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Originally posted by Aashu

Hello CDS for all your responses till date...

Another question

If one buys a home from a builder (not first home bought but primary home for living) , (inventory house) and pays HST , does the HST rebate go to builder or purchaser ?

Thanks

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I KNOW WHAT YOU ARE ASKING... But there are so many numbers and dates to remember before I can delve a little deeper into it. Since it is a long week end coming up and I will be too busy to respond in detail, I will post to you the portion that you are looking for and the link to it also. PLEASE read and understand and if there be questions, and then get back to us here and we will respond to you after the week end.

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13) HST on PURCHASES OF NEWLY CONSTRUCTED RESIDENTIAL PROPERTY

(a) Builder's Agreement Prior to June 19, 2009
NO HST is payable if an offer to purchase from a builder was accepted PRIOR TO June 19, 2009 (only GST will apply; however, most builders include GST inside the sale price). Note: Buying by way of an assignment (where the builder sale agreement was signed prior to June 19, 2009) becomes attractive!

(b) Builder's Agreement Accepted after June 18, 2009
If an offer to purchase from a builder was accepted AFTER June 18, 2009 AND either occupancy closing (for a new condo purchase) OR final closing occurs prior to July 1, 2010, HST is NOT payable; HST is payable if both occupancy (in a new condo purchase) and final closing occur AFTER July 1, 2010.

(c) If Builder's Agreement Silent about HST
If an offer to purchase from a builder was accepted AFTER June 18, 2009, AND failed to make reference to HST, the sale price includes Ontario's 8% PST component of the HST if it is payable (which means that the builder must pay the PST and cannot charge it to the buyer).

(d) GST Rebate (calculated on the 5% GST part of the 13% HST)
Typically, most builders include the GST component of HST (being 5%) in the sale price based on the government GST rebate being assigned from the buyer to the builder (such GST rebate being 36% of the GST payable on the first $350,000.00 which is reduced to NIL as the price increases from $350,000.00 to $450,000.00, there being no GST rebate after $450,000.00).

NOTE: In order for the GST rebate to be assigned to the builder by the buyer, the buyer must qualify by the buyer or an immediate family member living in the unit. If not qualifying (such as an investor who will be renting out the unit), the rebate cannot be assigned to the builder and the builder will charge the cost of such unassignable rebate to the buyer on closing in addition to the purchase price, which results in the buyer being forced to make a separate application to the federal government to recover such rebate. To qualify for recovery of such rebate, the investor must own the unit for at least one year and reasonably expect to rent the unit to the initial tenant for one year. An investor need not wait the year to apply for and obtain the rebate BUT if the government later discovers that ownership was less than one year, the government might seek to recover the rebate paid to the investor.

(e) PST Rebate (calculated on the 8% PST Component of the 13% HST)
WARNING: ALL builder agreements should be reviewed by a lawyer EITHER before a buyer signs an offer OR during any available cooling off period SINCE some builder agreements require buyers to pay the 8% PST (or the Net PST) component of the HST IN ADDITION TO the purchase price.

Regarding a PST rebate, ONLY 75% of the 8% PST component of the HST is refundable to a buyer on the part of the purchase price that is up to $400,000.00 (being newly constructed from a builder since there is NO HST on resale residential property). THERE IS NO government REBATE on the 8% PST for the part of ANY PRICE that EXCEEDS $400,000.00! This means that 75% of 8% (being 6%) is refundable by the government and 25% of 8% (being 2%) is NOT on the first $400,000.00 of price.

EXAMPLE: If the price from a builder is $500,000.00, the gross 8% PST component of the HST would be $40,000.00, BUT since the government offers a rebate of 75% of the 8% PST on the first $400,000.00, this will effectively (for a qualifying buyer whose immediate family member will be living in the unit) reduce the PST to 2% on the first $400,000.00 to $8,000.00. Since there is no PST rebate for that part of the price over $400,000.00, 8% is charged on the next $100,000.00 being a further $8,000.00 which means (for a qualified buyer who can assign the rebate to the builder) that the total NET PST payable is $16,000.00. If the Net PST is not included in the price of $500,000.00, the price plus Net PST payable becomes $516,000.00. The gross 8% PST on $500,000.00 is $40.000.00 but (due to the rebate of $24,000.00 on the first $400,000.00) the net PST payable is $16,000.00

Note: If the builder's agreement requires the Net PST to be paid by the buyer, the buyer pays $16,000.00 on top of the price. If the builder's agreement states that the Net PST is included in the price (as GST is typically with most builders), the price remains $500,000.00. WATCH OUT!

CAUTION: An investor-buyer who will rent out the unit will NOT qualify for assignment of PST rebate to the builder and, therefore, on closing, must pay the purchase price of $500,000.00 plus the gross PST of $40,000.00, (being a total of $540,000.00) and then, after closing apply to the government for the rebate of $24,000.00 to be received if the investor qualifies (must be owning for one year and rent to a tenant who is reasonably expected to live in the unit for one year, although the rebate application can be made as soon as the purchase from the builder is closed).

(f) Qualifying for a Rebate (GST or PST) when Buying from a Builder
In order to qualify for GST or PST rebates, the property purchased from a builder must be intended to be a primary place of residence, which means that if a person has more than one residence in the world, (in order to qualify for the rebate) the unit must be the main place of residence and not a secondary residence.

Also, the residence purchased must be used as a primary place of residence (as stated above) by the buyer or a relation of the buyer. Relation of the buyer includes an individual who is related by blood, marriage, adoption or common law ( including a former spouse or a former common law partner). Blood relation is limited to parents, siblings, children, grandchildren but does not include cousins, uncles or aunts.

(g) Additional Transitional PST rebate for NON-CONDOMINIUM Builder Purchase (where part of construction was done as of July 1, 2010)
If HST is payable on a newly constructed home (NOT a condominium) AND if construction of the residence was AT LEAST 10% complete as of July 1, 2010, a transitional PST rebate of up to 2% of the sale price can be claimed on the PST component of the HST as follows:

% Completed as of July 1, 2010


Portion of 2% of PRICE to be Refunded
10% - 24%


25%
25% - 49%


50%
50% - 74%


75%
75% - 89%


90%
90% - 100%


100%

Example: If buying a freehold townhouse, a semi-detached or a detached from a builder for $500,000.00 where construction was 95% complete on July 1, 2010 and closing occurs on July 15, 2010, PST rebate for qualified buyer will be:

(i) 75% of 8% on the first $400,000.00 = $24,000.00
(ii) 100% of 2% on $500,000.00 = $10,000.00
Total rebates $34,000.00

Instead of paying a gross PST of 8% on $500,000.00 being $40,000.00, the rebates of $34,000.00 would reduce the net PST payable to $6,000.00. The question is whether such Net PST is included OR NOT included in the purchase price from the builder according to the terms of the builder's agreement!

Note: The PST transitional rebate of up to 2% of the purchase price can ONLY be obtained if:

(i) HST is payable on the price where the builder's agreement was accepted after June 18, 2009 and closes after July 1, 2010;
(ii) the purchase is for new residential construction which is NOT a condominium;
(iii) construction is at least 10% complete as of July 1, 2010;
(iv) a certificate is obtained on closing from the builder stating the percentage of completion of construction as of July 1, 2010. Note: the builder is not required to provide this to a buyer unless the terms of the purchase agreement with the builder requires such a certificate to be provided; and
(v) an application for a transitional PST rebate is filed with the government by July 1, 2014.

(h) CONTACT TELEPHONE NUMBERS FOR HST TRANSITIONAL RULES
Ontario has proposed transitional rules that assist businesses in the transition to a Harmonized Sales Tax (HST). For more information on the transitional rules for the HST, please call Canada Revenue Agency (CRA):

For Personal property and services - 1 (800) 959-5525
For Real property - 1 (800) 959-8287

To speak with an information officer about the introduction of the HST in Ontario, please call 1 (800) 337-7222 or 1 (800) 263-7776

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Link to : http://www.homelegalcost.com/hst.asp

NJOY,


FH.