GST On Real Estate

GST On Real Estate Transaction*

In British Columbia, GST is applicable to many services involved in a real estate transaction, including real estate sale commission, appraisal, home inspection, lawyer fees, etc. The exception and exemption for GST payment are on home mortgages and mortgage broker fees. Although the Goods and Services Tax (GST) is collected at a rate of 5% on the sale price of goods and services, it doesn’t apply to every type of home sale or every form of real estate service.

1) GST on new homeWhen you buy a newly constructed home, condominium or townhouse, the entire purchase price, including land, is taxable. If the property is to be rented to tenants, the full 5% GST is charged on the purchase price. However, if the home is going to be your primary place of residence, it may qualify for a partial GST rebate, depending upon the sale price.

For homes costing $350,000 or less, you will receive a GST rebate of 36% of the GST paid, to a maximum of $8,750. That means you pay approximately 3.25% GST (not 5%) on the purchase price.

The rebate for new homes costing between $350,000 and $450,000 declines to zero on a proportional basis, using this formula:

Rebate = $8,750 x ($450,000 - Home Price)$100,000

New homes selling for more than $450,000 do not qualify for a GST rebate.

The seller is responsible for the GST payable, but most of the time the collection and payment of GST on a real estate transaction is defined at the time the contract is written whether the seller or buyer is paying for it. GST is due and payable when the real estate transaction is completed.

2) Substantially renovated home single transaction

When a builder sell the property in a single transaction, the GST rebate is the same as above. If in doubt, it is best to obtain a ruling from Canada Customs and Revenue Agency (CCRA).

3) GST on vacant land

Land that is purchased without a home on it is subject to GST. If you build a new home on the land, you will pay GST on the construction costs of the house, less any applicable rebate.

4) GST on resale home

You don’t have to pay GST on the purchase price of a resale residential home. A resale home is defined as residential property that has been occupied as a residence before you bought it.

*Note: Kindly confirm with your lawyer, accountant or Canada Customs and Revenue Agency (CCRA) for GST payable for your purchase.

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