How does GST work?
The Goods and Services Tax is a 5% federal tax which is added at the point of sale. In real estate, it applies to the purchase of new construction, some vacant land, and on the resale of accommodations that have been rented out for short term rentals (less than 1 month)
The payment of GST can be deferred if the new purchaser is going to continue to offer the property for short term rental for 90% of the time and becomes a GST registrant. GST registrant,s are entitled to claim credits for the GST paid on legal fees, property management fees, and utilities such as electricity, gas, cable and telephone. GST registrants are required to collect and remit GST on the short term rentals, which in some cases may be done through a property manager. An annual GST return must be filed and is also straighforward.
Do I have to pay GST?
GST replaced the 13.5% federal manufacturers sales tax in 1991. Although the tax is collected at a rate of 5% on the sale price of goods and services, it doesn't apply to every type of property or every form of real estate service. A GST rebate may be available under certain conditions.
GST on New Homes
When you buy a newly constructed home, condominium or townhouse, the entire purchase price including land is taxable. If the home is going to be your primary place of residence, it may qualify for a partial GST rebate, depending upon the sale price. If the property is to be rented to tenants, the full 5% GST is charged on the purchase price.
GST on Resale Homes
There is no GST on the purchase price of a resold residential property that has been occupied as a residence before you bought it. Resale residential property includes an owner occupied house, condominium, apartment, summer cottage, vacation property or non-commercial hobby farm. Resale property can also mean a recently built house that is substantially complete and has been sold at least once before you buy it.
GST and Real Estate Deals
GST applies to most of the services provided in completing a real estate transaction. For example, 5% GST is applied to the real estate commission. The person responsible for paying the commission pays the tax.
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