HST Transition Rules

October 21, 2009 -- The provincial government has provided rules/guidance on how it will transition to the implementation of the proposed Harmonized Sales Tax.

Background

The provincial government has passed legislation to combine the eight percent Provincial Sales Tax with the five percent federal Goods and Services Tax, creating a 13 percent Harmonized Sales Tax (HST).

• The HST is NOT YET IN EFFECT. The HST will come into effect beginning on July 1, 2010; however, note transition rules below.
• HST will not apply on the purchase price of re-sale homes.
• HST would apply to services such as moving cost, legal fees, home inspection fees, and REALTOR® commissions.
• HST will apply to the purchase price of newly constructed homes. However, the Province is proposing a rebate so that new homes across all price ranges would receive a 75 per cent rebate of the provincial portion of the single sales tax on the first $400,000. For new homes under $400,000, this would mean, on average, no additional tax amount compared to the current system.
• Click here for more background information on how the HST will affect REALTORS®.
• Click here for some common questions and answers.

Transitional Rules for New Housing

• Generally, sales of new homes under written agreements of purchase and sale entered into on or before June 18, 2009 would not be subject to the provincial portion of the single sales tax, even if both ownership and possession are transferred on or after July 1, 2010.
• The tax would also not apply to sales of new homes under written agreements of purchase and sale entered into after June 18, 2009 where ownership or possession is transferred before July 1, 2010.

Additional Transitional Rules

• Where services straddle the HST implementation date of July 1, 2010, the tax charged for the service may have to be split between the pre-July 2010 and post-June 2010 periods. However, the HST will generally not apply to a service if all or substantially all (90% or more) of the service is performed before July 2010.
• Four key timelines are important (see below). All are based on the earlier of the time the consideration is either due (In general, an amount is due on the date of the invoice or the day required to be paid pursuant to a written agreement), or is paid without having become due. If consideration is due or paid,

• Before October 15, 2009, HST will generally not apply (however, see above transition rules for new housing).
• From October 15, 2009 to April 30, 2010, certain business that are not entitled to recover all of their GST/HST paid as input tax credit may be required to self-assess the provincial component of the HST with respect to goods or services supplied after June 30, 2010.
• From May 1, 2010 to June 30, 2010, HST will generally apply for services supplied after June 30, 2010.
• After June 30, 2010, HST will generally apply. An exception to this rule would be where ownership of the property is transferred before July 2010 or the invoice relates to services provided before July 2010.

• With regard to the lease or license of goods, including non-residential real property, HST will generally apply to lease intervals or payment periods on or after July 1, 2010 and the general rules noted above will apply. However, where a lease interval begins before July 2010 and ends before July 31, 2010, it is not subject to HST.
• With regard to the sale of non-residential property, HST is due where both possession and ownership of non-residential property occurs on or after July 1, 2010.

More Detail

Additional detail on the transition rules is available at the provincial government web site here or by calling the provincial government enquiry line at 1-800-337-7222.

TREB HOUSING MARKET CHARTS 

 Greater Toronto REALTORS® report March Resale Market Figures

TORONTO, April 6, 2010 - Greater Toronto REALTORS® reported 10,430 sales through the Multiple Listing Service® (MLS®) in March, pushing total first quarter 2010 sales to 22,418 – the best result on record under the current Toronto Real Estate Board (TREB) boundaries. The average price for March transactions was $434,696. The average price for the first quarter was $427,948. "The strong rebound in the existing home market was one of the initial drivers of economic recovery," said TREB President Tom Lebour. "While we don't expect to see the same rates growth moving forward, GTA households will remain confident in ownership housing as a quality long-term investment, especially as economic recovery expands across all industries." 

The annual rate of growth for new listings continued to accelerate in March. The number of new listings grew by 42 per cent compared to March of 2009. "The average home price in the GTA will continue to grow this year, but the pace will slow as we move through the spring," said Jason Mercer, TREB's Senior Manager of Market Analysis. "As growth in new listings starts to outstrip growth in sales, buyers will experience more choice, resulting in more sustainable single digit rates of average price growth."

Toronto REALTORS® are passionate about their work. They adhere to a strict code of ethics and share a state-of-the-art Multiple Listing Service. Serving over 29,000 Members in the Greater Toronto Area, the Toronto Real Estate Board is Canada’s largest real estate board. Greater Toronto Area open house listings are now available on