GST and Land

Buyers who purchase land separately may have to pay GST on the sale price depending on the previous use of the land. When you build a new home on your land, then you will pay GST on the construction costs of the house, less nay applicable rebate.

The rebate would be the same as for a new home. That is, when the total value of the land and home is $350,000 or less, the rebate would be 35% of the GST paid on the building and the land to a maximum of $8,750. When the total value of the land and house exceeds $350,000 but is less than $450,000, a proportional formula for calculating the GST rebate applies.

As with other new home purchases, GST rebates are not available for land and buildings valued at $450,000 or more when you build a house on your lot.

When you buy a newly constructed home, condominium or townhome, the entire purchase price including land is taxable. If the property is to be rented to tenants, the full 7% GST is charged on the purchase price. However, if the home is going to be your primary place of residence, it may qualify for a partial GST rebate, depending upon the sale price.

For homes costing $350,000 or less, you will receive a rebate of 36% of the GST paid, to a maximum of $8,750. That means you pay approximately 4.5% GST (not 7%) on the purchase price. For homes costing $350,000 or less, you will receive a rebate of 36% of the GST paid, to a maximum of $8,750. That means you pay approximately 4.5% GST (not 7%) on the purchase price.

Example #1

You buy a new home for $150,000. The 7% GST is $10,500, less a 36% rebate of $3,780. So, you pay $6,720 is GST.

1) $150,000 x 7% = $10,500
2) $10,500 x 36% = $3,780
3) $10,500 - $3,780 = $6,720

The maximum rebate is $8,750. The rebate for new homes costing between $350,000 and $450,000 declines to zero on a proportional basis, using this formula:
Rebate = $8,750 x ($450,000 - Home Price) $100,000

Example #2

You buy a new home for $400,00. Your GST rebate is $4,375, and the total GST owed is $23,635.

1) $400,000 x 7% = $28,000 (GST)
2) $8,750 x ($450,000 - 400,000) = $4,375 (GST rebate) $100,000
3) $28,000 - $4,375 = $23,635 (total GST owed)

New homes selling for $450,000 or more do not qualify for a GST rebate. If you buy a substantially renovated home from a builder who supplies both the land and the house as a single transaction, the same GST rebate conditions described above apply. Your REALTOR can explain how the Federal Government defines "substantially renovated."

When is GST payable?

GST is normally due and payable when the real estate transaction is completed. This is usually referred to as the "closing date." In some cases, GST could be payable on transfer of possession.

• For buyers, GST owed on the purchase price of non-exempt property, as well as fees and commissions for professional services, is paid at closing.
• For sellers, GST owed on fees and commissions for professional services is also paid at closing. For additional GST information, contact your local Revenue Canada Tax Services Office.

For additional GST information, contact your local Revenue Canada Tax Services Office.