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HST: Confused? You Will Be.

Or maybe not. A quick overview of Real Estate and the upcoming HST.

HST will be implemented on July 1st this year. Here is a quick summary of the more relevant points for home buyers and sellers:

• The new HST applies only to new construction or homes that are substantially renovated. It does not apply to resale houses or condominiums.
• If you are purchasing a new home with a value less than $400,000, you should receive a rebate that will effectively mean that you are not paying any more taxes than you would have before the implementation of the HST.
• There will be HST on the ancillary services related to the real estate transaction such as real estate commission and legal services.
• If your transaction is taking place after July 1, 2010, you cannot pre-pay for services and thereby avoid paying this tax .
• If you entered into your agreement of purchase and sale for your new home prior to the announcement of the new tax, you are grandparented into the tax and you will not have to pay it on closing.

As far as the actual real estate fees OREA issued this information today:

“Over the past few months, OREA has been working with our outside tax counsel, CREA and (indirectly) CREA’s consulting firm KPMG on HST transitional provisions.

KPMG recently provided us the following guidance with respect to calculating HST payable during the transition period.

‘Based on discussions with Canada Revenue Agency and Finance Canada officials, it is a question of fact when the service commences and ends for purposes of applying either GST or HST.  In general the service commences when the agent and client sign a listing agreement or buyer agency agreement.  The service may conclude when the deal has ‘closed” – (leased or sold).  It may not conclude when an agreement of purchase of sale/lease has been signed because the REALTOR® could still provide some services up to the time the REALTOR® is paid when the deal closes.  Canada Revenue Agency and Finance officials have agreed verbally that a reasonable basis to apply the 90/10 per cent rule and to determine how much HST will be payable on the services is to prorate the number of calendar days over the time period beginning with the listing of the property and ending on the completion of the sale/lease:

·         Before July 1, 2010 (GST applies); and

·         After June 30 (HST applies).’
We understand that this is not an official Canada Revenue tax bulletin but we believe it is the best information available.”

This entry was posted on Monday, May 17th, 2010 at 7:58 pm and is filed under Financing, The World Of Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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