On April 1, 2013, British Columbia will eliminate the 12% harmonized sales tax (HST) and re-implement the 5% goods and services tax (GST) and 7% BC provincial sales tax (PST). Builders need to keep in mind the following issues with respect to the transition:
1. Sales of new homes prior to April 1, 2013
a) The 12% HST will continue to apply sales of new homes prior to April 1, 2013.
b) BC First Time New Home Buyer’s Bonus – Eligible first-time new home buyers that meet certain conditions will be able to receive a refundable income tax credit worth up to $10,000 for purchases of new homes from February 21, 2102 to March 31, 2013.
c) Increased Threshold for BC New Housing Rebate – The maximum rebate for the BC portion of the HST paid on the purchase of new homes will increase to $42,500 for qualifying homes purchased between April 1, 2012 and March 31, 2013. The rebate is 71.43% of the BC portion of the HST up to a maximum of $42,500. There is also an enhanced BC New Rental Housing Rebate and a new second and Recreational Home rebate available in certain circumstances with similar thresholds.
2. Sales of new homes on or after April 1, 2013
a) The 5% GST will apply to the sale of new homes on or after April 1, 2013. The 7% PST generally does no apply to the sale of new homes.
b) BC Transition Tax – BC will impose a 2% transition tax on purchasers of new homes where:
i) HST does not apply to the sale;
ii) Construction of the home is at least 10% complete at April 1, 2013; and
iii) Ownership or possession of the new home transfers before April 1, 2015. The transition tax will be collected by builders and is intended to mirror the embedded PST that would apply on the construction of a new home after PST is fully implemented.
c) BC Transition Tax Rebate – A BC Transition Tax Rebate is available to builders of between 0.2% and 1.5% of the selling price of the new home. The purpose of the rebate is to compensate builders for the PST costs incurred after April 1, 2013 which may not have been factored into the price of new homes.
The above rules also generally apply to substantially renovated housing.
For more information, please contact Merrill Leung, CA, Senior Manager, Tax at firstname.lastname@example.org
Read more about the “Return To PST” at http://www.pstinbc.ca/