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The 12% HST in B.C.—combining a 5% federal component and a 7% provincial component—will be replaced, effective April 1, 2013, by the Goods and Services Tax (GST) and B.C.’s PST.
The rules in place regarding new residential construction that were straddling the July 1, 2010, date will continue to apply. The PST Transitional Tax Adjustment and the PST Transitional Tax Rebate will still be available where all conditions are met until April 1, 2013.
Iif we have a builder that has constructed a residential condominium complex that was more 40% complete at July 1, 2010, they would be eligible for a PST Transitional Rebate based on either the floor space method or the selling price method. The builder is able to apply for the rebate any time after July 1, 2010, (and before April 1, 2013) if they are using the floor space method. The builder is only able to apply for the rebate using the selling price method when the units sell. If the units are sold after March 31, 2013, the builder will not be required to charge HST and will not be eligible for the PST Transitional Rebate.
Generally, tax is payable on real property on the earlier of the day ownership of the property is transferred to the purchaser and the day possession of the property is transferred under an agreement for supply. The following examples illustrate how the tax will apply with regards to the transition rules:
Mr. and Mrs. Overend entered into an agreement to purchase a new house on December 15, 2012. The house will be completed on June 15, 2013. The Overend’s will not be required to pay HST as they do not take possession and ownership of the property until after March 31, 2013. The house will be subject to GST.
Condominiums have special rules in that the tax is not payable until the condominium is registered or the ownership is transferred. An example provided is where Mr. and Mrs. Starr take possession of their condominium on March 15, 2013, and move in on that date. The condominium is registered on September 15, 2013, at which time ownership of the condominium is transferred. The condominium will be subject to GST.
In certain situations builders are required to self assess on property where there is a change of use. For example: Mr. Wong enters into an agreement to purchase a new house and a lease of land from the same builder. The agreement is entered into on January 17, 2012. The house is complete and Mr. Wong is able to move in of March 10, 2013. Immediately before Mr. Wong moves in, the builder is required to self assess HST on the value of the house and land.
Generally, the basic tax content of property is the tax paid less any rebates received of the tax paid. February 17, 2012, will be considered the announcement date for going back to the GST and PST. Real Property and Tangible Property situated in BC will not include the provincial portion of the HST paid when calculating its basic tax content after the announcement date.
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:GST; PST; HST; Property
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