Prince Edward Island HST Rate Increase – Sales and Rentals of New Housing
GST/HST Info Sheet GI-194
September 2016
On April 19, 2016, the Government of Prince Edward Island announced its intention to increase the provincial part of the harmonized sales tax (HST) by one percentage point from 9% to 10%, effective October 1, 2016. This results in an increase in the HST rate from 14% to 15%.
On June 16, 2016, the Government of Prince Edward Island released transitional rules to determine the HST rate applicable to transactions that straddle the October 1, 2016, implementation date.
This info sheet provides information that reflects the application of those transitional rules, which have been enacted in the Regulations Amending Various GST/HST Regulations, No. 9 (Prince Edward Island) (SOR/2016-212).
This info sheet does not deal with tax changes for the implementation of the HST in Prince Edward Island that came into effect on April 1, 2013. GST/HST technical publications dealing with those tax changes are available on the Canada Revenue Agency (CRA) website at cra.gc.ca/gsthsttech.
All supplies referred to in the examples are made in Prince Edward Island. If you are uncertain as to whether a supply is made in a participating province, 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.
This info sheet explains the rules for the Prince Edward Island HST rate increase that apply to the taxable sale, “self-supply,” or rental of new housing in Prince Edward Island. New housing includes single family homes, semi-detached houses, rowhouse units, residential condominium units, mobile homes, floating homes, duplexes, and multiple unit residences such as traditional apartment buildings, co-operative rental buildings, and long-term residential care facilities.
Exempt sales and rentals of housing are not affected by the HST rate increase.
Definitions for GST/HST purposes (for example, builder, mobile home, floating home, residential complex, residential condominium unit, single unit residential complex, and substantial renovation) continue to apply, as do the CRA’s current policies on the application of the GST/HST 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.
For purposes of this info sheet, “single unit house” means a detached house, semi-detached house, rowhouse unit, mobile home, or floating home, that is not a residential condominium unit.
Long-term care facilities, such as nursing homes or personal care homes, are treated the same as other residential housing. If a newly constructed or substantially renovated long-term care facility is similar to a traditional apartment building, the rules for apartment buildings apply.
For additional information on the transitional rules for housing and other real property, refer to GST/HST NOTICE 302, Prince Edward Island HST Rate Increase – Questions and Answers on Housing Rebates and Transitional Rules for Housing and Other Real Property Situated in Prince Edward Island.
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 sales of new housing
The sale of new housing by a builder is generally taxable even if the builder is a non-registrant. For more information, refer to Guide RC4052, GST/HST Information for the Home Construction Industry.
Application of the HST rate increase to sales of new housing
The HST at 14% applies to a taxable sale of new housing in Prince Edward Island if ownership or possession of the housing transfers to the purchaser before October 2016.
Generally, the HST at 15% applies to a taxable sale of new housing in Prince Edward Island if ownership and possession of the housing transfer to the purchaser after September 2016.
The transitional rules above apply to sales of all housing types, including single unit houses, duplexes residential condominium units, and multiple unit residences such as traditional apartment buildings.
An exception exists for certain types of new housing if the written agreement of purchase and sale was entered into on or before June 16, 2016. For more information, refer to the heading “Grandparented sales of new housing”.
For the purposes of applying the transitional rules, if a builder and a purchaser sign a written agreement of purchase and sale on different dates, the agreement is considered to be entered into on the date which the last party to the written agreement (that is, the builder or purchaser) signed the agreement.
Generally, the HST is payable on the earlier of the day on which ownership or possession of the housing is transferred to the purchaser. However, where the housing is a residential condominium unit and if possession is transferred before the condominium has been registered under the Condominium Act, the HST becomes payable when ownership of the residential condominium unit is transferred, or 60 days following the date of registration of the condominium, whichever is earlier.
Example 1
In the following examples, all of the builders are GST/HST registrants and all of the supplies of housing are subject to the HST.
You are the builder of a newly constructed residential condominium unit in Prince Edward Island. On June 22, 2016, you enter into a written agreement of purchase and sale to sell the unit to a purchaser. Under the agreement, ownership and possession of the unit transfer to the purchaser in September 2016.
Since ownership or possession (in this case, both) of the unit transfers before October 2016, the HST at 14% applies to the sale.
Example 2
You are the builder of a newly constructed house in Prince Edward Island. In April 2016, you enter into a written agreement of purchase and sale to sell the house to a purchaser. Under the agreement, possession of the house transfers to the purchaser on September 30, 2016, and ownership of the house transfers to the purchaser on October 31, 2016.
Since possession of the house transfers before October 2016, the HST at 14% applies to the sale.
Example 3
You are the builder of a newly constructed house in Prince Edward Island. On July 5, 2016, you enter into a written agreement of purchase and sale to sell the house to a purchaser. Under the agreement, ownership and possession of the house transfer to the purchaser in November 2016.
Since the agreement was entered into after June 16, 2016, and ownership and possession of the house transfer to the purchaser after September 2016, the HST at 15% applies to the sale.
A summary chart of the application of the transitional rule in examples 1 to 3 is included in Appendix A.
Grandparented sales of new housing
A builder’s taxable sale of a new or substantially renovated single unit house, duplex, or residential condominium unit is grandparented where ownership and possession transfer after September 2016, under a written agreement of purchase and sale that was entered into on or before the date that transitional rules were released. The Government of Prince Edward Island released its transitional rules on June 16, 2016. Grandparented sales of such housing are subject to the HST at 14%.
The grandparenting rule applies regardless of who the purchaser is (for example, whether the purchaser is an individual or a corporation) and how the purchaser plans to use the housing (for example, as rental property, principal residence, or vacation property).
The grandparenting rule does not apply to sales of traditional apartment buildings or condominium complexes.
Example 4
You are the builder of a new detached house in Prince Edward Island. In December 2015, you enter into a written agreement of purchase and sale to sell the house to an individual. Under the agreement, the individual takes ownership and possession of the house in November 2016.
Although ownership and possession of the house transfer, under the agreement, to the individual after September 2016, the sale of the house is grandparented since the agreement was entered into on or before June 16, 2016. The sale of the house is subject to the HST at 14%.
Example 5
You are a mobile home dealer in Prince Edward Island. In February 2016, you enter into a written agreement of purchase and sale to sell a new mobile home to a corporation. Under the agreement, the corporation takes ownership and possession of the mobile home in October 2016.
The sale of the mobile home is grandparented since the agreement was entered into on or before June 16, 2016, and ownership and possession of the mobile home transfer, under the agreement, to the corporation after September 2016. The sale of the mobile home is subject to the HST at 14%.
Example 6
You are the builder of a new apartment building in Prince Edward Island. In February 2016, you enter into a written agreement of purchase and sale to sell the building to a corporation. Under the agreement, the corporation takes ownership and possession of the building in October 2016. You do not rent any of the apartments in the building to tenants prior to the sale.
Although the agreement was entered into on or before June 16, 2016, the grandparenting rule does not apply to the sale since the sale of a traditional apartment building does not qualify for grandparenting. Since ownership and possession of the property transfer, under the agreement, to the corporation after September 2016, the sale of the apartment building is subject to the HST at 15%.
A summary chart of the application of the grandparenting rule in examples 4 to 6 is included in Appendix B.
The grandparenting rule for certain “self-supplies” of rental housing is explained under the heading “Grandparented self-supplies”.
Upgrades
A request by a purchaser for upgrades to new housing such as a detached house or a residential condominium unit can generally be accommodated by an amendment to an existing written agreement of purchase and sale such that the upgrades form part of that agreement. In this case, the tax rate for the upgrades is the same as the tax rate that applies to the sale of the housing.
Example 7
You are the builder of a newly constructed house in Prince Edward Island. On February 4, 2016, you enter into a written agreement of purchase and sale to sell the house to an individual. On May 18, 2016, the individual requests some flooring and lighting fixture upgrades. The agreement is amended to reflect these upgrades and their additional cost. Under the agreement, ownership and possession of the house transfer to the individual in October 2016.
Since the agreement was entered into on or before June 16, 2016, and ownership and possession of the house transfer, under the agreement, to the individual after September 2016, the sale of the house is grandparented. The HST at 14% applies to the total amount payable for the house (including the upgrades).
Where an existing agreement of purchase and sale is modified, varied, or otherwise materially altered to such an extent that it is considered to be a new agreement (for example, novation has occurred) the application of the grandparenting rule is based on the date that the new agreement is entered into.
If a builder and purchaser renegotiate the terms of a written agreement of purchase and sale for a new or substantially renovated single unit house, duplex or residential condominium unit that was entered into on or before June 16, 2016, and enter into a new agreement, the grandparenting rule applies based on the date that the builder and purchaser enter into the new agreement.
Example 8
You are the builder of a new residential condominium complex in Prince Edward Island. On April 27, 2016, you enter into a written agreement of purchase and sale to sell a new residential condominium unit (that is, Unit 5) to an individual. Under the agreement, ownership and possession of the condominium unit transfer to the individual in November 2016. On July 7, 2016, the individual requests that the agreement be amended such that the individual will acquire Unit 17, and not Unit 5. The agreement is amended to reflect this change and there is no additional cost to the individual to make this change.
Given that the individual is purchasing a different condominium unit, the builder and the individual have entered into a new agreement on July 7, 2016. Since this agreement was entered into after June 16, 2016, the sale of the condominium unit (Unit 17) is not grandparented and the HST at 15% applies to the sale of the condominium unit.
Builder disclosure requirements for new housing
If a builder enters into a written agreement of purchase and sale for a taxable sale of new housing after June 16, 2016 and before October 2016, the builder has to disclose in the agreement either:
- the total amount of the HST payable on the sale and whether that total takes into account the GST/HST new housing rebate paid or credited by the builder; or
- the rate at which the HST applies.
If the sale is subject to the HST at 15%, but the builder does not disclose the information as required, the builder is considered to have collected the HST at 15%. However, the tax payable by the purchaser is calculated at the HST rate of 14% and the purchaser is not required to pay any amount in addition to the total amount payable under the agreement of purchase and sale to account for the 1% increase in the HST rate.
Example 9
You are the builder of a new house in Prince Edward Island. In July 2016, you enter into a written agreement of purchase and sale to sell the house to a purchaser. Under the agreement, ownership and possession of the house transfer to the purchaser on November 10, 2016. The purchaser agrees to pay you $350,000 on the sale, and this is identified in the agreement as the total price (total amount payable), including the HST. The agreement does not indicate whether the HST applies at 14% or 15% to the sale. You are unsure whether the purchaser will qualify for the GST/HST new housing rebate, so you instruct them to make their application directly to the CRA.
The sale of the new house is not grandparented and the HST at 15% applies to the sale. However, because the written agreement of purchase and sale was entered into after June 16, 2016, and before October 2016, and the agreement does not meet the disclosure requirement, the HST payable by the purchaser is calculated at the rate of 14%:
HST
= $350,000 × 14/114
= $42,982.46
Consideration
= $350,000 − $42,982.46
= $307,017.54
However, the builder is considered to have collected the HST at 15%:
HST
= $307,017.54 × 15%
= $46,052.63
Self-supply of new housing
A builder who constructs or substantially renovates new housing for rental purposes is generally considered to have made a taxable “self-supply” (sale and repurchase) of the housing when the builder gives possession or use of the housing, or a unit in it, under a lease, licence, or similar arrangement to an individual who is the first to occupy the housing as a place of residence.
A self-supply may also occur where:
- a builder constructs an addition (for example, a new floor or wing) to a multiple unit residence and rents a unit in the addition to an individual who is the first to occupy it as a place of residence;
- a builder rents new housing to a person who, in turn, will rent it to an individual as a place of residence;
- a builder sells only the building part of the new house and leases the related land to the purchaser under the same agreement (other than the sale of a mobile home together with a site in a residential trailer park); or
- a builder is an individual and is the first to occupy the new housing as a place of residence.
A self-supply generally occurs at the later of the time construction or substantial renovation of the new housing is substantially complete and the time possession or use of the housing is given under a lease, licence, or similar arrangement to an individual who is the first to occupy it as a place of residence. In the case of a builder-occupied home, the self-supply occurs at the later of the time construction or substantial renovation of the new housing is substantially complete and the time the builder occupies the new housing as a place of residence.
In the case of a multiple unit residence (for example, a traditional apartment building) or an addition to that residence, the self-supply occurs at the later of the time construction or substantial renovation of the entire building (or addition) is substantially completed and the time possession or use of a unit in the building (or addition) is given to an individual who is the first to occupy a unit in the building (or addition) as a place of residence. Refer to Guide RC4052, GST/HST Information for the Home Construction Industry, for more information on the self-supply of new housing.
A builder who is considered to have collected the HST on a self-supply is required to report that amount on its GST/HST return for the reporting period during which the self-supply occurred. This is the case for GST/HST registrant and non-registrant builders alike.
Application of the HST rate increase to a self-supply
If a self-supply of new housing (for example, a single unit house, a residential condominium unit, or a multiple unit residence or an addition thereto) occurs before October 2016, the HST at 14% applies, calculated on the fair market value of both the building (or addition) and the land reasonably necessary for the use of that housing as a place of residence for individuals.
Generally, where a self-supply of new housing occurs after September 2016, the HST at 15% applies to the self-supply, calculated on the fair market value of both the building (or addition) and the land reasonably necessary for the use of that housing as a place of residence for individuals.
An exception exists for certain self-supplies of new housing where the builder makes a sale of the building together with leased land. This exception is explained under the heading “Grandparented self-supplies”.
Grandparented self-supplies
A self-supply of a newly constructed or substantially renovated single unit house or residential condominium unit is grandparented if:
- the builder sells the building part under a written agreement that was entered into on or before June 16, 2016, and leases the related land to the purchaser under that same agreement; and
- the builder’s self-supply occurs after September 2016.
Grandparented self-supplies of such housing are subject to the HST at 14%.
Where the written agreement was entered into after June 16, 2016, the transitional rule for self-supplies of new housing applies. Under the transitional rule, the HST at 15% applies where the self-supply occurs after September 2016, and at 14% where the self-supply occurs before October 2016.
Example 10
You are a builder who constructs a new house in Prince Edward Island. On April 11, 2016, you enter into a written agreement with an individual for the sale of the house together with a 40-year lease of the related land. Construction of the house is substantially completed on September 23, 2016, and possession of the house transfers to the individual, under the agreement, on October 28, 2016.
You are considered to have self-supplied the house on October 28, 2016, which is the later of the time the construction of the house is substantially completed and the time that possession of the house is given to the individual. Although the self-supply occurs after September 2016, the self-supply is subject to the HST at 14% since the written agreement was entered into on or before June 16, 2016.
Example 11
You are a builder who constructs a new house in Prince Edward Island. On July 14, 2016, you enter into a written agreement with an individual for the sale of the house together with a 40-year lease of the related land. Construction of the house is substantially completed on September 30, 2016, and possession of the house transfers to the individual, under the agreement, on October 10, 2016.
You are considered to have self-supplied the house on October 10, 2016, this being the later of the time construction of the house is substantially completed and the time possession of the house is given to the individual. Since the agreement was entered into after June 16, 2016, and the self-supply occurs after September 2016, the self-supply is subject to the HST at 15%.
Short-term rentals of new housing
Where a builder transfers possession of new housing to an individual for their use as a place of lodging (instead of as a place of residence), the self-supply rules do not apply.
If the period throughout which the individual is given continuous possession or use of the housing is less than one month, the supply to the individual is subject to the HST unless the charge for their stay is no more than $20 per day. The builder is required to collect the HST on these rentals if the builder is a GST/HST registrant. Where the housing is not considered to be a “residential complex” for GST/HST purposes, the rental may be subject to the HST even if the period of continuous possession or use is one month or more. Refer to the explanation of the definition of “residential complex” in GST/HST Memorandum 19.2, Residential Real Property, for more information.
The factors to consider in determining whether the HST at 14% or 15% applies to a taxable supply of new housing made by way of lease, licence, or similar arrangement are the same as those used for the lease of non-residential real property. These factors are explained in GST/HST Info Sheet GI - 192, Prince Edward Island HST Rate Increase: Sales and Rentals of Non-residential Real Property.
Further information
All GST/HST technical publications are available on the CRA website at cra.gc.ca/gsthsttech.
To make a GST/HST enquiry by telephone:
- for general GST/HST enquiries, call Business Enquiries at 1-800-959-5525
- for technical GST/HST enquiries, call GST/HST Rulings at 1-800-959-8287
If you are located in Quebec, call Revenu Québec at 1-800-567-4692 or visit their website at revenuquebec.ca.
If you are a selected listed financial institution (whether or not you are located in Quebec) and require information on the GST/HST or the QST, go to cra.gc.ca/slfi or
- for general GST/HST or QST enquiries, call Business Enquiries at 1-800-959-5525
- for technical GST/HST or QST enquiries, call GST/HST Rulings SLFI at 1-855-666-5166
Any legislative references in this publication are to the Excise Tax Act (the Act) unless otherwise specified. The information in this publication does not replace the law found in the Act and its regulations.
If this information does not completely address your particular situation, you may wish to refer to the Act or relevant regulation, or call GST/HST Rulings at 1-800-959-8287 for additional information. If you require certainty with respect to any particular GST/HST matter, you may request a ruling. GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, explains how to obtain a ruling or an interpretation and lists the GST/HST rulings centres.
| Examples | Date of agreement is | Possession is transferred | Ownership is transferred | HST applies at the rate of |
|---|---|---|---|---|
| Example 1 | after June 16, 2016 | before October 2016 | before October 2016 | 14% |
| Example 2 | on or before June 16, 2016 | before October 2016 | after September 2016 | 14% |
| Example 3 | after June 16, 2016 | after September 2016 | after September 2016 | 15% |
| Examples | Type of housing | Date of agreement is | Possession and ownership are transferred | Grandparented (Yes/No) | HST applies at the rate of |
|---|---|---|---|---|---|
| Example 4 | Single unit detached house | on or before June 16, 2016 |
after September 2016 | Yes | 14% |
| Example 5 | Mobile home | on or before June 16, 2016 |
after September 2016 | Yes | 14% |
| Example 6 | Apartment building | on or before June 16, 2016 |
after September 2016 | No | 15% |
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