Transition measures support new-home buyers, builders – Vancouver Real Estate News
New housing transition measures give certainty to an important economic sector and help to keep taxes equitable throughout the transition as the province returns to the PST, Finance Minister Kevin Falcon announced today.
B.C. will return to the PST on April 1, 2013, meeting the Province’s commitment to return to the PST as quickly and responsibly as possible, while ensuring businesses can plan their training and systems switch-over effectively to apply the sales tax correctly.
Government is announcing new relief measures that will benefit purchasers and builders of new homes. The B.C. new housing rebate threshold will be increased to $850,000, effective April 1, 2012, meaning more than 90 per cent of newly built homes will now be eligible for a provincial HST rebate of up to $42,500. It is important to note that the HST does not apply to resale housing.
In addition, to help support workers and communities in B.C. that depend on residential recreational development, purchasers of new secondary vacation or recreational homes outside the Greater Vancouver and Capital regional districts priced up to $850,000 will now be eligible to claim a provincial grant of up to $42,500 effective April 1, 2012.
The housing transition rules help ensure when people buy a newly constructed home under the PST, whether built entirely under the HST, entirely under the PST, or partly under HST and partly under the PST, they will all pay a consistent and equitable amount of tax.
- B.C.’s portion of the HST will continue to apply before April 1, 2013. Purchasers will be eligible for the new higher B.C. HST new housing rebate, of up to $42,500, and builders will continue to claim input tax credits.
- B.C.’s portion of the HST will no longer apply to newly built homes where construction begins on or after April 1, 2013. Builders will once again pay seven per cent PST on their building materials. On average, about two per cent of the home’s final price will again be embedded PST.
- For newly built homes where construction begins before April 1, 2013, but ownership and possession occur after, purchasers will not pay the seven per cent provincial portion of the HST. Instead, purchasers will pay a temporary, transitional provincial tax of two per cent on the full house price. This ensures equitable treatment among purchasers and will help mitigate distortive market behaviour. Builders will receive temporary housing transition rebates to offset PST on materials to help prevent double-taxation on homebuyers.
The transition rules outlined today provide certainty for new-home construction and sales, particularly during the transition period.
For goods and services that will be subject to PST, PST will generally apply where tax becomes payable on or after April 1, 2013. Detailed general transitional rules for goods and services will be available with the full PST legislation introduced in the legislature this spring.
The provincial changes are subject to the approval of the legislature.
- Raising the B.C. HST rebate threshold to $850,000 is expected to save purchasers about $60 million in 2012-13. The maximum value rises to $42,500 from $26,250, a 60 per cent increase.
- More than 90 per cent of newly built homes sold in B.C. are below the new higher rebate threshold.
- Average amount of embedded sales tax in newly built homes under PST: two per cent.
- Tax paid by purchasers on an $850,000-newly built home after HST rebate: two per cent.
- Tax rate on a newly built home during transition: two per cent.
- The temporary housing transition measures will be in place for two years, until March 31, 2015. The tax only applies to homes where construction begins before the transition date and ownership and possession occur after.
- The temporary housing transition tax and the temporary housing transition rebates will be administered by the Canada Revenue Agency on behalf of B.C. The Province is administering the grant for new secondary vacation and recreational homes.
If you have any real estate questions or if you are thinking of buying or selling your home, please do not hesitate to email James Chung, Vancouver REALTOR® at [email protected] or call ( 6 0 4 ) 7 1 9 – 6 3 2 8 today!