GST on your new property – Everything you need to know about this ‘hidden cost’
Congratulations, you are buying a new home! Now it is time to open up the cheque book. It is important to be aware of closing costs that will crop up in addition to the purchase price of the home. Among fees like notaries, lawyers, and property transfer tax (link to PTT article), you may be required to pay goods and services tax (GST) on your property purchase in BC.
The British Columbia goods and services tax rate for real estate is 5% and due at the time of completion. The GST only applies to the sale of brand new properties but even then, there are exemptions and rebates.
Do I have to pay?
Firstly, if your new home is a resale residential property you can stop reading now! You are not subject to GST as the first owner of the property would have been responsible for it. However, if the property has been substantially renovated, GST may be payable. A property is defined as substantially renovated if most of the house has been removed or replaced other than the foundation, roof, staircases, etc. Please click here for more information. Sometimes, the purchase price of a property includes taxes. In this case, the GST is all taken care of!
What About Rebates?
If your new home is going to be your permanent residence and the home is under $350,000, the rebate is 36% of the GST (5%) with a maximum rebate of $6,300.
Homes between $350,00 and $450,000 receive partial rebates in a significantly lower amount and homes over $450,000 receive no GST New Home Rebate.
If you are planning to rent out your new home, you may be eligible for the GST New Residential Rental Rebate. Just like the above rebates, the GST NRR Rebate only applies to new homes up to $350,000. For more details on the GST NRR Rebate, click here.
How do I figure out my GST?
As you’ve now read, the potential amount of tax to be paid on new property purchased in BC can vary greatly. Luckily, the British Columbia Real Estate Association created a straightforward and easy to use tax calculator. It will help determine all relevant payable taxes on your property. Please note that this calculator should not be considered a substitute for professional accounting or legal advice.