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Professional Standards Manual

Trading Services

4. General Information

(a) Contract Clauses - View Entire Section

(XIX) Goods and Services Tax - View Subsection
(1) GST: New Housing Rebates

[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]

Licensees should be aware that GST is payable not only on new homes (including strata units and manufactured homes), but also on substantially renovated homes, as well. Sellers may need to obtain a ruling from the local GST office on what constitutes ‘‘substantial’’ and keep a record of the official who rendered that opinion.

Sellers of new homes use various ways to present the GST and the New Housing Rebate to prospective buyers. There are now at least four different combinations that buyers may face:

  • price includes GST; rebate to builder;
  • price includes GST; rebate to buyer;
  • GST over purchase price; rebate to buyer; and
  • GST over purchase price; rebate to builder.

It is the buyer, however, who is ultimately going to pay the GST, whether it is included in the purchase price or added to the price. It is also the buyer who is entitled to the New Housing Rebate, which the buyer can claim directly from Canada Revenue Agency or assign to the seller, who can claim it from Canada Revenue Agency. If the rebate is transferred to the seller, negotiations between the seller and the buyer should result in a saving to the buyer of the equivalent amount in the purchase price; however, it is expressed as either GST included in, or added to, the purchase price.

In the written contract, licensees must clearly indicate whether or not GST is included and who is being paid the rebate (if applicable). Licensees should leave the calculation of the exact amounts to the notary/lawyer acting as conveyancer ( just as the notary/lawyer calculates tax and utility adjustments, not the licensee).

Many developers/builders have their own preprinted GST clauses. A licensee working with an interested buyer should ask for these clauses in advance of the offer and have the buyer discuss them with independent counsel.

If the GST rebate is being credited to the seller, the following clause should be included in the contract:

GST: New Housing Rebate Clause

If the Buyer is not eligible for the New Housing Rebate, or does not complete or execute the documentation to assign the benefit of the rebate to the Seller on the closing date, the purchase price shall be increased by an amount equal to the New Housing Rebate that would have been otherwise available with respect to this purchase. If the Canada Revenue Agency disallows all or any part of the rebate claimed, the Buyer will immediately, upon receiving a written demand from the Seller, reimburse such disallowed amount to the Seller together with any interest and penalties that the Seller is required to pay under the Excise Act as a result of such disallowance.

An additional form of confirmation for both parties of GST Rebate eligibility is the following clause to be added to the Contract of Purchase and Sale. Licensees should confirm current rebate parameters before using this clause:

NOTE: The GST New Housing Rebate falls under the Canadian Excise Act. Some buyers may not qualify for the rebate and there is a ceiling to the value of the rebate.

Eligibility for GST Rebate Clause

The Buyer confirms that he or she is purchasing the property for use as a principal residence or that of a qualified relative, and hereby is entitled to the GST New Housing Rebate. The Seller and Buyer agree that the purchase price includes GST based on the Buyer assigning any applicable Rebate to the Seller, and that the price reflects the credit given by the Seller to the Buyer for this assignment. The price includes GST payable by the Seller and net of any applicable Rebate. The Buyer hereby assigns the Rebate, if any, to the Seller, and agrees to sign the Rebate application and any other documents necessary to have the Rebate paid or credited to the Seller. If the Buyer is not entitled to the Rebate for any reason, he or she shall immediately remit the amount claimed to Canada Revenue Agency, and/or indemnify the Seller for the loss of the Rebate. The Seller is relying on the Buyer’s declaration of entitlement to the Rebate and shall not be responsible if the claim is disallowed.

The Seller is to include the GST in the purchase price of the property. The Buyer will execute all documentation necessary to assign the Rebate to the Seller on Completion. The Buyer will occupy the premises.

The full GST New Housing Rebate for the GST applies only to properties with a value of $350,000 or less. The amount of the rebate for the GST New Housing Rebate is reduced on properties valued between $350,000 and $450,000. There is no GST New Housing Rebate for the GST for properties that are valued at $450,000 or higher.

As these amounts can change, licensees should check with the Canada Revenue Agency at www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/menu-eng.html.