HST in a real estate transaction
The rules surrounding HST and real estate in Ontario are often quite complicated and are rarely properly understood by purchasers and vendors. Where HST is payable on real estate this results in a significant additional cost that purchasers need to consider. Rebates for such amounts are often obtainable for most of the tax payable if done properly. Even where HST is not payable on the value of the property itself, HST may still be payable on other aspects of the purchase of the purchase.
Below we discuss some of the frequently asked questions purchasers have. If you have a specific question which is not addressed, or are unsure if HST applies to your transaction, please contact one of our lawyers today!
When is HST payable?
HST is payable on the purchase price of newly constructed property. If you are purchasing a pre-construction condominium, contact us to discuss the HST implications n your purchase.
HST may be payable on substantially renovated property. “Substantially renovated” is defined as the removal and/or replacement of over 90% of the interior of a home, exclusive of the foundations, internal support walls, floors, staircases, and roof. If you are purchasing a home that may have been substantially renovated you should contact us to discuss whether HST might be payable on top of the purchase price for the property.
Cost of any Home Inspections or Surveys that are completed. We can help advise you whether or not a Home Inspection or Survey should be done.
Real Estate Commissions.
What is not subject to HST
Residential Condominium Maintenance fees
CMCH insurance amount (although PST is applied at 8%)
Mortgage Broker fees (exempt as a financial services supply)
What if the Vendor didn’t disclose whether HST would be payable on top of the purchase price?
It is the Vendor’s responsibility to disclose whether or not HST will be payable on top of the purchase price, subject to the assignability of any provincial and federal credits. If the Vendor did not disclose that HST would be payable on the purchase price will be inclusive of HST.
Do I qualify for a rebate if I am buying newly constructed property?
HST rebates generally only available to individuals. If a corporation or trust is being registered on title, you should contact a lawyer to discuss the tax implications.
The purchaser must live themselves, or have an immediate family member live in the unit within 8 months of closing? If this is the case, then the purchaser will be entitled to a rebate of up to $24,000 towards the provincial amount of HST paid. This credit will be fully assignable to the builder, which will generally be reflected in your Agreement of Purchase and Sale. You will have to complete an assignment of this credit to the builder, the form of which is typically provided by the builder prior to closing.
If the rebate is not assignable (because neither the purchaser not an immediate family member will be residing in the unit) the full provincial tax payable will typically be charged on top of the purchase price. At this point the purchaser can apply to an equivalent credit from the provincial government if they own unit for at least one year and reasonably expect to rent the unit to the initial tenant for a full year after closing.
Amount of both credits is 75% of the provincial tax paid up to $24,000.00.
What about the Federal tax portion of HST?
GST rebate (New Housing Rebate): purchasers are entitled to a credit of 36% of the GST payable on the first $350,000.00. This credit is reduced to NIL as the price increases from $350,000.00 to $450,000.00. There is no GST rebate after $450,000.00
What are the requirements to obtain the federal rebate?
The two requirements are the same as for the provincial portions.