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.
