Discover GST Rates, Rebates, and Tax Calculations for Your British Columbia Home Purchase
When buying a new home, especially for first-time buyers, it's crucial to consider more than just the purchase price. Closing costs and taxes play a significant role in the overall home buying process. In this blog, we'll delve into the specifics of the Goods and Services Tax (GST) on new homes in British Columbia (BC). We'll address common questions like "how much is GST on new homes" and "are there GST new home rebates?" Our goal is to provide you with a comprehensive understanding of the taxes you're responsible for and any potential rebates or exemptions that may apply to your situation.
GST on New Homes in BC (2023)
The GST in British Columbia is a 5% tax imposed on goods or services for personal use and enjoyment. This tax applies similarly to the purchase of clothing and extends to the acquisition of a new home in BC. GST is charged in addition to the purchase price of the home and is specific to newly constructed properties, such as pre-sale high-rise condos from developers or owner-builder homes. Any property that isn't brand new, i.e., has been previously lived in, and used for residential purposes, is exempt from GST as it was already paid at the initial point of purchase.
Calculating GST on New Home Purchases:
When paying GST on new homes in BC, the tax rate is a fixed 5%, subject to potential rebates.
The tax rate is calculated as 5% of the purchase price, which means that you need to consider the purchase price plus the 5% GST.
However, it's essential to check your purchase agreement to ensure if full sales taxes are already included in the purchase price. If they are, GST is already factored in, and this should be communicated to your legal representative to avoid double charges.
Due Date for GST on Real Estate:
GST is payable at the time of completion, as stipulated in the purchase and sale contract.
Your legal representative (notary or lawyer) will calculate this for you when preparing the statement of adjustments in anticipation of completion.
Keep in mind that if you qualify for a rebate, you will initially pay the full 5% GST upon completion and claim the rebate afterward.
Who Pays GST on New Homes in BC:
In a residential real estate purchase of a new home in BC, the buyer is responsible for paying GST upon completion.
Sellers or developers do not pay GST on new homes.
Clarification: GST and Assignment of Contract for New Homes and Presales:
Assignments of contracts involve the transfer of the original buyer's contract to a new buyer.
In this scenario, the new buyer (assignee) is responsible for paying GST on the purchase of the property, while the original buyer (assignor) is not responsible for GST but may need to pay capital gains tax on any profit made from the sale.
What Constitutes a New Home:
While the definition of a new home is typically clear-cut (newly built or in the presale phase and sold directly by a developer or builder), some situations can be more ambiguous.
Homes that are move-in ready but have never been lived in may still be considered new, in which case GST would apply. The determining factor is whether the home is being sold directly by the developer and has never been lived in, indicating that GST may not have been paid.
GST also applies to homes that have undergone substantial renovations, typically requiring a minimum degree of 90% renovation. Various methods, including comparisons of square footage, walls, and bedrooms, are used to assess renovations.
How Much Can You Save with the GST Rebate for New Homes in BC?
The GST New Housing Rebate depends on the purchase price of your new home. Here's the breakdown:
Maximum GST Rebate:
A whopping 36% rebate of the 5% GST.
To qualify for the maximum rebate, your new or presale home's purchase price must not exceed $350,000, and the property must be your primary residence.
For a $350,000 purchase, you can enjoy a maximum rebate of $6,300.
Partial GST Rebate:
To be eligible for the partial rebate, your new or presale home should cost more than $350,000 but less than $450,000, and it must be your primary residence.
The partial rebate is gradually reduced and is calculated using this formula: $6,300 x [$450,000 - qualifying purchase price] / $100,000.
No GST rebate applies if your property's purchase price exceeds $450,000. In this case, you are responsible for paying the full 5% GST, as stipulated in the Contract of Purchase and Sale. Please remember that when claiming the rebate, you must pay the full GST upon completion and cannot roll it into your mortgage.
Here's how it works:
Assume the purchase price of your new home is $350,000, excluding GST.
Purchase price: $350,000
Full GST of 5%: $17,500
Purchase price with full GST: $367,500
GST New Home Rebate Calculation: 36% of $17,500 (5% GST) = $6,300
GST After Rebate: $17,500 - $6,300 = $11,200
Purchase Price + GST - GST Rebate: $361,200
Partial GST Rebate example:
Let's say the purchase price of your new home is $400,000, excluding GST.
Purchase price: $400,000
Full GST of 5%: $20,000
Purchase price with full GST: $420,000
GST Partial Rebate Calculation: [($6,300) x ($450,000 - $400,000)] / $100,000 = $3,150
GST After Rebate: $20,000 - $3,150 = $16,850
Purchase Price + GST - GST Rebate: $416,850
Explore the GST New Residential Rental Rebate
Another rebate awaits those who plan to rent out their new home as an investment property—the GST New Residential Rental Rebate (GST NRR Rebate). This rebate follows the same rules for both full and partial exemptions (36% of 5% GST). As with the GST New Housing Rebate, the full GST NRR Rebate is only applicable to new homes priced up to $350,000, while a partial GST NRR Rebate is available for homes priced between $350,000 and $450,000.
To qualify for the GST NRR Rebate, you must meet these conditions:
You must not be eligible to claim input tax credits for any portion of the tax payable on the acquisition of the rental unit.
The rental unit must be a "qualifying residential unit," meaning you must own the unit, and it must be a self-contained residence as defined in the Excise Tax Act.
The unit must be held by you for the purpose of making exempt supplies, such as residential tenancy.
The unit must serve as the primary residence for tenants for at least one year, as stipulated in the tenancy agreement.
Keep in mind that the developer cannot apply the GST NRR Rebate on completion. You will need to pay the full 5% GST upon completion and then claim the GST NRR Rebate directly from the Canada Revenue Agency.
For a comprehensive calculator covering taxes, including GST, property transfer tax, and foreign buyer tax, along with auto-populated rebates, check out the BCREA Tax Calculator.
Understanding the details of GST on new homes in BC is crucial for making informed decisions when purchasing a new property. By knowing the calculations, rebates, and eligibility criteria, you can navigate the home buying process more confidently and effectively.
If you’re looking to purchase a property in the Lower Mainland and want to get crystal clear on the costs, then start a conversation with me at 778-233-8366 via call or text. If you prefer email as your communication method, feel free to send me a message at firstname.lastname@example.org. I’m here to assist you in finding the perfect representation for your home purchase needs. Feel free to contact me today, and let's get started on finding your dream home.