Good advice.

Good advice.

Goods and Services Tax

DBM Law Blog

When buying a newly built or substantially renovated home, one tax to consider is the GST.

GST is payable on the purchase price of newly constructed homes in Canada. The GST is currently 5%.

You may qualify for a GST rebate after the purchase of your new home. There are two rebate programs available: the New Housing Rebate and the Rental Rebate.

1. GST New Housing Rebate

You qualify for this rebate if you or a related individual intend to move in to this home and make it your primary place of residence. You must be an individual.

The amount of the rebate is based on the GST paid. It is approximately 36% of the GST paid at the time of completion. Maximum Rebates are only available for homes up to $350,000. For homes between $350,000 and $450,000, a rebate is available but is reduced. For homes over $450,000, there is no rebate available.

Your primary place of residence is generally a house that you own, jointly or otherwise, and that you intend to live in on a permanent basis. You may have more than one place of residence, but you are considered to have only one primary place of residence.

Although sometimes developers will credit the Purchaser on completion for the amount of the GST Rebate, purchasers usually pay the full GST to the developer at time of completion, and apply for the rebate after their purchase.

Rebate applications are mailed to the Federal Tax authorities, and take approximately a few months to be processed.

Please note that the federal government has been cracking down on this program. Don’t be surprised to receive a letter or phone call from a Revenue Canada agent, requesting proof that this newly built home is, in fact, your primary place of residence. The agent normally prefers something mailed to your new home, such as credit card statements. BC Hydro bills are apparently NOT sufficient.

2. GST New Residential Rental Property Rebate

You qualify for this rebate if you rent the property out for an extended period of time.

The amount of the rebate is based on the GST paid. It is approximately 36% of the GST paid at the time of completion. Maximum Rebates are only available for homes up to $350,000. For homes between $350,000 and $450,000, a rebate is available but is reduced. For homes over $450,000, there is no rebate available.

The developers cannot credit the Purchaser on completion for the amount of the GST Rental Rebate, purchasers must pay the full GST to the developer at time of completion, and apply for the rebate themselves after their purchase.

With this Application, purchasers need to submit copies of their Contract of Purchase and Sale, their Statement of Adjustments, and a copy of the lease / rental agreement they have with their tenant. Please note that the rental term must be long-term, normally for at least one year.

Rebate applications are mailed to the Federal Tax authorities, and take approximately a few months to be processed.

Please note that the federal government has been cracking down on this program. Don’t be surprised to receive a letter or phone call from a Revenue Canada agent, requesting proof that this newly built home is, in fact, a rental property.

If you have any questions about this post, please contact Lewis Nguyen at lewis@dbmlaw.ca or 604-937-6373.

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