Frequently Asked Questions - PST Transition Rules

1. Why are transition rules necessary?

   Transition rules determine whether 12% HST or 5% GST will apply to new housing contracts that start before April 1, 2013, but conclude on or after this date. Both the federal and provincial governments administer their own set of transition rules.

2. When does HST apply, and when does GST apply?

   HST applies if tax becomes payable before April 1, 2013.

   GST applies where tax becomes payable after March 31, 2013. In addition, the BC transition tax may then apply where construction or substantial renovation is at least 10% complete on April 1, 2013.

3. Generally, when does the tax become payable?

   Except for the sale of certain residential strata units, the tax is payable on the earlier of the following dates:

   • when the seller transfers ownership (also known as the completion date) of the new home to the buyer, OR
   • when the seller transfers possession of the new home to the buyer under the Contract of Purchase and Sale.

   In summary:

   The 12% HST applies if the seller transfers either possession or ownership of a new home to the buyer before April 1, 2013.

   The 5% GST applies if the seller transfers both possession and ownership of a new home on, or after, April 1, 2013.

   

4. Generally, when does the tax become payable when the transaction involves a strata unit?

   The general tax payable rule will apply for stratas except where the strata plan hasn’t been registered as a condominium by the date possession is transferred. The tax payable is then based on the earlier of the following dates:

   • when the seller transfers ownership (also known as the completion date), OR
   • 60 days following the date the strata plan is registered.

5. Who will be responsible for paying the GST?

   As was the case prior to the implementation of the HST, the seller is responsible for charging GST on the sale to the buyer, and must then collect and remit the tax to the Canada Revenue Agency (CRA).

6. Will the PST apply to real property?

   No. HST will generally cease to apply on the purchase of new housing as of April 1, 2013, even if the Contract of Purchase and Sale was signed or new home construction started before April 1, 2013, provided neither possession nor ownership transfer before April 1, 2013. However, the provincial government may collect a temporary transition tax of 2% if certain conditions are met.

7. How will the temporary transition tax work?

   The provincial government may, in certain circumstances, collect a temporary transition tax of 2% on the purchase price of a new home where:

   • HST does not apply to the sale (that is, GST applies because tax is payable on or after April 1, 2013), the construction or substantial renovation of the new housing is at least 10% complete before April 1, 2013, and
   • either ownership or possession of the new housing transfers, or a deemed sale of the new housing (for example, a self-supply of an owner-built rental unit) transfers before April 1, 2015.