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.
