Goods and Services TaxWe do not advise about GST. For GST advice, please contact an accountant
Goods and Services Tax
How Does GST Apply to Used Residential Housing?
It does not. Used residential housing is not subject to GST.
How Does GST Apply to New Residential Housing?GST is payable on the purchase price of newly constructed or substantially renovated residential homes. In legislation, substantially renovated is defined as the removal or replacement of most of the house construction components except for the foundation, external walls, interior supporting walls, floor, roof and staircase.
What is The Tax Rate for GST?GST is 5% and can be subject to rebates. (See below.)
What Are the GST Rebates if Your New Home is Your Primary Place of Residence?
First, let us define the primary place of residence. This means a home that you own, jointly or otherwise, that you intend to live in on a permanent basis. To be eligible, the intent to use the home as your primary place of residence must be evident at the outset of buying the home. A recreational cottage, an investment property or a property you might retire to in the distant future do not qualify.
If you (or a certain related family member) are planning to reside in the new home as your primary residence, you may be eligible for a GST New Housing Rebate. This rebate equals 36% of the GST but only applies to homes under a certain price point.
For example, if you purchase your new home for $350,000 excluding GST, the gross GST is $17,500 (5% on $350,000). The GST New Housing Rebate is 36% of $17,500, which is $6,300. Thus, the applicable GST is $17,500 less $6,300, which equals $11,200.
The full GST New Housing Rebate is available for new homes priced up to $350,000. There is no GST New Housing Rebate on homes valued over $450,000.
For homes valued between $350,000 and $450,000, the rebate is gradually reduced and is calculated with the following formula (get ready to brush up on your high school math):
$6,300 x [$450,000 – the purchase price] / $100,000
For example, assuming the purchase price of a new home is $400,000 excluding GST, the GST New Housing Rebate is
$6,300 x [$450,000 – $400,000] / $100,000
This results in a rebate of $3,150. The gross GST would be 5% of $400,000, which equals $20,000, less the partial GST New Housing Rebate of $3,150, for a net tax of $16,850.
Please note that the developer may agree to credit you the rebate on completion, but not all developers do this. In these cases, you will have to pay the full 5% GST on completion and then apply to Canada Revenue Agency (CRA) for the GST New Housing Rebate after closing. This means that you will have to ensure that you have additional funds to cover the 5% GST on completion. Note the GST New Housing Rebate is not available to corporations or partnerships.
What Are the Rental Rebates?
If you are planning to rent out the new home, you may be eligible for a GST New Residential Rental Rebate (GST NRR Rebate).
Like the GST New Housing Rebate, the full GST NRR Rebate is available only on new homes priced up to $350,000. A partial GST NRR Rebate is available for homes priced between $350,000 and $450,000. The actual rebate calculations are identical to rebate calculations for the GST New Housing Rebate.
To be eligible for the GST NRR Rebate, you must meet the following criteria:
- You must not be entitled to claim input tax credits on any part of the tax payable on the acquisition of the rental unit.
- The rental unit must be a “qualifying residential unit” which means you must be the owner of the unit and the unit must be a self-contained residence as defined in the Excise Tax Act.
- The unit must be held by the owner for the purpose of making exempt supplies (for example, a residential tenancy).
- The unit must be used as a primary place of residence by the tenants and must be so used for at least one year. You will have to provide a copy of the tenancy agreement showing a term of at least one year.
Please note that developers are not allowed to credit you on completion with the GST NRR Rebate. This means you will have to pay the full 5% GST on completion and then claim the GST NRR Rebate afterward directly from CRA. Therefore, you will have to ensure you have the necessary funds to cover the 5% GST on completion.
Does GST Apply to New Mobile Homes and Floating Homes?
Yes, for a purchase of a newly constructed or substantially renovated mobile home or floating home, 5% GST will apply on the purchase price of the mobile home or floating home. You will be able to claim the various rebates, as applicable.
Does GST Apply to the Sale of Vacant Land by an Individual?
Sometimes. Here are some examples of when GST applies
The sale of land that is capital property that had been used primarily in a business
The sale of land in the course of a business
The sale of a parcel of land created by subdividing another parcel into more than two parts
The sale of land by an individual that had been kept for personal use would be exempt from GST.