Harmonized Sales Tax: Stated Price Net of the GST/HST New Housing Rebate in Prince Edward Island

GST/HST Info Sheet GI-147
March 2013

This info sheet explains how to determine the consideration payable for new housing in P.E.I. where a builder's price includes the HST at 14% and is net of the GST/HST new housing rebate in respect of the federal part of the HST paid or credited by the builder to the purchaser.

Definitions for GST purposes, e.g., builder, residential complex, residential condominium unit, single unit residential complex and substantial renovation, would generally apply under the HST, as would 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, discuss many of these important terms and concepts. Others are explained in GST/HST Memorandum 19.2, Residential Real Property.

Housing rebates paid or credited by builder

Where certain conditions are met, the purchaser of a newly constructed or substantially renovated single unit residential complex or residential condominium unit may be entitled to claim a GST/HST new housing rebate in respect of the GST, or the federal part of the HST, paid on such housing.

The purchaser and the builder may agree to have the builder pay or credit the amount of the GST/HST new housing rebate to the purchaser.

In this case, the purchaser does not have to submit a rebate application directly to the CRA. The purchaser will sign the rebate application and provide it to the builder who will be required to send the rebate application to the CRA when the builder claims a deduction in its net tax calculation for the amount of the rebate. The deduction must be taken in the net tax calculation for the reporting period during which the rebate amount was paid or credited to the purchaser.

Stated price net of rebate

In this info sheet, the "stated price" is the amount the purchaser agrees to pay the builder for the housing. The stated price includes the HST that would be payable on the purchase.

The "stated price net of rebate" means the stated price for the housing net of any GST/HST new housing rebate paid or credited by the builder.

The "consideration" payable for the purchase of the housing is the amount to be paid for the housing before any calculation of the tax payable and housing rebate entitlements for the purchaser.

Where a stated price net of rebate is used, a calculation must be made to determine the value of the consideration payable for the housing. The value of the consideration must be calculated before the tax payable can be determined. Similarly, the tax payable must be calculated before the amount of the rebate can be determined.

A separate formula would be used to calculate the consideration within each of two price ranges. These are set out below.

Conditions

The formulas in this info sheet can only be used if all of the following conditions are met:

• the purchaser is buying a newly constructed or substantially renovated single unit residential complex or residential condominium unit from a builder, together with the related land;
• the housing is situated in P.E.I.;
• HST at 14% applies to the sale;
• the purchaser meets the conditions for claiming the GST/HST new housing rebate;
• the builder pays or credits the GST/HST new housing rebate in respect of the federal part of the HST to the purchaser; and
• the builder and the purchaser have agreed to a stated price net of the GST/HST new housing rebate in respect of the federal part of the HST.

Calculating the consideration payable

The formula to be used for a particular sale depends on the builder's stated price net of rebate as follows.

Formula #1

Stated price net of rebate (SPNR) is not more than $392,700 (meaning that the consideration is not more than $350,000):

Consideration = SPNR ÷ 1.122

Formula #2

Stated price net of rebate (SPNR) is more than $392,700 and less than $513,000 (meaning that the consideration is more than $350,000 and less than $450,000):

Consideration = (SPNR + $28,350) ÷ 1.203

If the stated price is $513,000 or more, a GST/HST new housing rebate is not available.

PST transitional new housing rebate

Refer to GST/HST Info Sheet GI-148, Harmonized Sales Tax: Stated Price Net of GST/HST New Housing Rebate and the PEI PST Transitional New Housing Rebate if the stated price includes the HST and is net of:

• the GST/HST new housing rebate in respect of the federal part of the HST; and
• the P.E.I. provincial sales tax (PST) transitional new housing rebate.

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