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.
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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.
