If you will be
buying a new home in the next few months or over the next two years,
then you need to know about the 2% BC Transition Tax.
It is a new tax that comes into effect on April 1, 2013. The 2% BC Transition Tax will end on March 31, 2015.
The 2% BC Transition Tax applies to the full price of a NEW home,
which is 10% or more complete, where ownership or possession is on or
after April 1, 2013, but before April 1, 2015. The 5% GST also applies
to the full price of a new home, where ownership or possession is on or
after April 1, 2013.
With the end of the HST and the
return to the PST/GST system, the BC government chose to introduce the
2% BC Transition Tax as a way, in their words, “to ensure the equitable
application of tax for purchasers of new residential homes currently
under the HST system” and after April 1, 2013 when the province returns
to GST on new residential homes. The government also wishes to replace
some of the revenue lost through the return to the PST.
BC’s portion of the HST will no
longer apply to newly built homes where construction begins on or after
April 1, 2013. Builders will once again pay 7% PST on their building
materials (construction inputs). The provincial government asserts that
on average, about 2% of the home’s final price is embedded PST that
builders pay on their building materials.
The Transition Tax rebate for
builders (sellers) recognizes that the builder will not be able to claim
input tax credits on the PST paid on building materials acquired after
March 31, 2013. The rebate is available where both of the following
conditions are met:
-
The 2% BC Transition Tax applies to the sale of new housing; and
-
Construction or substantial renovation is at least 10%, but not more than 90%, complete before April 1, 2013.
The Transition Tax rebate for
sellers of new housing will be calculated on the degree of completion of
the housing as of April 1, 2013:
The 2% BC Transition Tax does NOT apply to:
-
the sale of vacant land, whether the GST would apply or not;
-
the sale of new commercial units; or
-
REALTOR® commissions.
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