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Feb. 17, 2012

Transition measures support new-home buyers, builders

 

VICTORIA– New housing transition measures give certainty to an important economic sector and help to keep taxes equitable throughout the transition as the province returns to the PST, Finance Minister Kevin Falcon announced today.

 

B.C. will return to the PST on April 1, 2013, meeting the Province’s commitment to return to the PST as quickly and responsibly as possible, while ensuring businesses can plan their training and systems switch-over effectively to apply the sales tax correctly.

Government is announcing new relief measures that will benefit purchasers and builders of new homes. The B.C. new housing rebate threshold will be increased to $850,000, effective April 1, 2012, meaning more than 90 per cent of newly built homes will now be eligible for a provincial HST rebate of up to $42,500. It is important to note that the HST does not apply to resale housing.

 

In addition, to help support workers and communities in B.C. that depend on residential recreational development, purchasers of new secondary vacation or recreational homes outside the Greater Vancouver and Capital regional districts priced up to $850,000 will now be eligible to claim a provincial grant of up to $42,500 effective April 1, 2012.

The housing transition rules help ensure when people buy a newly constructed home under the PST, whether built entirely under the HST, entirely under the PST, or partly under HST and partly under the PST, they will all pay a consistent and equitable amount of tax.

 

Specifically:

 

  • B.C.’s portion of the HST will continue to apply before April 1, 2013. Purchasers will be eligible for the new higher B.C. HST new housing rebate, of up to $42,500, and builders will continue to claim input tax credits.
  • B.C.’s portion of the HST will no longer apply to newly built homes where construction begins on or after April 1, 2013. Builders will once again pay seven per cent PST on their building materials. On average, about two per cent of the home’s final price will again be embedded PST.
  • For newly built homes where construction begins before April 1, 2013, but ownership and possession occur after, purchasers will not pay the seven per cent provincial portion of the HST. Instead, purchasers will pay a temporary, transitional provincial tax of two per cent on the full house price. This ensures equitable treatment among purchasers and will help mitigate distortive market behaviour. Builders will receive temporary housing transition rebates to offset PST on materials to help prevent double-taxation on homebuyers.

 

The transition rules outlined today provide certainty for new-home construction and sales, particularly during the transition period.

For goods and services that will be subject to PST, PST will generally apply where tax becomes payable on or after April 1, 2013. Detailed general transitional rules for goods and services will be available with the full PST legislation introduced in the legislature this spring.

The provincial changes are subject to the approval of the legislature.

 

Quotes:

Finance Minister Kevin Falcon –

“These measures ensure that there is fairness and equity throughout the transition period, and provide a roadmap for the housing industry to make the transition back to PST as smooth as possible.”

“The relief measures announced today are a boost to home buyers purchasing either a new primary residence or a secondary home. At the same time, they help an important job-creator in all parts of the province.”

 

Quick Facts:

 

  • Raising the B.C. HST rebate threshold to $850,000 is expected to save purchasers about $60 million in 2012-13. The maximum value rises to $42,500 from $26,250, a 60 per cent increase.
  • More than 90 per cent of newly built homes sold in B.C. are below the new higher rebate threshold.
  • Average amount of embedded sales tax in newly built homes under PST: two per cent.
  • Tax paid by purchasers on an $850,000-newly built home after HST rebate: two per cent.
  • Tax rate on a newly built home during transition: two per cent.
  • The temporary housing transition measures will be in place for two years, until March 31, 2015. The tax only applies to homes where construction begins before the transition date and ownership and possession occur after.
  • The temporary housing transition tax and the temporary housing transition rebates will be administered by the Canada Revenue Agency on behalf of B.C. The Province is administering the grant for new secondary vacation and recreational homes.

 Copyright (c) The BC Government. All Rights Reserved. No Copyright Infringement intended. Source: Government of BC - Feb. 21, 2012

 
February 21, 2012
 

Information about the new HST/PST

housing transitional rules

 

The province will transition back to the Provincial Sales Tax (PST), which will replace the Harmonized Sales Tax (HST), on April 1, 2013. Until then, the province has announced transitional rules for new homes which take effect April 1, 2012.

 

Note: This information is current to today, February 21, 2012

and has been verified with the Canada Revenue Agency, HST

Branch. However, we have been advised that the information

could change depending on HST rulings to come.

 

Enhanced New Housing Rebate

Effective April 1, 2012, your clients may be eligible for a provincial enhanced New Housing Rebate if they buy, as their primary residence, priced up to $850,000:

• a new home together with land;

• a new home together with leased land;

• a new mobile home or float home;

• a new home bought through shares in a housing cooperative;

or

• a new home constructed or substantially renovated (more

than 90%) by the owner builder.

 

Your clients may also be eligible for a provincial New Housing Rebate if they buy a secondary vacation or recreational homes outside the Greater Vancouver and Capital Regional Districts priced up to $850,000. Buyers of new homes will be eligible for a rebate of 71.43% of the provincial portion of the HST paid on the new home up to a maximum rebate of $42,500. Homes priced at more than $850,000 will be eligible for a flat rebate of $42,500. HST is payable GST/HST generally becomes payable on the earlier of the day on which ownership is transferred to the recipient and the day on which possession of the property is transferred to the recipient.

 

Presales

Agreements signed before April 1, 2012, with possession before April 1, 2012 (Current to April 1, 2012) If your clients buy a presale residential property and they have an agreement dated on or before April 1, 2012 and they take ownership or possession before on or before April 1, 2012, they will pay the 12% HST and be eligible for a rebate of up to $26,250 on homes priced to a maximum of $525,000. Homes priced at more than $525,000 are eligible for a flat rebate of $26,250.

 

Agreements signed before April 1, 2012, with possession before April 1, 2013. If your clients buy a presale residential property and they have an agreement dated on or before April 1, 2012 and they take ownership or possession on or before April 1, 2013, they will

pay the 12% HST and be eligible for a rebate of up to $42,500 on homes priced to a maximum of $850,000. Homes priced are more than $850,000 are eligible for a flat rebate of $42,500.

 

Agreements signed before April 1, 2012, with possession after April 1, 2013 If your clients buy a presale residential property and they have an agreement dated on or before April 1, 2012 and they take ownership or possession before on or after April 1, 2013, they will not pay the 7% provincial portion of the HST. Instead, buyers will be a temporary transitional provincial tax of 2% on the full house price. This 2% reflects an embedded PST builders pay on materials.

 

Agreements signed after on or after April 1, 2012 and before April 1, 2013, with possession before April 1, 2013 (This is the transition period) If your client buys a presale residential property and they have an agreement dated on or after April 1, 2012 and before April 1, 2013, and they take ownership and possession before April 1, 2013, they will pay the 12% HST and be eligible for a rebate of up to $42,500 on homes priced to a maximum of $850,000. Homes priced are more than $850,000 are eligible for a flat rebate of $42,500.

 

Agreements signed on or after April 1, 2012, with possession after April 1, 2013 If your client buys a residential property and they have an agreement dated on or after April 1, 2012 but the construction of the home commenced before April 1, 2013, and they take ownership and possession after April 1, 2013, they will not pay the 7% provincial portion of the HST. Instead, buyers will be a temporary transitional provincial tax of 2% on the full house price. This 2% reflects an embedded PST builders pay on materials.

 

Agreements signed on or after April 1, 2013, with possession after April 1, 2013 The GST is applicable. The HST will generally cease to apply to sales of real property (including residential real property) if ownership and possession of the property transfer on or after April 1, 2013. This will be the case for sales of new housing, irrespective of whether the agreement of purchase and sale was entered into before April 1, 2013 or whether construction of the new housing began before April 1, 2013. The PST will not apply to sales of real property. However, the PST will apply to certain types of housing which, at the time of purchase are tangible personal property (a mobile home purchased without land) and where possession transfers on or after April 1, 2013. The PST will also apply to construction inputs that are used to improve real property on or after April 1, 2013.

 

Agreements signed on or before November 18, 2009, or construction began before July 1, 2010, with possession on or after April 1, 2013 (Doublestraddling, grandparented) Special transitional rules apply if your client has bought a presale residential property and they have an agreement dated on or before November 18, 2009, or construction began before July 1, 2010 (the HST start date in BC) and for which ownership and possession transfer on or after April 1, 2013 (the HST end date in BC), this is known as a double-straddling home sale. In this situation, your client will pay a 2% transition tax.

Agreements signed after November 18, 2009, or construction began before July 1, 2010, with possession on or after April 1, 2013 (Doublestraddling,

non-grandparented) Special transitional rules apply if your client has bought a presale residential property and they have an agreement dated after November 18, 2009, and construction began before July 1, 2010 (the HST start date in BC) and for which ownership and possession transfer on or after April 1, 2013 (the HST end date in BC), this is known as a double-straddling home sale. In this situation, your client will pay a 2% transition tax. In this situation, your client will pay a 2% transition tax. However the

2% tax will not apply where construction has been substantially completed before July 1, 2010 and the PST Transitional New Housing Rebate has not been claimed as of February 17, 2012.

 

Recreational Property

All the same rules apply to recreational property that apply to other residential property. Your clients may be eligible for a provincial enhanced New Housing Rebate if they buy

a secondary vacation or recreational home outside Metro Vancouver and Capital Regional Districts priced up to $850,000.

 

Vacant Land

HST paid on land For owner-built homes where the HST was paid on the land, the owner may be eligible for a rebate on qualifying construction expenses (including land), up to a maximum of $42,500. There

will be no phase-out of this rebate, such that owner-built homes with qualifying construction expenses over $850,000 will qualify for the maximum rebate of $42,500.

 

No HST paid on land

Where the HST was not paid on the land, the owner will be entitled to a new housing rebate on qualifying construction expenses (which would not include land), up to a maximum rebate amount of $28,475 (for example 67% of $42,500).

 

Enhanced New Rental Housing Rebate

There is an enhanced provincial New Rental Housing rebate. If your clients construct or substantially renovate a residential property to rent to tenants, your clients are eligible for a rebate up to $42,500 on units priced up to $850,000. There is a flat rebate

of $42,500 for units priced above $850,000. The first use of the home must be by a renter of the unit or as a primary residence by the owner for at least one year. Eligible

units include:

• a detached, attached, condominium apartment or duplexes,

with or without a legal secondary suite;

• a mobile or float home;

• units in a multiple unit building including long-term care

residential facilities; or

• the land component of a single-unit or multiple-unit housing,

where the land is leased or is a housing cooperative.

If your clients buy a new apartment which is not their principal

residence and they don’t rent it, for example, if strata bylaws

prohibit rentals, or your clients buy a new apartment to use on

weekends, the unit is not eligible for the New Rental Housing

Rebate.

 

But, if you have clients who buy a new rental apartment building so long as they rent all of the units, they will be eligible for a New Rental Housing Rebate for each unit up to a maximum rebate of $42,500 per unit.

 

If your clients build or substantially renovate rental property, they will be required to self-assess and pay the HST on or after April 2012 and before April 1, 2013.

 

Important Dates

November 18, 2009 – Date the transition rules from PST to

HST came into effect.

July 1, 2010 – Date the HST came into effect in BC.

April 1, 2012 – Date the HST to PST transitional rules come

into effect. The enhanced HST rebate comes into effect.

April 1, 2013 – HST end date. GST on new homes is back

in effect.

 

Copyright (c) The REGBV. All Rights Reserved. No Copyright Infringement intended. Source: REGBV- Feb. 21, 2012