BC's HST and Real Estate
"The cost of real estate transactions will increase on July 1, 2010 with the introduction of the new HST. The people of BC will be particularly affected since our province has some of the highest priced real estate in the country. "
PROVINCE INCREASES NEW HOUSING REBATE THRESHOLD
VICTORIA – The Province is proposing to increase the threshold for the B.C. HST new housing rebate from $400,000 to $525,000 to ensure that, on average, purchasers of new homes up to $525,000 pay no more tax due to harmonization, Finance Minister Colin Hansen announced today.
“We heard the concerns from consumers and industry about how the HST might affect home buyers, and this increase will move the threshold to above the average new home price in the province. At $26,250, this provides the highest maximum provincial rebate in Canada,” said Hansen. “A similar rebate will also support the construction or substantial renovation of affordable rental housing.”
Purchasers of new homes would be eligible for a rebate of 71.43 per cent of the provincial portion of the HST paid on a new home, up to a maximum of $26,250. Homes above $525,000 would receive a flat rebate of $26,250. This enhanced rebate represents a 30 per cent increase in the threshold and maximum rebate available.
The Province is also proposing transitional rules for new housing. The provincial portion of the HST would not apply to sales of new homes where ownership or possession is transferred before July 1, 2010. In addition, sales of new homes under written agreements of purchase and sale entered into on or before Nov. 18, 2009, would generally not be subject to the provincial portion of the HST, even if both ownership and possession are transferred on or after July 1,2010.
On July 1, 2010, British Columbia intends to adopt the HST, combining a seven per cent B.C. rate with the five per cent federal Goods and Services Tax. At 12 per cent, B.C. would have the lowest HST rate in Canada. It is estimated the HST would remove over $2 billion in costs for B.C. businesses, including an estimated $1.9 billion of sales tax removed from business inputs and an estimated $150 million annually in compliance costs.
BACKGROUNDER
October 14 update: General Transition rules have been announced by the provincial government, although the general rules contain little information regarding real estate.
On July 23, 2009, the B.C. government announced that it has reached an agreement with the federal government to combine the 7% B.C. PST with the 5% GST to create a single harmonized sales tax (HST). The new tax will come into effect on July 1, 2010.
General
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The HST rate will be 12% (5% federal + 7% provincial)
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The PST will be eliminated completely
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There will be a partial rebate of the provincial portion of the HST of up to 20,000 on new housing
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Input tax credits will be available of HST in the same manner as under the current GST
New Housing
Currently under the GST, new housing is taxed while used housing is not. No housing sales are directly taxed under the PST, although the B.C. Ministry of Finance states that there is currently an average of 2% PST embedded in the cost of new homes from PST charges on construction materials. Under the HST, there would be no embedded tax but the full 12% HST would apply to new housing.
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