GST on Real Estate Purchases
British Columbia Goods and Services Tax (GST) is a 5% tax you pay on goods or services for personal use and enjoyment. Much like the GST you pay for the purchase of clothing, the same principle applies to the purchase of a new home in BC.
GST is charged on top of the purchase price of the home, and applies only for new homes in BC. This means that GST is payable on newly constructed properties such as a presale high-rise condo sold by a developer, or an owner builder home. (usually detached)
Any property that is not brand new (has been lived in) and has been used for residential purposes in the past are exempt from GST. Essentially, the GST has already been paid for at the first point of purchase.
How much is the GST Rebate for New Homes in BC?
The GST New Housing Rebate is dependent on the purchase price of the home.
Maximum GST Rebate
36% Rebate of 5% GST
To qualify for the Maximum Rebate, the purchase price of a new or presale home must be $350,000 or less, and the property must be a principal residence.
At a purchase price of $350,000, the maximum rebate is $6,300.
Partial GST Rebate
To qualify for the Partial Rebate, the purchase price of a new or presale home must be more then $350,000 and less than $450,000, and the property must be a principal residence.
The rebate is gradually reduced and is calculated by using the following formula:
$6,300 x [$450,000 – the qualifying purchase price] / $100,000
No GST Rebate applies if the property purchase price is above $450,000. In this case, the buyer is responsible for paying the full 5% GST as per the Contract of Purchase and Sale.
GST Rebate New Home
There are 2 types of GST Rebates for New Home Purchases. They are:
- GST New Housing Rebate (GST N.H Rebate)
- GST New Residential Rental Rebate (GST N.R.R Rebate)
GST New Housing Rebate
Full GST New Housing Rebate: The full GST new housing rebate is 36% of the 5% GST. For new homes in BC that are under $350,000 that a buyer intends on living in as their primary residence, the GST new housing rebate may apply.
Partial GST New Housing Rebate: Property purchases between $350,000 and $450,000 have partial rebates at a much lower amount. For homes valued between $350,000.00 and $450,000.00, the rebate is gradually reduced and is calculated by using the following formula:
$6,300 x [$450,000 – the purchase price] / $100,000
Homes over $450,000 receive no GST New Home Rebate at all and are subject to paying the full 5% GST on the new home purchase.
If you are claiming the rebate, keep in mind that you will be required to pay GST in full at the time of completion and cannot blend the GST amount in to your mortgage.
Full GST Rebate example:
Assume the purchase price of a new home is $350,000 excluding G.S.T.
Purchase price: $350,000
Full GST of 5%: $17,500
Purchase price with full GST = $367,500
GST New Home Rebate Calculation: 36% of $17,500(5% GST) = $6,300
GST After Rebate: $17,500 – $6,300 = $11,200
Purchase Price + GST – GST Rebate = $361,200
Partial GST Rebate example:
The Partial G.S.T. New Housing Rebate calculation is:
((Full GST Rebate of $6,300) x ($450,000 – qualifying purchase price)) / $100,000
Assume the purchase price of a new home is $400,000 excluding G.S.T.
Purchase price: $400,000
Full GST of 5%: $20,000
Purchase price with full GST = $420,000
GST Partial Rebate Calculation: ((Full GST Rebate of $6,300) x ($450,000 – $400,000)) / $100,000 = $3,150
GST After Rebate: $20,000 – $3,150 = $16,850
Purchase Price + GST – GST Rebate = $416,850
GST New Residential Rental Rebate
An additional rebate for new homes in BC is offered to purchasers that are planning to rent out the new home as an investment property. This rebate is called the GST New Residential Rental Rebate (GST NRR Rebate).
The calculation for both the full and partial exemptions are the same (36% of 5% GST), and similar to 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 the following conditions:
- 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 GST NRR Rebate afterwards directly from Canada Revenue Agency.
GST Rebate New Home Calculator
For an easy calculator for taxes including GST, property transfer tax, and foreign buyer tax, in addition to auto-populated rebates, you can check out this tax calculator: BCREA – Tax Calculator
If you’re looking to purchase a property in the Lower Mainland and want to get crystal clear on the costs, then start a conversation by calling 604-765-0376. Prefer text? 604-319-0200 or email [email protected]. We’re here to help.