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

From: Canada Revenue Agency

GST/HST Info Sheet GI-147
March 2013

The Government of Prince Edward Island has proposed a harmonized sales tax (HST) that would come into effect on April 1, 2013.

The HST rate in Prince Edward Island would be 14% of which 5% would represent the federal part and 9% the provincial part.

This info sheet reflects proposed tax changes announced in the Prince Edward Island 2012 Budget and Revenue Tax Guide RTG185, Implementation of the Harmonized Sales Tax in Prince Edward Island.

Any commentary in this info sheet should not be taken as a statement by the Canada Revenue Agency (CRA) that the proposed transitional rules will be enacted in their current form.

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

Example 1

The stated price net of rebate is $325,000 and all of the above conditions are satisfied. The consideration would be calculated as:

Consideration

= $325,000 ÷ 1.122
= $289,661.32

Once the consideration is determined the tax payable and the new housing rebate may be calculated.

HST payable

= $289,661.32 × 14%
= $40,552.58

GST/HST new housing rebate in respect of the federal part of the HST

= ($289,661.32 × 5%) × 36%
= $5,213.90

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

Example 2

The stated price net of rebate is $460,000 and all of the above conditions are satisfied. The consideration would be calculated as:

Consideration

= ($460,000 + $28,350) ÷ 1.203
= $405,943.48

Once the consideration is determined the tax payable and the new housing rebate may be calculated.

HST payable

= $405,943.48× 14%
= $56,832.09

GST/HST new housing rebate in respect of the federal part of the HST

= $6,300 × [($450,000 – $405,943.48)] ÷ $100,000
= $2,775.56

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.

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.

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.

Report a problem or mistake on this page
Please select all that apply:

Thank you for your help!

You will not receive a reply. For enquiries, contact us.

Date modified: