Thursday, November 15, 2007

GST reduced from 6% to 5% as of January 1st 2008- How will it affect real estate transactions?

GST Reduction Information

November 9, 2007 -- A reduction in the GST from 6 per cent to 5 per cent was announced by the federal government on October 30, 2007. With regard to the purchase price of residential properties, GST only applies to sales of newly constructed and substantially renovated homes.

GST is not applied to the purchase price of resale homes, but it does apply to REALTOR® commissions. The reduced rate will become effective on January 1, 2008; however, the reduced rate will apply to the purchase price of new homes immediately, subject to transitional rules detailed below (Note: This summary has been reviewed by the Canadian Real Estate Association for accuracy).

REALTOR® Commissions

GST is generally payable when an invoice is issued. However, since commissions do not typically become payable until the transaction closes, the closing date is generally the relevant date for calculating the applicable GST rate. The GST rate will depend on when the GST on the commission is paid or payable, as follows:

  • If GST becomes payable, or is paid without having become payable, before January 1, 2008, the rate of 6 per cent will apply.
  • If GST becomes payable on or after January 1, 2008, without having been paid before that day, the rate of 5 per cent will apply.
  • If GST is paid on or after January 1, 2008, without having become payable before that day, the rate of 5 per cent will apply.

Purchase Price of New Homes

Ownership or Possession Transferred before January 1, 2008: Generally, the 6 per cent rate will apply if ownership of the property, or possession of it under the agreement of purchase and sale, is transferred to the buyer before January 1, 2008.

Ownership and Possession Transferred on or after January 1, 2008: The 5 per cent rate will apply if both ownership of the property and possession of it under the agreement are transferred to the buyer on or after January 1, 2008. Note the special transitional rule for new residential housing below.

Sales of New Housing under Written Agreements Entered Into on or before October 30, 2007 Where Both Ownership and Possession Transferred on or after January 1, 2008. The Following Rules Apply:

  • Agreements of Purchase and Sale entered into on or before October 30, 2007 but after May 2, 2006, the 6 per cent rate will apply.
  • Agreements of Purchase and Sale entered into on or before May 2, 2006, the 7 per cent rate will apply.
  • In both of these circumstances, the purchaser will be entitled to file a claim directly with the Canada Revenue Agency to be paid a Transitional Rebate that reflects the GST rate reduction to 5 per cent, net of any corresponding rebate adjustment.

Search the MLS or read more about Interest Rates, Power of Sale Properties, Price Trends and more at my website. Homes for Sale

Thank you for reading my blog and if there is anything else I can help you with please don't hesitate to contact me,

Mark

A. Mark Argentino
P. Eng. Broker
Specializing in Residential & Investment Real Estate



Thinking of Selling? Best Mortgage Rates Current Home Prices Search MLS
RE/MAX

Realty Specialists Inc.

Providing Full-Time Professional Real Estate Services since 1987
( BUS 905-828-3434
2
FAX 905-828-2829 ÈCELL 416-520-1577
E-MAIL : mark@mississauga4sale.com
8 Website : Mississauga4Sale.com

No comments:

Post a comment