If you or anyone you know is buying a new home, here are some important highlights to be sure to understand. This information was sent to me by Morin Law Corporation; check with them or your own personal legal counsel about how this can affect your purchase.
HST to GST Transition - April 1, 2013
Highlights for New Home Purchasers
- On April 1 the basic HST/GST tax rate paid by Buyers of New Homes will change from 12% to 5% (effective on the earlier of the Completion Date or the Possession date) with the exception being Strata Properties regarding giving early possession.
- Buyers will also pay an additional 2% BC Transitional Tax for homes that are at least 10% constructed on April 1, 2013. This is in effect until April 1, 2015.
- Do you save tax by waiting to purchase until after April 1 if the home is more than 10% constructed on April 1? Depends on the price. You must do a calculation including both pre and post April 1 rates (12%/5%), the HST rebate, Provincial Rebate and the 2% BC Transitional Tax. Generally speaking if the purchase price is greater than $840,000. there may be some tax savings to closing after March 31.
- Contract Disclosure Requirements. Where a sale is not completed by December 31, 2012, all contracts for the purchase of new homes dated between February 17, 2012 and April 1, 2015 must clearly stipulate how the property will be taxed at Closing. Sellers had until January 2, 2013 to provide this information to Buyers if the stipulation was omitted. Failure of Sellers to do this can result in penalties of up to $40,000. per home. Not clear at this time if failure to stipulate can give buyers a remedy (eg. void the contract).
- Real Estate Commission calculation is simpler that the past change from GST to HST. The date the commission is payable (normally the Completion Date) is the key date. Pre-April = 12%. Starting April 1 = 5%. There is no percentage of work calculation needed.
The above information is for general discussion purposes and is not to be relied upon. Morin Law Corporation has referred only to highlights of legislation and regulations that have not been finalized. Error and Ommissions are excepted. You should see professional accounting/legal advice for your specific transaction.
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