GST Drops to 5 Percent
January 1, 2008, the GST drops to 5% from 6%. The GST that must be paid on the purchase of new construction residential property, and the GST that must be paid on substantial renovations where 90% or more of the structure has been replaced and qualifies as new property. There is no GST charged on residential resale property. Therefore this reduction does not affect sales.
The important time frame when the GST becomes payable on the transaction. Pre-October 30, 2007 contract / pre-December 31, 2007 possession and ownership: the 6% GST applies. Pre-October 30, 2007 contract / post December 31, 2007 possession and ownership: the 5% GST applies. Post October 30, 2007 contract / pre-December 31, 2007 possession and ownership: the 6% GST applies. Post October 30, 2007 contract / post December 31, 2007 possession and ownership: the 5% GST applies. New Home Rebate Changes There will be a reduction of the maximum rebate amount to $6,300 from $7,560. Current New Under the current GST rebate of 6%, the maximum rebate amount is equal to the lesser of 36% of the GST paid or $7,560. On January 1, 2008 when the rate is reduced to 5%, the maximum rebate amount will be equal to the lesser of 36% of the GST paid or $6,300. Transitional Rebate A special rule applies where the agreement was entered into before October 30, 2007 but closes (both ownership and possession transferred) after December 31, 2007. The buyer will pay the higher tax rate of 6% but is entitled to a Transitional Rebate of 1% if they complete a revised rebate application form which will be available after January 1, 2008 on the Canada Revenue Agency (CRA) web site.
