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Professional Standards Manual

Trading Services

4. General Information

(a) Contract Clauses - View Entire Section

(XX) Goods and Services Tax (GST)

[04/09/2013 The following information updated to reflect switch back to GST]
[08/24/2010 The following information updated to reflect switch to HST]

The application of the Goods and Services Tax (GST) to real estate transactions is complex. Generally speaking, GST applies to the sale or rental of real estate unless the sale or rental is exempt.

Exemptions may include but are not restricted to the following: residential rents, sales of used residential housing other than substantially renovated property, sales of personal-use land by an individual or an estate, certain sales of farmland to related individuals where the farmland is for personal use, and most sales and rentals of real property by charities, non-profit organizations and other public-service organizations.

NOTE: Licensees are responsible for the accuracy of any advice they may provide concerning the application of GST to real estate transactions. Both the buyer and the seller should be advised that if they have any questions regarding GST liability, exemptions, or their right to apply for a rebate, they should contact a lawyer, accountant or the nearest Canada Revenue Agency Office.

On April 1, 2013, the Harmonized Sales Tax (HST) was replaced by the federal GST and the BC Provincial Sales Tax (PST).  For any contracts entered into prior to April 1, 2013, and which close after April 1, 2013, there are certain rules for the transition from HST to GST and PST that may impact a buyer or seller’s obligations with respect to the payment of GST or PST. If a buyer or seller has entered into a Contract of Purchase and Sale prior to April 1, 2013, they should contact a lawyer, accountant or the nearest Canada Revenue Agency Office with respect to the application of such transitional rules.

There are brochures and GST memoranda available at Canada Revenue Agency offices that licensees may find useful regarding current rebate limits and exemptions, including the GST New Housing Rebate brochure RC4028(E). Licensees in smaller centres not served by a Canada Revenue Agency office may call 1-800-959-1953. On the Internet, government publications are available at www.cra-arc.gc.ca.

Where the buyer has not received independent advice regarding GST liability, exemptions, or rebates, prior to entering into a Contract of Purchase and Sale, the following clause should be inserted into the Contract:

Receipt of Information or Professional Advice by Buyer/Seller Concerning GST Liability Clause

Subject to the (select either Buyer or Seller) receiving and approving information or professional advice concerning the (select either Buyer or Seller) GST liability, GST exemptions or GST rebates, on or before (date) .

This condition is for the sole benefit of the (select either Buyer or Seller) .

Ω If not using the standard form Contract of Purchase and Sale, refer to ‘‘Contracts under Seal’’.

Before using the following clauses in the written contract, licensees must clearly indicate whether GST, if applicable, is included in the purchase price or if it is in addition to the purchase price. The following clause should be inserted into the contract for this purpose

Purchase Price to Include/Not Include GST Clause

The purchase price to (select either include/not include) GST.

Where the buyer acknowledges responsibility for paying the GST, the licensee should insert the following clause into the contract:

Buyer’s Responsibility to Pay GST Clause

The Buyer confirms the receipt of independent GST advice concerning the obligation to pay GST and will be responsible to pay any GST and apply for any GST rebate in connection with this transaction.

Where, for some reason, the seller agrees to pay GST on behalf of the buyer, the licensee should insert the following clause into the contract:

Seller’s Agreement To Pay GST Clause

The Seller will pay any GST in connection with this transaction and the Buyer will assign any rebate entitlement to the Seller.

Of course, the above-noted clauses can be amended or worded to fit a particular situation.

NOTE: Because of the complexity of the application of the Goods and Services Tax to real estate transactions, it is strongly recommended that licensees not give advice with respect to the application of the Goods and Services Tax to particular situations. If the wrong advice is given, the licensee may be liable for any problems that might arise as a result of incorrect advice.