If you are planning on buying a new home over the next two years, then you need to know about the 2% BC Transition Tax.
It is a new tax that comes into effect on April 1, 2013. It will apply to the sale of new residential homes that are 10% or more complete as of April 1, 2013. The 2% BC Transition Tax will end on March 31, 2015.
The 2% BC Transition Tax applies to the full price of a new home, which is 10% or more complete, where ownership or possession is on or after April 1, 2013, but before April 1, 2015. The 5% GST also applies to the full price of a new home, where ownership or possession is on or after April 1, 2013.
With the end of the HST and the return to the PST/GST system, the BC government chose to introduce the 2% BC Transition Tax as a way, in their words, “to ensure the equitable application of tax for purchasers of new residential homes currently under the HST system” and after April 1, 2013 when the province returns to GST on new residential homes. The government also wishes to replace some of the revenue lost through the return to the PST.
BC’s portion of the HST will no longer apply to newly built homes where construction begins on or after April 1, 2013. Builders will once again pay 7% PST on their building materials (construction inputs). The provincial government asserts that on average, about 2% of the home’s final price is embedded PST that builders pay on their building materials.
For newly built homes where construction begins before April 1, 2013, but ownership and possession transfer after, purchasers will not pay the 7% provincial portion of the HST. Instead, purchasers will pay 5% GST and the 2% Transition Tax on the full house price. The Transition Tax rebate for builders (sellers) recognizes that the builder will not be able to claim input tax credits on the PST paid on building materials acquired after March 31, 2013. The rebate is available where both of the following conditions are met:
. The 2% BC Transition Tax applies to the sale of new housing; and
. Construction or substantial renovation is at least 10%, but not more than 90%, complete before April 1, 2013.
THE TRANSITION TAX REBATE FOR SELLERS OF NEW HOUSING WILL BE CALCULATED ON THE DEGREE OF COMPLETION OF THE HOUSING AS OF APRIL 1, 2013:
DEGREE OF CONSTRUCTION COMPLETE AS OF APRIL 1, 2013
Less than 10 %
10% ? and < 25%
25% ? and < 50%
50% ? and < 75%
75% ? and < 90%
90% or greater
TRANSITION TAX REBATE AS A % OF CONSIDERATION OR FAIR MARKET VALUE
THE 2% BC TRANSITION TAX DOES NOT APPLY TO:
. the sale of vacant land, whether the GST would apply or not;
. the sale of new commercial units; or
. REALTOR® commissions.
Read more: http://www.vancouversun.com/news/transition+homes+coming+april+2013/8049624/story.html#ixzz2N55CU829