HST on Property in Ontario
HST is applicable on the purchase of property in Ontario in three instances: (a) the property is a new construction build or has been substantially renovated; (b) the property is vacant land or a portion of the property has non-personal use vacant land; and (c) the property is a commercial property. Each instance will be discussed in turn.
New Builds or Substantially Renovated Homes
If you are buying a newly constructed home, HST will be payable. As well, if the home you are buying is a re-sale home, but it has been substantially renovated, then HST will be payable. A substantial renovation refers to a renovation where at least 90% of the interior of a building (excluding the foundation, external walls, internal supporting walls, roof, floors and staircases) has been removed or replaced. Outside of these two instances, HST will not apply to the purchase price of resale residential homes.
Many builders include the HST in the purchase price, while others charge the HST in addition to the purchase price. If you are buying a newly built home, you should make sure you know what the total purchase price is including HST.
You may qualify for a rebate of a portion of the HST payable. You do not have to be a first-time home buyer to qualify. The maximum rebate amount for eligible buyers is $30,000. To determine if you are eligible for an HST rebate and the amount you will be eligible for, it is best to consult your accountant.
The new housing rebate is not available to a corporation or a partnership.
The HST rebate is built-in to a new home purchase – the builder submits it for the buyer. If the property will be a rental property, the builder can’t submit the HST rebate for you and you will be required to submit it for yourself. That means that the builder will charge the HST payable to you up front.
HST is payable on vacant land in three instances: (a) the vacant land was created by subdividing another parcel into more than two parts; (b) the vacant land was being
used in a business; and (c) the vacant land is being sold in the course of a business sale.
HST will also be payable on the non-personal use portion of a property when purchasing a house that is situated on a large portion of land. When the sale of a house includes vacant land, the sale is viewed as two separate sales as follows:
- a) the portion that includes the house plus the land that is necessary for the use and enjoyment of the house, and
- b) the remaining portion of land.
If the vacant land portion can be demonstrated to have been used by the seller personally, then no HST will be payable on its portion.
The test for personal use of vacant land for exemption from HST looks to the use of the land prior to the purchase, not the proposed use after the purchase.
Commercial properties are subject to HST. However, where the purchaser is an HST registrant, the seller may not be required to collect the tax. Where this is the case, both parties can make an election pursuant under the Excise Tax Act to have the transaction exempt from HST.
A business selling real property should ensure that the purchaser is registered before concluding that no tax will be collected on the sale. In this case, we recommend that the seller should obtain a Certificate of GST/HST Registration from the purchaser, and verify its accuracy on CRA’s online GST/HST Registry. Incorrect treatment or lack of proper documentation in this scenario can be very costly to the seller.
HST and Resale Cottage/Vacation Property Purchases
HST will not be payable on the purchase of a cottage or vacation property if the property is for personal use. However, if the seller had been renting out the property more than 50% of the time during the seller’s ownership then it will be deemed to be a commercial property and the price will likely be subject to HST.
The information in this article is not to be substituted for advice from your accounting professional. The government routinely changes their policies and each individual’s circumstances are different. There are exemptions that may apply to you or the property you are purchasing or selling. It is important to seek the advice of your accountant before making any important financial decisions.
Thank you for taking the time to read this article. If you are in need of real estate advice or if you are planning on buying or selling a property in the near future, feel free to get in touch. I would love to work with you to meet your goals!