The province has set out transitional rules for newly built residential housing that it says provide clarity about the application of tax for buyers and the residential construction industry and ensure buyers are treated fairly during the transition from the HST back to the PST.
Bill 56, the New Housing Transition Tax and Rebate Act, provides temporary, transitional rules designed to help ensure the amount of tax payable on a newly built home during the transition period is comparable to the amount of tax payable on a home fully built under the PST, regardless of when construction began.
For newly built homes where construction begins before April 1, 2013, but ownership and possession transfer after, purchasers will not pay the 7% provincial portion of the HST.
Instead, purchasers will pay a temporary, transitional provincial tax of 2% on the full house price. This is designed to ensure equitable treatment among purchasers and to help mitigate distortive market behaviour.
Eligible builders will receive transition rebates to offset PST on materials to help prevent double-taxation on homebuyers.
For newly built homes where construction begins on or after April 1, 2013, the B.C. portion of HST will not apply. Builders will again pay 7% PST on their building materials. On average, about 2% of a new home's final price will again be embedded PST.
The B.C. portion of the HST will continue to apply to purchases of newly built residential housing where ownership or possession transfers before April 1, 2013.
The province has instituted temporary measures to help mitigate the effects of the HST until the return to PST on April 1, 2013. These include:
- increasing the B.C. HST New Housing Rebate threshold to $850,000 from $525,000 for new housing used as a primary residence where the HST is payable between April 1, 2012, and April 1, 2013, raising the maximum rebate available to $42,500; and
- providing a grant of up to $42,500 to buyers of new residential housing purchased as a secondary or recreational residence in qualifying areas of the province. The grant applies where the HST is paid on new homes purchased on or after April 1, 2012, and before April 1, 2013.
The province says these temporary measures offer certainty to the housing sector and help ensure that, whether people buy a newly built home constructed under HST, PST or partly under each, they will pay an equitable amount of tax.