When is G.S.T. Payable on a Home?
B.C. Transfer Tax

The Goods and Services Tax is collected at the rate of 7 % on the sale price of goods and services. However, it does not apply to every type of home or every form of real estate service.

New home purchases are subject to G.S.T. but may qualify for a G.S.T. rebate. Resale homes are exempt. Revenue Canada defines "used residential property" to include an owner occupied house, apartment, summer cottage, condominium, vacation property or noncommercial hobby farm. Essentially, used residential property is considered to be property that has been occupied as a residence before you bought it. Also, used property can include a recently built house that is substantially completed and has been sold at least once before it is purchased. For example, if a new house is purchased and resold before being occupied and lived in, the home's resale price will normally be exempt from G.S.T..

If you purchase a newly constructed home, condominium or townhouse, the entire purchase price, including land, is taxable. If the home is to be rented to tenants, the full 7 percent is charged on the purchase price. However, if the home is going to be your primary place of residence, it may qualify for a partial G.S.T. rebate, depending upon the sale price.

If your primary residence costs $350,000 or less, you will receive a rebate of 36 percent of the G.S.T. paid, to a maximum of $8750. This translates to a G.S.T. payment of approximately 4.5 percent on the purchase price. Seven percent G.S.T. on $350,000 amounts to $24,500, less a maximum rebate of $8750, for net G.S.T. payable on that amount of $15,750.

For each $1000 of purchase price above $350,000, the maximum rebate of $8750 is reduced by one percent. For example, if your home costs $400,000, you are $50,000 over the maximum and the $8750 rebate is reduced by 50 percent, to $4375. You would then pay G.S.T. of $28,000, less $4375, for a net of $23,625. The rebate adjustment continues at the rate of one percent per $1000 until an amount of $450,000 is reached, at which point there is no rebate and the full 7 percent tax is payable.

With respect to real estate commissions paid, these are payable whether there is any G.S.T. payable on the home or not. G.S.T. also applies to the other costs of the real estate transaction including legal fees, surveys, appraisals and legal assistance.

Other Land Transfer Taxes

In addition to G.S.T., there are property transfer taxes in both B.C. and Ontario.

In British Columbia, there is a land transfer tax of one percent on the first $200,000 in value, and two percent on the balance. Currently, first-time home buyers are exempt but must meet the following qualifications:

• the purchaser must be a Canadian citizen or permanent resident of Canada.
• it must be the purchase of a principal residence.
• the purchaser must not have previously owned an interest in a principal residence anywhere in the world.
• the purchaser must have resided in the province of B.C. for at least one year immediately prior to the application to register the purchase of the principal residence.
• the fair market value of the property 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 anywhere else in the province.
• the amount borrowed to finance the property purchase and registered against title must be 70 percent or greater of the fair market value.
• the amount borrowed must have a term of at least one year.