GST/HST Information

Combined revision comparison

The following is an excerpt from a document entitled are GST/HST Rate Reduction in 2008,links to sections of interest ondated December 2007 published by the Canada Revenue Agency . For further details on GST/HST on real property please visit the Canada Revenue Agencyweb site:website.

  Real Property General  1.    Do the new rates of tax (5% GST or 13% HST) apply to real property purchased before January 1, 2008? For purchases of real property (other than a residential complex where a written agreement of purchase and sale was entered into on or before October 30, 2007): ·         The new rates of tax (5% GST or 13% HST) apply to a taxable purchase of real property made before January 1, 2008 if both ownership and possession are transferred on or after January 1, 2008. ·         For taxable purchases of real property made after June 30, 2006, 6% GST or 14% HST will apply if either ownership or possession of the real property is transferred before January 1, 2008. ·         For taxable purchases of real property made before July 1, 2006, 7% GST or 15% HST will apply if either ownership or possession of the real property is transferred before July 1, 2006. ·         For taxable purchases of real property made before July 1, 2006, 6% GST or 14% HST will apply if both ownership and possession of the real property are transferred after June 30, 2006, and either ownership or possession of the real property is transferred before January 1, 2008.  Refer to question number 7 for the exception to the general rule for the purchase of a new or substantially renovated residential complex. 2.    Does the GST rate change affect the rate of HST payable in respect of a taxable supply of real property made in a participating province?  Yes, a taxable supply of real property (other than a residential complex where a written agreement of purchase and sale was entered into on or before October 30, 2007) made in a participating province, where both ownership and possession of the property are transferred on or after January 1, 2008, will be subject to HST at a rate of 13%. 3.    A GST/HST registrant purchases a commercial building that is fully leased to retail tenants. The registrant entered into the agreement of purchase and sale in September 2007. Ownership and possession will be transferred in January 2008. At what tax rate is the registrant required to report and pay the tax payable on the purchase? http://wwwThe taxable purchase of the commercial building is subject to 5% GST or 13% HST since both ownership and possession will be transferred on or after January 1, 2008.   If either ownership or possession of the commercial building is transferred before January 1, 2008, the taxable purchase of the commercial building is subject to 6% GST or 14% HST.   4.    cra-A GST/HST registrant purchases a residential apartment building that is already fully occupied and is leased to tenants on a long-term basis. Is the registrant required to pay GST/HST if ownership and possession will be transferred after January 1, 2008? Generally, the supply of a residential apartment building in these circumstances is exempt pursuant to Part I of Schedule V to the Act. There are no changes where the supply of the real property is exempt.  5.    A GST/HST registrant paid the GST that was payable at the rate of 6% on the purchase of a commercial building. If the return for the reporting period in which tax becomes payable is due after January 1, 2008, can the registrant still claim an ITC at the 6% rate or are they restricted to 5%? Since GST was payable at the rate of 6%, the registrant may claim an ITC for the GST paid at 6%, provided that the conditions for claiming the ITC are met. If the commercial building was located in a participating province and HST was payable at 14%, the registrant would claim an ITC for the tax payable at 14%, provided that the conditions for claiming the ITC are met. 6.    What are the rules for determining when GST/HST is payable on a holdback amount, and what rate of tax will apply? If a purchaser retains part of a payment as a holdback amount pursuant to federal or provincial legislation or pursuant to a written agreement for the construction, renovation or repair of real property, GST/HST calculated on the holdback amount is payable on the earlier of the day the holdback is paid by the purchaser and the day the holdback becomes due under the agreement or pursuant to the legislation.  If the purchaser pays the holdback amount in 2007, 6% GST or 14% HST will apply. If the holdback amount becomes due under the agreement or pursuant to the legislation in 2007, 6% GST or 14% HST will apply. If the holdback amount becomes due under the agreement or pursuant to the legislation on or after January 1, 2008, and the purchaser does not pay the holdback amount before January 1, 2008, 5% GST or 13% HST will apply.  New housing Tables illustrating the transition rules for purchases of new or substantially renovated residential complexes from a builder are included in the Appendix. 7.    Do the new rates of tax (5% GST or 13% HST) apply to the purchase of a new or substantially renovated residential complex where a written purchase and sale agreement was entered into after May 2, 2006, and on or before October 30, 2007?  No, if a written agreement of purchase and sale was entered into after May 2, 2006 and on or before October 30, 2007, 6% GST or 14% HST will apply unless ownership or possession was transferred before July 1, 2006. 7% GST or 15% HST will apply if either ownership or possession was transferred before July 1, 2006.  If both ownership and possession are transferred on or after January 1, 2008, a GST/HST 2008 transitional rebate will be available to the purchaser to account for the 2006 rate reduction. If either ownership or possession is transferred before January 1, 2008, the purchaser will not be entitled to claim a 2008 transitional rebate. 8.    Do the new rates of tax apply to the purchase of a new or substantially renovated residential complex where a written purchase and sale agreement was entered into before May 3, 2006?  No, if a written agreement of purchase and sale was entered into before May 3, 2006, 7% GST or 15% HST will apply.  If both ownership and possession are transferred on or after January 1, 2008, a GST/HST 2006 transitional rebate will be available to the purchaser to account for the 2006 rate reduction, and a GST/HST 2008 transitional rebate will be available to account for the 2008 rate reduction.  If both ownership and possession are transferred after June 30, 2006, and either ownership or possession is transferred before January 1, 2008, 7% GST or 15% HST will apply and the purchaser will only be entitled to claim a GST/HST 2006 transitional rebate to account for the 2006 rate reduction. 9.    Do the new rates of tax apply to new or substantially renovated housing purchased after October 30, 2007? Where an agreement of purchase and sale is entered into after October 30, 2007, the 5% GST or 13% HST will apply provided both ownership and possession are transferred on or after January 1, 2008.  If either ownership or possession is transferred before January 1, 2008, 6% GST or 14% HST will apply and the purchaser will not be entitled to claim a GST/HST 2008 transitional rebate.  10. A purchaser entered into a written agreement of purchase and sale in November 2005 to purchase a new residential complex. Both ownership and possession will be transferred in February 2008. What rate of tax is applicable? The purchase of a new residential complex under a written agreement of purchase and sale entered into on or before May 2, 2006 is subject to 7% GST or 15% HST.  Since both ownership and possession of the complex will be transferred on or after January 1, 2008, the purchaser will be entitled to claim a GST/HST 2006 transitional rebate to account for the rate reduction in 2006 and a GST/HST 2008 transitional rebate to account for the rate reduction in 2008.  11. arc.A purchaser entered into an agreement of purchase and sale in September 2006 to purchase a new residential complex. Ownership of the complex will be transferred to the purchaser in December 2007, but possession will only be transferred in March 2008. What rate of GST/HST is applicable?  The 6% GST or 14% HST rate will apply, since ownership of the residential complex will be transferred before January 1, 2008, even though possession will be transferred after January 1, 2008.  In this case, the purchaser will not be entitled to claim a GST/HST transitional rebate since ownership will be transferred before January 1, 2008.  12. gc.A purchaser entered into an agreement of purchase and sale in August 2006 to purchase a new residential condominium unit. Possession of the condominium unit will be transferred in December 2007, but ownership will only be transferred in April 2008. What rate of GST/HST is applicable? The 6% GST or 14% HST rate will apply, since possession of the residential condominium unit will be transferred before January 1, 2008, even though ownership will be transferred after January 1, 2008. ca/In this case, the purchaser will not be entitled to claim a GST/HST transitional rebate since possession will be transferred before January 1, 2008.  13. After entering into a written agreement of purchase and sale in September 2007 for a new residential complex, the purchaser requests in November 2007 that additional upgrades be made to the complex. Do the new rates of tax apply to the additional amount payable for the upgrades? Upgrades to a residential complex will generally result in modifications to the existing agreement, such that the upgrades form part of the agreement of purchase and sale for the complex. In this case, the tax rate applicable to the purchase of the complex will prevail. Since a written agreement of purchase and sale was entered into after May 2, 2006 and on or before October 30, 2007, 6% GST or 14% HST will apply to the total amount payable for the complex, including the amount payable for the upgrades.  E/If both ownership and possession of the complex are transferred on or after January 1, 2008, a GST/HST 2008 transitional rebate will be available to the purchaser to account for the rate reduction based on the total amount payable for the complex, including the amount payable for the upgrades. If either ownership or possession is transferred before January 1, 2008, the purchaser will not be entitled to claim a transitional rebate. 14. A written agreement of purchase and sale entered into in September 2007 for a new residential complex provides for standard kitchen cabinets. The purchaser negotiates with the builder for an upgrade to deluxe cabinets in November 2007. Do the new rates of tax apply to the additional amount payable for the upgrade? The additional amount the builder charges for the upgrade is an additional amount payable for the residential complex. The purchaser is not considered to have entered into a new agreement as a result of the upgrade and there is no impact on the application of the transitional rules. Since the agreement was entered into after May 2, 2006 and on or before October 30, 2007, 6% GST or 14% HST will apply on the total amount payable for the residential complex, including the amount payable for the upgrade.   pub/If both ownership and possession of the complex are transferred on or after January 1, 2008, the purchaser may claim a GST/HST 2008 transitional rebate. When determining the amount of the transitional rebate, the total amount paid for the complex includes the additional amount paid for the upgrade. A transitional rebate is not available if either ownership or possession is transferred before January 1, 2008. 15. After entering into a written agreement of purchase and sale for a residential complex in September 2007, the purchaser requests that the builder upgrade the flooring on the main floor to hardwood. The amount payable for the upgrade is not included in the written agreement of purchase and sale, nor is an addendum to that agreement made in respect of the upgrade. The builder issues a separate invoice for the upgrade on February 12, 2008, and the purchaser pays the amount directly to the builder on the following day. Both ownership and possession of the residential complex will be transferred in April 2008. Do the new rates of tax apply to the additional amount payable for the upgrade? The additional amount the builder charges for the upgrade is an additional amount payable for the residential complex. Although the purchase and sale agreement is not actually modified, the upgrade nonetheless forms part of the single supply of the residential complex made by the builder, as the builder is not making a separate supply of hardwood flooring. Since the written agreement of purchase and sale was entered into after May 2, 2006, and on or before October 30, 2007, 6% GST or 14% HST will apply on the total amount payable for the residential complex, including the amount payable for the upgrade.  gi/Where both ownership and possession are transferred on or after January 1, 2008, the purchaser may claim a GST/HST 2008 transitional rebate. When determining the amount of the transitional rebate, the total amount paid for the complex includes the additional amount paid for the upgrade. A transitional rebate is not available if either ownership or possession is transferred before January 1, 2008. 16. What happens if the purchaser of a new residential complex replaces a previous purchaser in the agreement of purchase and sale?  gi-086/gi-086-eIt must be determined whether the agreement has been modified, varied or otherwise materially altered to the extent that a new agreement is entered into and, as a result, whether novation (i.e., a new agreement) has occurred. If novation has occurred, the application of the transitional rule for sales of new housing will be based on the date the new agreement is entered into, as well as the dates that possession and ownership are transferred under that new agreement. Refer to GST/HST Policy Statement P-249, Agreements and Novation. If novation has not occurred, the application of the transitional rule will be based on the date that the agreement was entered into as well as the dates that ownership and possession are transferred under that agreement. Generally, however, a change in the purchaser (i.e., the person liable to pay for the supply under the agreement) would result in a novation.   17. A written agreement of purchase and sale was entered into in September 2007 for a new residential complex where both ownership and possession will be transferred in December 2007. The purchaser and builder renegotiate the terms of the agreement and enter into a new agreement in November 2007. Both ownership and possession under the new agreement will be transferred in February 2008. Do the new rates of tax apply to this transaction? Where the builder and purchaser renegotiate the terms of agreement to purchase a new residential complex and enter into a new agreement of purchase and sale, the transitional rule will apply to the new agreement. Since the new agreement is entered into after October 30, 2007, and both ownership and possession under the new agreement will be transferred on or after January 1, 2008, 5% GST or 13% HST will apply.pdf