By: Jayson Schwarz LLM
A number of readers have expressed concern over the documents in the Agreement of Purchase and Sale relating to HST. Today, virtually all builders include GST in the purchase price. There are standard clauses in the Agreement of Purchase and Sale assigning the HST rebate to the builder. In addition there will be clauses that indicate, if for some reason the Purchase does not qualify for the HST rebate, the Purchase not only will be required to pay the HST but an additional amount equal to the rebate, to the Builder. In order to qualify for the rebate the purchaser(s) will have to swear they are the Purchasers and they are acquiring the property to be their primary place of residence for the purpose of Section 254 of the Excise Tax Act of Canada. In addition they will have to certify that all books and records relating to the transaction are available for inspection, the rebate was for a newly constructed or substantially renovated residence and that at the time of possession the premises were for the Purchaser’s use or for the use of a relation (as defined under the Act) as a primary place of residence.
Many people become worried about the whole HST issue. As long as your settled intention is to reside in the home after Closing, you will simply execute the appropriate paperwork and the issue will have no effect overall on your purchase. If you buy with the intention of leasing you can qualify for the rebate if you complete and submit the HST New Residential Rental Property Rebate Application
Whenever you purchase Land in the Province of Ontario, you have to pay a tax referred to as Land Transfer Tax. In the City of Toronto you now have to pay Land Transfer Tax (“LTT”) again to the City, which is a form of double taxation.
For the Ontario tax, should you qualify pursuant to the Land Transfer Tax Rebate program, the exemption will apply to the first $2,000 of LTT payable. This that means you will pay some LTT on all homes costing more than $227,500. In order to qualify for the exemption you must meet the following criteria:
- be at least 18 years old;
- never owned an eligible home as defined in OHOSP Act (which is any kind of home ie., condo, detached, semi, etc. anywhere in the world);
- not have a spouse who has owned an eligible home as defined in OHOSP Act while he or she was a spouse of the home purchaser;
- not have a Same-Sex Partner, who has owned an eligible home as defined in OHOSP Act, which he or she was a same-sex partner of each other as defined by s. 29 of the Family Law Act.
If these criteria are met you may apply for the exemption.
LTT is calculated for the Ontario Tax as follows:
Up to a purchase price of $55,000 LTT = 1/2 of 1% of the purchase price net of GST
Up to a purchase price of $250,000 LTT = 1% of the purchase price minus $275 net of GST
Up to a purchase price of $400,000 LTT = 1.5% of the purchase price minus $1,525 net of GST
Over $400,000 LTT = 2% of the purchase price minus $3,525 net of GST
If you meet the same criteria you may qualify for the City of Toronto rebate or exemption. As an example purchases with a purchase price over $400,000.00 on resale homes must pay and then get the money back from the City. In addition the City rebate maximum is $3,725.00. The other difference is the method of calculation:
Up to a purchase price of $55,000 LTT = 1/2 of 1% of the purchase price net of GST
Up to a purchase price of $400,000 LTT = 1% of the purchase price net of GST
$400,000 to $40,000,000 LTT = 1.5% of the purchase price net of GST
Over $40,000,000 LTT =1% of the purchase price net of GST
Please remember that all other non-qualifying people have to pay the Land Transfer Tax at the time of registrations of the title documents, which means you need to have the money available to pay it on Closing!!!!