Subject: ACT: HST on New Home Purchases from Builders (Closing within 120 Days)

SUMMARY

Effective July 1, 2010, the Harmonized Sales Tax (HST) in Ontario and British Columbia will apply to residential home purchases from builders closing within 120 days. When completing these applications it is important to ensure the purchase price of the residential property includes the HST minus any applicable rebates.

While most builders include the HST, minus any applicable rebates in the purchase price, not all of them will do this. When the builder does not include the HST, it will result in an uncomfortable customer experience at closing as the customer may have a large outstanding HST amount included on their Statement of Adjustments.

ACTION

When completing a residential home purchase from a builder closing within 120 days, carefully review the Purchase Agreement to determine if the purchase price of the property includes or excludes the HST, minus any applicable rebates.

1. If the purchase price includes the HST, minus any applicable rebates, use the purchase price as stated on the Purchase Agreement.

2. If the purchase price excludes the HST and/or any applicable rebates, ask your customer to obtain an Amendment/Addendum from their builder reflecting a purchase price inclusive of the HST, minus any applicable rebates.

• · If an Amendment/Addendum is available, use the purchase price as stated on that document.
• · If an Amendment/Addendum is not available, manually calculate the purchase price to be used using the following guidelines:
  • · Ontario – Guidelines
  • · British Columbia –Guidelines

3.       If your customer presents a separate agreement with builder upgrades that are apart from the original contract, use the purchase price of the property including the HST, minus any applicable rebates PLUS the cost of the upgrades, including the HST, minus any applicable rebates.

ADDITIONAL INFORMATION

• For questions specific to HST and Federal or Provincial New Housing Rebate eligibility, customers must contact their builder or solicitor directly.

·       The CRA’s current policies regarding the application of the GST to housing generally applies to the HST.  Similarly for rebate eligibility, the property must be the primary place of residence of the purchaser or a direct relation of the purchaser.