Harmonized Sales Tax: Information for Non-registrant Builders of Housing in Ontario, British Columbia and Nova Scotia

From: Canada Revenue Agency

GST/HST Info Sheet GI-101
May 2011

NOTE:  This version replaces the one dated September 2010.

The Government of Ontario and the Government of British Columbia have each introduced a harmonized sales tax (HST) that came into effect on July 1, 2010.

The HST rate in Ontario is 13% of which 5% represents the federal part and 8% the provincial part.

The HST rate in British Columbia is 12% of which 5% represents the federal part and 7% the provincial part.

The Government of Nova Scotia increased the provincial part of the HST from 8% to 10% effective July 1, 2010. The HST rate in Nova Scotia effective as of that date is 15% of which 5% represents the federal part and 10% the provincial part

This info sheet reflects tax changes included in:

  • the New Harmonized Value Added Tax System Regulations, No. 2; and
  • the Nova Scotia HST Regulations, 2010.

This info sheet outlines some ongoing rules and HST transitional rules that apply to GST/HST non-registrant builders of new housing in Ontario, British Columbia (B.C.) and Nova Scotia, particularly rules relating to the reporting of tax.

A GST/HST non-registrant person is a person who is not, and is not required to be, registered for GST/HST purposes. For more information on GST/HST registration requirements, refer to Guide RC4022, General Information for GST/HST Registrants.

Definitions for GST purposes, e.g., builder, mobile home, residential complex, residential unit, residential condominium unit and substantial renovation, generally apply under the HST, as do the CRA's current policies on the application of the GST to housing. Guide RC4052, GST/HST Information for the Home Construction Industry, and GST/HST Info Sheet GI-005, Sale of a Residence by a Builder Who is an Individual, explore many of these important terms and concepts.

New housing

The term new housing used throughout this info sheet refers to newly constructed or substantially renovated housing. Housing that has been substantially renovated is generally given the same treatment under the GST/HST as newly constructed housing. Extensive modifications must be made to the housing in order to meet the definition of a "substantial renovation" for GST/HST purposes. For a full explanation of the factors to consider in deciding if a substantial renovation has taken place, refer to GST/HST Technical Information Bulletin B-092, Substantial Renovations and the GST/HST New Housing Rebate.

Taxable new housing sales and resales by a non-registrant builder

The sale, or resale, of new housing by a builder is generally taxable even if the builder is a non-registrant.

Refer to GST/HST Info Sheet GI-083, Harmonized Sales Tax: Information for Builders of New Housing in Ontario, and to GST/HST Info Sheet GI-084, Harmonized Sales Tax: Information for Builders of New Housing in British Columbia, for information on the HST transitional rules for builders who sell new housing in Ontario or B.C., including single family homes, semi-detached houses, residential condominium units, mobile homes, floating homes, and multi-unit residences such as duplexes, traditional apartment buildings, co-operative rental buildings and long-term residential care facilities. These info sheets provide information on the tax that applies to the sale of new housing: the GST at 5% or the HST at 12% in B.C. or at 13% in Ontario. Refer to GST/HST Notice 256, HST Rate Increase for Nova Scotia – Questions and Answers on Housing Rebates and Transitional Rules for Housing and Other Real Property Situated in Nova Scotia for information on whether the HST applies at 13% or 15%.

Generally, the vendor of new housing is responsible for collecting and reporting the GST/HST payable on the sale of new housing. However, there are some exceptions to the rule. This rule and its exceptions are explained in Guide RC4052.

Grandparented sales of new housing

Certain taxable sales of new housing in Ontario, B.C. and Nova Scotia are grandparented. The grandparenting rules are explained in the publications referred to in the previous section. Where a non-registrant makes a grandparented taxable sale of new housing and the non-registrant is required to collect the tax on the sale, the non-registrant is only required to collect the GST at 5% if the grandparented sale is for housing in Ontario or B.C., or the HST at 13% if the grandparented sale is for housing in Nova Scotia.

For information on how a non-registrant reports the tax collectible on the grandparented sale of housing and other related information, see the information under the heading "Reporting and remitting GST/HST". GST/HST Info Sheet GI-098, Harmonized Sales Tax: Resales of New Housing in Ontario and British Columbiaexplains how the HST transitional rules apply to the sale of housing that was purchased by a reseller on a grandparented basis.

Transitional tax adjustment

Under the HST transitional rules, a builder may be considered to have collected a transitional tax adjustment for certain sales of new housing in Ontario and B.C.

If so, the builder is required to include that amount in its net tax calculation on the builder's GST/HST return for the reporting period that includes the day that is:

  • in the case of a detached house, semi-detached house, rowhouse unit or residential condominium unit, the earlier of the day ownership or possession of the housing is transferred to the purchaser under the written agreement of purchase and sale for the housing; or
  • in the case of a condominium complex, the earlier of the day ownership of the complex is transferred to the purchaser and the day that is sixty days after the day the complex is registered as a condominium.

GST/HST Info Sheet GI-095, Harmonized Sales Tax: Information on the Transitional Tax Adjustment for Builders of housing in Ontario and British Columbia provides additional information on this subject.

For information on how a non-registrant reports and remits the transitional tax adjustment, see the information under the heading "Reporting and remitting GST/HST".

Taxable self-supply by a non-registrant builder

A builder that constructs new housing is generally considered to have made a taxable sale and repurchase (self-supply) of the housing when the builder first gives possession or use of the new housing, or a unit in it, under a lease, licence or similar arrangement for use as a place of residence by an individual. This includes those situations where the builder sells the building part of the new housing and leases the underlying land (other than a sale of a mobile home and the lease of a site in a residential trailer park).

This rule also applies to builders who construct a new addition (e.g., floor or wing) to multiple-unit rental housing when the builder first rents the addition, or a unit in the addition, for use by an individual as the individual's place of residence.

The self-supply rule applies to non-registrant builders as well as builders that are registered for the GST/HST.

A builder who is considered to have made a self-supply of new housing has to account for the GST/HST that the builder is considered to have collected on that self-supply by reporting that tax in its GST/HST return, even if the builder is a non-registrant. The amount of the GST/HST that a builder is considered to have collected is calculated on the fair market value of the new housing as of the date of the self-supply.

See GST/HST Info Sheet GI-091, Harmonized Sales Tax: Information for Landlords of New Rental Housing, for an explanation of the HST transitional rules for the self-supply by a builder of new housing in Ontario or British Columbia. Refer to GST/HST Notice 256 for information on the self-supply of new housing in Nova Scotia.

Reporting and remitting GST/HST

Non-registrant builders have different filing requirements than GST/HST registrant builders, and these requirements continue under the HST.

A non-registrant builder is required to use Form GST62, Goods and Services Tax/Harmonized Sales Tax (GST/HST) Return (Non-Personalized) to report the following amounts for any reporting period in which they have tax to report, including:

  • GST/HST collectible on a taxable sale, or resale, of new housing,
  • the transitional tax adjustment for the sale of new housing, or
  • GST/HST collectible on a self-supply of new housing.

The reporting period of a non-registrant is the calendar month.

A non-registrant builder is required to remit the net tax owing for a particular month and file the GST/HST return by the end of the month following the month during which tax became payable on the non-registrant's taxable sale of new housing, tax became collectible on a self-supply, or the builder was considered to have collected the transitional tax adjustment, as the case may be.

Although most GST/HST registrants, including builders, are required to file their GST/HST returns electronically for reporting periods ending on or after July 1, 2010, non-registrants cannot file their returns electronically. Non-registrant builders continue to file paper GST/HST returns. However, non-registrant builders have to report the same information that a builder who is a registrant is required to report in its electronic return.

A non-registrant builder must attach a letter to its GST62 GST/HST return to report any of the following information:

  • the number of grandparented housing units sold during the reporting period where the purchaser was not entitled to claim a GST/HST new housing rebate or GST/HST new residential rental property rebate and the total of the sale prices of those units (In the case of a grandparented sale of a condominium complex in Ontario or B.C., the sale counts as one grandparented housing unit. In the case of a sale of a building and lease of land in Nova Scotia, include the number of grandparented housing units and the fair market value of those units.);
  • where the non-registrant builder is a first reseller, the number of newly constructed or substantially renovated housing units sold during the reporting period that are subject to HST at 13% in Ontario, 12% in B.C. or 15% in Nova Scotia, where those units were previously purchased by the first reseller on a grandparented basis and the total of the purchase prices paid by the first reseller for those units;
  • the transitional tax adjustment in respect of grandparented housing that is required to be included in the non-registrant builder's net tax calculation for the reporting period; and
  • the amount of all provincial transitional new housing rebates for the reporting period (including those assigned to the non-registrant builder by a purchaser) that the non-registrant builder is reporting in its GST/HST return.

Recovering GST/HST paid or owing

A non-registrant builder cannot claim input tax credits (ITCs) to recover the GST/HST paid or payable by the non-registrant on their land, construction and other costs incurred to construct or substantially renovate housing. However, a non-registrant may be eligible to recover some, or all, of these amounts by way of rebate if certain conditions are met.

Public service body rebates

A non-registrant public service body (e.g., a charity, a university or a qualifying non-profit organization) in Ontario, B.C. or Nova Scotia continues to be entitled to claim a rebate in respect of the federal part of the HST the body paid or owes on the purchase or construction of new housing, where the conditions for claiming that rebate are met.

In addition, Ontario and B.C. provide public service body rebates in respect of the provincial part of HST. Refer to GST/HST Info Sheet GI-067, Basic GST/HST Guidelines for Charities, and GST/HST Info Sheet GI-068, Basic GST/HST Guidelines for Public Institutions, for details.

Rebate when taxable sale of real property is made

A GST/HST rebate is generally available to a non-registrant builder at the time the builder makes a taxable sale of new housing to another person, or is considered under the self-supply rules to have made a taxable sale of the new housing. This rebate entitles the builder to recover the GST/HST paid on the construction or substantial renovation of the housing that the builder could not previously recover (e.g., though an ITC or a public service body rebate).

This rebate continues to be available after the implementation of the HST in Ontario and B.C. and the HST tax increase in Nova Scotia. For more information, see Guide RC4052, GST/HST Information for the Home Construction Industry, and Guide RC4033, General Application for GST/HST Rebates.

New residential rental property rebates

The new residential rental property rebate in respect of the GST, or federal part of the HST, that a non-registrant builder is considered to have collected on a self-supply of new housing continues to be available to eligible builder-landlords.

In addition, Ontario and B.C. provide a new residential rental property rebate for the provincial part of the HST.

GST/HST Info Sheet GI-091, Harmonized Sales Tax: Information for Landlords of New Rental Housing explains when the HST is considered to be collected by a builder-landlord on their self-supply of new housing. The new residential rental property rebates provided by Ontario and B.C. are explained in GST/HST Info Sheet GI-093, Harmonized Sales Tax: Ontario New Residential Rental Property Rebate, andin GST/HST Info Sheet GI-094, Harmonized Sales Tax: British Columbia New Residential Rental Property Rebate.

Recovering embedded retail sales tax or provincial sales tax

New housing in Ontario and B.C. that is constructed or under construction as of July 1, 2010 will have retail sales tax in Ontario (RST) or the provincial sales tax in B.C. (PST) embedded in the cost of the housing. A non-registrant builder cannot recover this amount through any of the rebates described above. However, a non-registrant builder may be eligible for one of the provincial transitional rebates described below.

Provincial transitional new housing rebate – First sale

Depending on the circumstances, a provincial transitional new housing rebate of the estimated embedded RST or PST may be available to a non-registrant builder when the builder first sells new housing to another person or when the builder is considered to have made a self-supply of new housing. See GST/HST Info Sheet GI-096, Harmonized Sales Tax: Provincial Transitional New Housing Rebates for Housing in Ontario and British Columbia, for more information.

Provincial transitional new housing rebate – Resale

A purchaser of new housing may be considered to be a builder for GST/HST purposes because of the purchaser's intentions at the time of their purchase. If so, where a builder (the first reseller) sells the new housing, the resale is generally taxable.

Where the initial sale of that housing was "grandparented", and the resale by the first reseller is subject to the HST, the RST/PST embedded in the cost of the new housing may be recoverable. In such situations, a non-registrant first reseller will generally be entitled to claim a rebate to recover an amount on account of the retail sales tax or provincial sales tax, as the case may be, that is embedded in the price of the housing.

The rebate available to the first reseller is equal to 2% of the purchase price payable by the first reseller on the purchase of the grandparented housing from the original builder.

An eligible first reseller that is not a registrant claims this rebate on Form RC7003-ON, Ontario Retail Sales Tax (RST) Transitional New Housing Rebate for Certain Non-Registrants, or Form RC7003-BC, British Columbia Provincial Sales Tax (PST) Transitional New Housing Rebate for Certain Non-Registrants.

This info sheet does not replace the law found in the Excise Tax Act (the Act) and its regulations. It is provided for your reference. As it may not completely address your particular operation, you may wish to refer to the Act or appropriate regulation, or contact any CRA GST/HST rulings office for additional information. A ruling should be requested for certainty in respect of any particular GST/HST matter. Pamphlet RC4405, GST/HST Rulings – Experts in GST/HST Legislation explains how to obtain a ruling and lists the GST/HST rulings offices. If you wish to make a technical enquiry on the GST/HST by telephone, please call 1-800-959-8287.

Reference in this publication is made to supplies that are subject to the GST or the HST. The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 15% in Nova Scotia, and 12% in British Columbia. The GST applies in the rest of Canada at the rate of 5%. If you are uncertain as to whether a supply is made in a participating province, you may refer to GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of Supply Rules for Determining Whether a Supply is Made in a Province.

If you are located in Quebec and wish to make a technical enquiry or request a ruling related to the GST/HST, please contact Revenu Québec at 1-800-567-4692. You may also visit the Revenu Québec Web site to obtain general information.

All technical publications related to GST/HST are available on the CRA Web site at www.cra.gc.ca/gsthsttech.

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