Elimination of the HST in British Columbia: Builder Information Requirements for the Transition Period

GST/HST Info Sheet GI-132
December 2012

Effective April 1, 2013, the 12% HST, consisting of a 5% federal part and a 7% provincial part, will no longer apply in British Columbia (B.C.). Instead, the GST at 5% and a provincial sales tax will apply.

To aid the transition between the two tax regimes, the B.C. New Housing Transition Tax and Rebate Act (NHTTRA), which was passed in May 2012:

  • imposes a new, temporary, 2% B.C. transition tax on purchasers of certain newly constructed or substantially renovated housing that is fully or partially constructed under the HST, but where ownership and possession generally transfer on or after April 1, 2013;
  • introduces a new, temporary B.C. transition rebate (for builders who supply new housing that is subject to the B.C. transition tax, but who have paid provincial sales tax (PST) on at least some of the construction materials incorporated into the new housing); and
  • requires vendors of new housing to provide certain tax-related information to purchasers.

The B.C. transition tax and B.C. transition rebate will apply until April 1, 2015.

For more information on the transition from the HST to the GST and PST, refer to GST/HST Notice 276, Elimination of the HST in British Columbia in 2013 – Transitional Rules for Real Property Including New Housing.

This info sheet describes the information requirements set out in the New Housing Transition Tax and Rebate Regulation (the Regulation) passed by the Government of British Columbia on November 132012.

First Nations:  The content in this info sheet applies in the same manner to new housing on land where the First Nations goods and services tax (FNGST) has replaced the GST. For an overview of the FNGST, see Guide RC4365, First Nations Goods and Services Tax (FNGST).

This info sheet explains the written information that a vendor (including a builder or an agent of the builder) must provide to a purchaser of new housing, or an interest in such housing, in B.C. where:

  • a written agreement of purchase and sale for the housing or interest is entered into on or after February 17, 2012 and before April 1, 2015, Footnote 1 or
  • in any event, where the B.C. transition tax is payable in respect of the sale of the housing or interest.

Definitions for GST/HST purposes, e.g., builder, residential complex, residential unit and substantial renovation, will continue to apply under the GST and PST system, as will the CRA's current policies on the application of the GST/HST to housing. The following CRA publications discuss many of these terms and concepts:  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.

New housing

The terms "new house" and "new housing" used throughout this info sheet refer to newly constructed or substantially renovated housing supplied by a builder. Housing that has been substantially renovated is generally given the same treatment under the GST/HST as newly constructed housing. For a full explanation of the factors to consider in determining 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.

Written information that a vendor must provide to a purchaser of new housing or an interest in new housing

Where a written agreement of purchase and sale for new housing, or an interest in such housing, is entered into on or after February 17, 2012 and before April 1, 2015, the vendor must provide specific written information to the purchaser. In some cases, this information must be provided in the written agreement of purchase and sale while in other cases, the information must be provided in a written addendum to the agreement.

In addition, regardless of the date on which the written agreement of purchase and sale is entered into, if the B.C. transition tax is payable on the sale of new housing or an interest therein, other specific information must be provided to the purchaser in the statement of adjustments or other similar document.

Where the information must be provided in the statement of adjustments or similar document, the information can be provided in any statement of adjustments as long as it is provided at or before the time at which tax becomes payable. Footnote 2 It is expected that the information will typically be provided in the statement of adjustments signed by the vendor and returned to the purchaser.

There may be cases where there is no statement of adjustments or where the information must be provided before the statement of adjustments is prepared. For example, if possession of taxable new housing transfers earlier than ownership transfers (and possession transfers on or after April 1, 2013 and before April 1, 2015), the B.C. transition tax would generally become payable at the time possession transfers. In such a case, the builder must provide the information to the purchaser at the time tax becomes payable, e.g., generally at the time possession transfers, which may be earlier than when a statement of adjustments would normally be prepared.

The information that the vendor must provide is as follows:

A. Written agreement of purchase and sale entered into on or after December 1, 2012 and before April 1, 2015

In these cases, the vendor is required to include in the written agreement, on the date the agreement is entered into, each of the following items:

  • the value of consideration for the housing or interest therein as established for GST/HST purposes;
  • a statement as to whether the amount represented in the agreement as the purchase price includes any of the B.C. transition tax, the GST or the HST and, if the purchase price includes any such tax, a statement that identifies each such tax, the rate of the tax and the amount of the tax;
  • if a GST/HST new housing rebate, B.C. provincial new housing rebate or B.C. transition rebate has been taken into account in determining the amount payable to the vendor under the agreement, a statement that identifies each such rebate and the amount of the rebate;
  • a statement as to whether the builder is a foreign supplier. Footnote 3

Depending on whether the builder is a foreign supplier, one of the following "Notice to Purchaser" notifications must also be included.

If the builder is NOT a foreign supplier, the following statement must be included in the written agreement:

NOTICE TO PURCHASER

If:

  • both ownership and possession of newly constructed or substantially renovated housing, or an interest in such housing, transfer on or after April 1, 2013, and
  • either ownership or possession of the housing or interest transfers before April 1, 2015,

then:

  • the 7% provincial part of the HST and the B.C. HST new housing rebate for primary places of residence generally will not apply,
  • the 2% B.C. transition tax may be payable by the purchaser, and
  • the supplier may be eligible for a B.C. transition rebate in respect of the housing.

For more information, refer to
http://www.cra-arc.gc.ca/E/pub/gi/notice276/README.html.

If the builder is a foreign supplierFootnote 4, the following statement must be included in the written agreement:

NOTICE TO PURCHASER

If:

  • both ownership and possession of newly constructed or substantially renovated housing, or an interest in such housing, transfer on or after April 1, 2013, and
  • either ownership or possession of the housing or interest transfers before April 1, 2015,

then:

  • the 7% provincial part of the HST and the B.C. HST new housing rebate for primary places of residence generally will not apply,
  • the 2% B.C. transition tax may be payable by the purchaser,
  • because the supplier is a foreign supplier, the purchaser will be required to remit directly any 2% B.C. transition tax payable, and
  • the supplier may be eligible for a B.C. transition rebate in respect of the housing.

For more information, refer to
http://www.cra-arc.gc.ca/E/pub/gi/notice276/README.html.

In addition, if the B.C. transition tax is payable on the sale of new housing or an interest therein, see under situation C below for additional information requirements that must be met at the time tax becomes payable.

Example 1

You are the builder (who is not a foreign supplier) of a new house situated in B.C. On December 15, 2012, you enter into a written agreement of purchase and sale for the house. Under the agreement, possession and ownership of the house transfer to the purchaser on December 15, 2013.

You are required to include in the written agreement, on the date the agreement is entered into (which in this case is December 15, 2012), all of the items listed under situation A above, including the "Notice to Purchaser" for a builder who is not a foreign supplier.

For information requirements at the time of closing, please refer to Example 3 under situation C below.

If you fail to disclose this required information fully and accurately, penalties will be imposed as indicated in the section entitled "Penalties".

B. Written agreement of purchase and sale entered into on or after February 17, 2012 and before December 1, 2012

In these cases, unless ownership or possession of the new housing or interest in the new housing transfers on or before December 31, 2012, the vendor must provide the purchaser with a written addendum to the agreement.Footnote 5 The addendum provides additional information, but does not amend the agreement. The addendum must be provided on or before January 2, 2013 and must contain the following items:

  • each item set out under situation A above, including the applicable "Notice to Purchaser"; and
  • the addendum must be signed by the vendor. It does not need to be signed by the purchaser.

The vendor must provide the written addendum to the purchaser in at least one of the following ways:

  • by giving a copy of the written addendum in person to the purchaser or an agent of the purchaser;
  • by sending a copy of the written addendum by courier or registered mail to the purchaser's address of record for delivery specified in the agreement;
  • by sending a copy of the addendum to the purchaser's facsimile number of record specified in the agreement, provided that the facsimile confirmation of receipt is obtained; or
  • by sending a copy of the addendum by any other method including, for example, electronic mail, provided the vendor obtains a written confirmation of receipt from the purchaser or purchaser's agent.

The addendum will be considered to have been provided to the purchaser:

  • if provided by giving a copy in person, on the date the copy is given;
  • if provided by sending a copy by courier or registered mail, on the date the copy is sent;
  • if provided by facsimile, the date indicated on the confirmation of receipt; and
  • if provided by sending a copy in any other manner, on the date indicated on the confirmation of receipt.

As stated above, if it is required, the addendum must be provided on or before January 2, 2013.

In addition, if the B.C. transition tax is payable on the sale of new housing or an interest therein, see under situation C below for additional information requirements that must be met.

Example 2

You are the builder (who is not a foreign supplier) of a new house situated in B.C. On September 1, 2012, you enter into a written agreement of purchase and sale for the house. Under the agreement, possession and ownership of the house transfer to the purchaser on September 1, 2013.

You are required to provide a written addendum to the purchaser on or before January 2, 2013. The addendum must include the items listed under  situation B above and must be provided in one of the four manners listed under that situation.

For information requirements at the time of closing, please refer to Example 4 under situation C below.

If you fail to disclose this required information fully and accurately, penalties will be imposed as indicated below in the section entitled "Penalties".

C. Sales of new housing in respect of which the B.C. transition tax becomes payable on or after April 1, 2013 and before April 1, 2015

See the section entitled "B.C. transition tax" in GST/HST Notice 276, Elimination of the HST in British Columbia in 2013 – Transitional Rules for Real Property Including New Housing for circumstances in which the B.C. transition tax applies. The B.C. transition tax will also be the subject of an info sheet to be published in the near future.

Regardless of the date on which the written agreement of purchase and sale is entered into, if the B.C. transition tax is payable on the sale of new housing or an interest therein, other specific information must be provided to the purchaser in the statement of adjustments or other similar document.

In such cases the vendor is required to include in the statement of adjustments or other document provided to the purchaser, by the time tax on the sale becomes payable, each of the following items:

  • the value of consideration for the housing or an interest therein as established for GST/HST purposes;

Where the sale of the housing was grandparented under the rules for the transition to the HST in 2010,Footnote 6 the value of consideration is calculated differently than in other cases. See the answer to question 62 in GST/HST Notice 276, Elimination of the HST in British Columbia in 2013 – Transitional Rules for Real Property Including New Housing for information on determining the value of consideration for GST/HST purposes in these circumstances.

  • a statement as to whether the GST is payable on the sale and the amount of the tax;
  • a statement as to whether the B.C. transition tax is payable on the sale and the amount of the tax;
  • the completion percentage of the housing:
    • immediately before July 1, 2010,
    • immediately before April 1, 2013, and
    • at the time the GST is payable in respect of the sale;
  • the amount of the B.C. transition rebate that the builder is entitled to claim;
  • the amount of the B.C. PST transitional new housing rebate that the builder has claimed or is entitled to claim in respect of the housing;
  • the amount of any GST/HST new housing rebate that the vendor agreed to pay or credit to the purchaser; and
  • a statement as to whether the builder is a foreign supplier.

In the case of a grandparented sale, the statement of adjustments or other document must include the following statement:

NOTICE TO PURCHASER

The purchase price is deemed to include the 2% B.C. transition tax and the purchaser is not required to pay any additional amount on account of that tax. (See section 19(4) of the New Housing Transition Tax and Rebate Act.)

For more information, refer to
http://www.cra-arc.gc.ca/E/pub/gi/notice276/README.html.

In the case of a sale by a foreign supplier (other than a foreign supplier of a grandparented sale), the statement of adjustments or other document must include the following statement:

NOTICE TO PURCHASER

Because the supplier is a foreign supplier, the purchaser will be required to remit directly any 2% B.C. transition tax payable.

For more information, refer to
http://www.cra-arc.gc.ca/E/pub/gi/notice276/README.html.

Example 3

Returning to Example 1, assume construction of the house is 20% completed before April 1, 2013.

In this case, because construction of the house was at least 10% complete before April 1, 2013 and ownership and possession transfer on or after April 1, 2013 and before April 1, 2015 (i.e., the B.C. transition tax would be payable), the builder is also required to include in the statement of adjustments or other document provided to the purchaser the items under situation C, including the "Notice to Purchaser" for a builder who is not a foreign supplier.


Example 4

Returning to Example 2, assume construction of the house is 40% completed before April 1, 2013.

In this case, because construction of the house is at least 10% completed before April 1, 2013 and ownership and possession transfer on or after April 1, 2013 and before April 1, 2015, you are required to include the items under situation C above, including the "Notice to Purchaser" for a vendor who is not a foreign supplier.

Penalties

If a vendor fails to fully and accurately disclose the required information as set out above, a penalty of up to 1% of the purchase price of the housing, to a maximum of $10,000 per sale, will be imposed on the vendor.

If a vendor knowingly, or under circumstances amounting to gross negligence, makes or participates in making a false statement or fails to fully and accurately disclose the required information, a penalty of up to 4% of the purchase price, to a maximum of $40,000 per sale, will be imposed on the vendor.

These penalties could be reduced or waived in certain circumstances.

Joint and several liability

If a vendor has, under an agreement of purchase and sale for new housing or an interest in such housing, agreed on behalf of another person to sell such housing or such an interest, the vendor and the other person are jointly and severally liable for all obligations and liabilities of the vendor that arise as a consequence of any failure to comply with the information requirements set out in the Regulation.

Example 5

You are a builder who constructs new housing in B.C. You hire an agent to sell the house on your behalf. The agent enters into an agreement of purchase and sale for the house on May 15, 2013. Under the agreement, ownership and possession of the housing transfer to the purchaser on June 1, 2014.

The agent is required to include in the written agreement, on the date the agreement is entered into (which in this case is May 15, 2013), all of the items listed under situation A above, including the appropriate "Notice to Purchaser". In addition, because tax is payable on or after April 1, 2013 and before April 1, 2015, and the B.C. transition tax is payable, the agent is also required to include the relevant items under situation C above.

If the agent fails to disclose this required information fully and accurately, penalties will be imposed as indicated above. Since the agent is selling the housing on your behalf, you and the agent are jointly and severally liable for all obligations and liabilities that arise as a consequence of any failure to comply with the information requirements as set out in the Regulation.


This info sheet does not replace the law found in the New Housing Transition Tax and Rebate Act and its regulation and the Excise Tax 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 these acts 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 regarding the B.C. New Housing Transition Tax and Rebate Act by telephone, please call 1-800-959-8287.

All technical publications related to the New Housing Transition Tax and Rebate Act are available on the CRA Web site at www.cra.gc.ca/gsthsttech.

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