The Facts about HST

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With the HST announcement by the Ontario government in March the great unknown was how this would affect our clients?

I have attended the various seminars and workshops put on by the OHBA and BILD hoping to get definite answers to all my questions as to how the HST will be applicable to Homebuilders.  At these sessions there have had experts from both the private and public sectors.

I did get some information but all the rules have not been defined by Canada Revenue Agency or the Ontario Finance department.

Things You Should Know about HST – HST will be implemented on July 1, 2010

According to the Ontario Ministry of Finance the HST will be revenue neutral.  It will reduce the amount of tax paid by Ontario businesses.  That prior to the announcement there was a 2% o 3% RST (Retail Sales Tax) component already factored into the Home Sales price.

To take the Ontario New Housing Rebate the house must be the Primary residence.  The same rules and conditions as the GST rebate.  If the sale is “grand- parented” then there is no Ontario New Housing Rebate.  The Ontario New Housing Rebate can be claimed by the Home Buyer or can be assigned to the Builder.

For the HST rebate calculation the existing GST rebate remains unchanged.  For the Provincial portion of the HST the rebate will apply to the first $400,000 of the purchase price.

With the “Grand-parented” sale the Home Buyer does not pay the HST only GST.  But the Builder is able to claim the Input Tax Credits on all costs paid after July 1, 2010 related to the house construction.  The Builder will pay 2% of the selling price times a factor based on percentage of completion on July 1, 2010.

One of the changes with the HST implementation that the Builder must be aware of is Disclosure.  What I mean by this is that the Builder must disclose if the Agreement of Purchase and Sale was signed between July 19, 2009 and June 30, 2009, whether the 8% Provincial component of the HST applies and if the purchase price is net of the New Housing Rebate.  If this disclosure is not made then the Purchase Price is deemed to include the 8% Provincial component of the HST.

A builder is considered a large business (annual sales above $10 million) then the PST component for the Energy (i.e. Gas, Electrical), Telecommunications (excludes internet services), Vehicles and  Food, Beverage & Entertainment  will be restricted from applying for the Input Tax Credit on the PST portion only.

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