for domestic consumption. The GST is paid by consumers, but it is remitted to the government by the businesses selling the goods and services. In effect, GST provides revenue for the government.”
To put it simply, GST is tax you pay on goods or services for personal use and enjoyment. The GST is a common tax – usually the same price across a nation – that is included in the final price at point of sale.
Who pays the GST?
The GST is paid by the consumer as businesses add the GST to the price of the product or service. A consumer will pay the price of the product or service with the GST on top of the sales price. This GST is then remitted to the government and provides a source of revenue for the government.
What is GST for Real Estate?
So what does that mean for Real Estate and how does that apply to buyers of homes? Much like paying GST on household items or clothing, the same principle applies to buying a new or presale home. There is a GST that needs to be paid when purchasing a new or presale home. This GST is only for brand new properties.
This means that you do not have to pay for GST on resale residential properties. Any property that is not brand new 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.
When buying a home, an experienced realtor can help you figure out if GST is included or not in a sale.
GST on New Homes in BC
The GST on new or presale homes in BC is a 5% Federal Tax, that is paid at the time of purchase. This GST on Real Estate is on the sale of brand new properties in BC.
The details of payment on the GST should be included in the Contract of Purchase and Sale. When buying a new home, make sure to verify if the GST is included in the listing price or if it will be added on top of the listing price.
For example, imagine that the listing price of a brand new property is $1,299,000.
When GST is included, the buyer will pay $1,299,000 and the GST is covered within that price.
On the other hand, if GST is added on top of the listing price, the buyer will pay $1,299,000 + $64,950 (5% of listing price), bringing the total payment up to $1,363,950.
Again, this only applies to brand new properties and will not be applicable for resale residential properties! Be sure to double check whether the GST is included in the listing price or if it is an additional cost on top, as it will make a difference in your total payment.
What is the GST New Housing Rebate?
The GST New Housing Rebate is a partial refund on the GST portion paid on purchases of brand new properties. There are certain criteria that need to be met in order to be eligible for the GST New Housing Rebate and the amount received also varies depending on the purchase price of the new home.
Depending on the province of Canada, the buyer may be subject to the Harmonized Sales Tax (HST). In this case, the buyer may be eligible for an HST rebate on a new property. For example, homebuyers living in Toronto are subject to a 13% HST when purchasing a new home. This is not the case for British Columbia and there is no HST to pay on a purchase of a new property.
How much is the GST New Housing Rebate?
If your new home is priced below $450,000 before tax, there is an eligible partial rebate of the 5% GST paid on the purchase of a new or presale home. The rebate amount varies, however, there is a portion of the rebate available in all the provinces of Canada. If the new or presale home is priced above $450,000 before tax, there is no eligible GST New Housing Rebate to receive.
The GST New Housing Rebate is broken down into three different rate scales: Maximum Rebate (36%), Partial Rebate (<36%) and No Rebate (0%).
Maximum Rebate = 36%
To qualify for the Maximum Rebate, the purchase price of a new or presale home must be $350,000 or less, and the property must be a principal residence. The rebate is 36% of the 5% GST with a maximum rebate of $6,300.
Partial Rebate = < 36%
To qualify for the Partial Rebate, the purchase price of a new or presale home must be more then $350,000 and less than $450,000, and the property must be a principal residence.
No Rebate = 0%
If the purchase price of a new or presale home is over $450,000, and the property is a principal residence, it does not qualify for a GST New Housing Rebate. In this case, the buyer is responsible for paying the full 5% GST as per the Contract of Purchase and Sale.
Is there a GST New Housing Rebate in BC?
Yes, there is a GST New Housing Rebate in BC. The full 5% of GST is paid on a purchase of a new property and the rebate amount varies depending on the purchase price as mentioned above.
GST/HST New Housing Rebate in Canada
To see the official guide of the GST/HST New Housing Rebate in Canada from the Government of Canada, check out this publication here. The guide gives full details on all types of housing rebates in Canada and also includes instructions on how to claim a rebate.
If you are buying a new home for residential purposes, then you can skip through to this link and learn about the GST/HST New Residential Rental Property Rebate.
With this understanding of the GST New Housing Rebate, you may want to calculate the potential GST on a new property for sale. To do this, check out this online BC homebuyer tax calculator by the British Columbia Real Estate Association (BCREA).
This online calculator can be used to calculate the property transfer taxes, GST, and foreign buyer taxes. This calculator should not be used as a substitute for professional accounting or legal advice. However, it will provide an easy calculation.