GST on Real Estate in BC: Explaining When You Pay GST on a Residential Home Purchases in British Columbia
When you’re buying a new home, especially if it’s for the first time, there is so much more to account for than just the purchase price of your new home. It’s very important to pay attention to additional fees like notaries/lawyers, goods and services tax (GST), and the property transfer tax – just to name a few.
First, let’s go through the basics of the GST on real estate in BC.
What is the GST on Real Estate in BC?
The British Columbia Goods and Services Tax for real estate in BC is a 5% Federal Tax that is payable at completion on the sale of brand new properties in BC. This means that GST is payable only on newly constructed properties such as a presale highrise condo sold by a developer, or an owner builder home. (usually detached) This also means that assignment of contract purchased from another investor are subject to BC GST.
When is the GST due on a property?
GST is due at the time of completion, as per the contract of purchase and sale. Your notary or lawyer will calculate this for you when they prepare the statement of adjustments in preparation for completion.
Is there a GST Rebate for Real Estate in BC?
Yes there is a general rebate for homes that are under $350,000 that a buyer intends on living is an his/her permanent residence. The rebate is 36% of the GST (therefore, 36% of the 5% GST) is the highest rebate that can be issued for new homes. Property purchases between $350,000 and $450,000 have partial rebates at a much lower amount. Homes over $450,000 receive no GST New Home Rebate at all.
What is the tax rate for GST?
When you’re paying GST on real estate in BC, for residential properties (excluding used), the tax rate is 5%, subject to any rebates.
The question of whether or not you have to pay GST is a tricky one, as it depends on your purchasing status, and the type of home you’re buying. To begin calculating whether or not you have to pay GST (and how much), there are a couple of things you need to ask yourself:
- Are you buying a used residential property?
- Is the home purchased less than $350,000 and your primary residence?
- Are you buying a new build/presale property?
- Are you assigning a property or purchasing an assignment?
- Are you planning on renting out the property?
- Are you selling or are you buying?
- Does the purchase price include GST?
Let’s address these one by one.
How does GST apply to used residential homes?
It doesn’t. GST on real estate in BC is not subject to used homes, as the first owner of the property would have already paid it.
Is the home purchased less than $350,000 and your primary residence?
As mentioned previously, there is a general rebate for homes that are under $350,000 that a buyer intends on living is an his/her permanent residence. The rebate is 36% of the GST (therefore, 36% of the 5% GST) is the highest rebate that can be issued for new homes.
To be very clear, in all RESALE properties you do not need to pay GST. Why? Because the current seller or a previous seller will have already paid it at some point previously. Further to that, if you’re a first time home buyer, you should be eligible for property transfer tax exemption.
New home buyers can apply for a rebate of the 5% GST if the purchase price is $350,000 or less. The rebate is up to 36% of the 5% GST to a maximum rebate of $6,300. There is a proportional GST rebate for new homes costing between $350,000 and $450,000. Keep in mind you may have to pay the full GST upon the purchase, and you will receive the rebate at a later date. However, there are also times where the developer may rebate you upon completion so that you do not have to pay the full amount.
More information on the GST New Housing rebate can be found at: CRA – New Housing Rebate
If you’re buying a presale/new build…
As mentioned in the previous point, if you are a buyer that intends on living in the new build as a primary residence then you are most likely eligible for a rebate of 36% of the 5% GST. The full G.S.T. New Housing Rebate is available for new homes priced up to $350,000. There is no G.S.T. New Housing Rebate on homes valued at over $450,000.00 so the full 5% will be paid.
Let’s brush up our math skills for a little example:
Assume the purchase price of a new home is $350,000 excluding G.S.T. The gross G.S.T. is $17,500 (5% of $350,000). The G.S.T. New Housing Rebate is 36% of $17,500 (5% GST), which is $6,300. Thus, the applicable G.S.T. is $17,500 (5%) less $6,300 (36% of 5% on $350,000), which equals $11,200. (GST payable after rebates)
For homes valued between $350,000.00 and $450,000.00, the rebate is gradually reduced and is calculated by using the following formula (get ready to brush up on your high school math):
$6,300 x [$450,000 – the purchase price] / $100,000
For example, assume the purchase price of a new home is $400,000 excluding G.S.T. The G.S.T. New Housing Rebate is
$6,300 x [$450,000 – $400,000.00] / $100,000
which equals $3,150. The gross G.S.T. would be 5% of $400,000.00, which equals $20,000.00, less the partial G.S.T. New Housing Rebate of $3,150.00, for a net tax of $16,850.00.
Are assignment of contracts subject to paying GST?
Yes. Assignment of contracts are still considered a new home, so you will be paying the GST upon completion unless otherwise agreed to between the assignee and the assignor.
Are there any rental rebates?
If a Purchaser is planning to rent out the new home, they may be eligible for a GST New Residential Rental Rebate.
Like the GST New Housing Rebate, the full GST NRR Rebate is only available on new homes priced up to $350,000. A partial GST NRR Rebate is available for homes priced between $350,000 and $450,000.
To be eligible for the G.S.T. NRR Rebate, the Purchaser must meet certain conditions which include:
- The Purchaser must not be entitled to claim input tax credits in respect of any part of the tax payable on the acquisition of the rental unit.
- The rental unit must be a “qualifying residential unit” which means the person applying for the rebate must be the owner of the unit and the unit must be a self contained residence as defined in the Excise Tax Act;
- The unit must be held by the owner for the purpose of making exempt supplies (for example, a residential tenancy);
- The unit must be used as a primary place of residence by the tenants and must be so used for at least one year and the Purchaser will have to provide a copy of the tenancy agreement showing a term of at least one year.
Please note that the Developer is not allowed to credit the Purchaser on completion with the GST NRR Rebate. This means the Purchaser will have to pay the full 5% G.S.T. on completion and then claim the G.S.T. NRR Rebate afterwards directly from Canada Revenue Agency.
Are you a buyer or a seller?
Next, are you a buyer or a seller? So far, we’ve discussed when buyers have to pay GST with regards to the purchase price of the home. Keep in mind, you will still have to pay GST on other services throughout the transaction, like your lawyer or notary. If you are a seller, then you are responsible for paying the GST on commission for your listing real estate agent as well as the buyer’s agent, unless otherwise agreed to in your listing contract.
Buyers typically do not pay real estate commissions, as the buyer’s agent is usually paid by the seller. However, if you are a buyer and have an agreement to pay your agent a commission please keep in mind you will also have to pay GST on that service. If you’re buying, you might be interested in our other article: Costs of Buying a Home in BC.
Did your purchase price already include GST?
Lastly, did the purchase price include full sales taxes when you purchased it? If the answer is yes, then the GST has already been accounted for and you DO NOT need to pay it again. Make sure that this is specified in your contract and that your lawyer or notary is aware.
Looking for a Tax Calculator?
For an easy calculator of the property transfer taxes, GST, and foreign buyer taxes you can also use the following tax app. It’ll do all the calculations for you:
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