GST
and the Resale Home
You don't have to pay GST on the purchase price
of a used residential home. In other words,
the purchase is "exempt" from GST.
Revenue
Canada defines "used residential property"
to include an owner-occupied house, condominium,
apartment, summer cottage, vacation property
or non-commercial hobby farm. They refer to
"used" as residential property that
has been occupied as a residence before you
bought it.
Used
property can also mean a recently built house
that is substantially complete and has been
sold at least once before you buy it. For example,
if a new house is purchased and resold before
being occupied, the home's resale price will
normally be exempt from GST.
GST and the Real Estate Transaction
GST applies to most of the services provided
in completing the real estate transaction. For
example 7% GST is applied to the commission
a Realtor charges for facilitating a sale. The
tax is paid by the person responsible for paying
the commission- usually the seller.
Realtor
commissions are taxable even if the total GST
owed is reduced by a rebate, or the sale of
the property is exempt from GST. For example,
if you sell a used home, the sale price is exempt
from GST but the Realtor's commission is still
taxable.
GST
applies to many other services involved in the
real estate transaction. These include legal
fees, appraisals, surveys and legal assistance.
Again, GST is charged on these fees regardless
of whether the house you purchase is exempt
from the tax.
GST and Rent
No GST is payable on residential rents. However,
if you employ a Realtor or another professional
to find and arrange a tenant for your rental
property, GST applies to the fees and commissions
they charge for providing this service. GST
also applies to the fees charged to the landlord
for property management, as well as repair and
maintenance services. Monthly fees charged by
condominium associations are not subject to
GST.
Land Transfer Taxes
Along
with the GST there are also other taxes that
a purchaser must pay. Included is the Ontario
Land Transfer Tax and the BC Property Transfer
Tax. These are Provincial taxes levied on the
purchase of property.
BC
Property Transfer Tax
Property Transfer Tax is a provincial tax that
is payable upon the purchase of real estate
in British Columbia. The tax is equal to one
percent on the first $200,000 in value and two
percent on the balance. There currently is an
exemption for first time buyers but there are
a number of requirements to qualify, including:
(a)
Must be the purchase of a principal residence;
(b)
The purchaser must be a Canadian citizen or
permanent resident of Canada;
(c)
The purchaser must have resided in the province
of British Columbia for at least one year immediately
prior to the application to register the purchase
of the principal residence;
(d)
The purchaser must not have previously owned
an interest in a principal residence anywhere
in the world;
(e)
The fair market value of the land and improvements
must not exceed $275,000 within the Capital
Regional District, Greater Vancouver, Central
Fraser Valley, Dewdney-Allouette and Fraser
Cheam and $225,000 if the property is located
elsewhere in the province;
(f)
The amount borrowed to finance the purchase,
and registered against title, must be 70% or
greater of the fair market value; and
(g)
The amount borrowed must have a term of at least
one year.
These
are major requirements which should be reviewed
with your realtor, lender or lawyer to ensure
that you qualify.
