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The Federal Government and the Province are both working towards an April 1, 2013 transition date back to GST and PST in British Columbia.
It appears that for the transition back to PST the approach is going to be much simpler.
The 12 per cent HST in BC—combining a 5 per cent federal component and a 7 per cent provincial component—will be replaced, effective April 1, 2013, by the Goods and Services Tax (GST) and BC’s PST.
The BC Minister of Finance announced on Friday February 17, 2012, that there would be several changes to the existing rebates in place for purchasers of new housing.
Effective April 1, 2012 until March 31, 2013, the threshold for the Provincial Portion of the New Housing rebate will be increased to $850,000. Therefore, purchasers of new housing during this time period will be entitled to a maximum rebate of $42,500. This rebate is calculated as 71.43% of the provincial part of the HST payable on these new homes.
In addition to having the existing provincial rebate for purchasers of new homes, there will also be a new rebate added with the same parameters for purchasers of vacation and secondary homes outside of the Greater Vancouver and Capital Regions.
These provisions are being put in place to ensure that the housing market does not come to a standstill while waiting for the transition back to GST & PST.
Example 1: A builder of single family homes sells a home to Mr. Smith on April 15, 2012 for $720,000 plus HST.
This new home purchased will be Mr. Smith’s summer home in Kelowna. Mr. Smith will be required to pay $720,000 + the HST of $86,400. Prior to April 1, 2012, Mr. Smith would not qualify for any new Housing Rebate on this property as it is not intended to be his primary residence. However, Mr. Smith is now able to apply to the province for a rebate of 71.43% of the provincial part of the HST paid. Mr. Smith will now qualify for a rebate of $36,000.
Purchasers of new housing after April 1, 2013, will not be subject to HST; however, there will be a temporary transitional provincial tax of 2% on the full purchase price of the home where construction begins before April 1, 2013. Builders will also receive a temporary housing transition rebate to offset the additional cost of PST on materials to ensure that there is not double taxation.
The rules surrounding the GST and PST transition are complex. That’s why it is important to work with a professional who can help you understand the rules and set up the proper systems so you can take advantage of all the tax savings. Working closely with you, MNP will perform a diagnostic analysis, establish priorities for necessary systems, process changes and help you minimize cost and cash flow impacts that improve the performance of your business.
For more information or to find out how MNP can help you successfully manage the transition, please contact your local MNP Tax advisor.
Related Topics:Tax Rates; PST; GST; HST; Property
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