Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 128618
October 29, 2010
Dear [Client]:
Subject:
GST/HST RULING
Rate of HST on Purchase of New House
Thank you for your letter of September 20, 2010, addressed to the Atlantic GST/HST Rulings Centre concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the purchase of a new house in Nova Scotia. Your request was transferred to our office for response.
Effective July 1, 2010, the provincial part of the HST in Nova Scotia changed from 8% to 10% and therefore the HST rate for Nova Scotia was increased from 13% to 15%, consisting of a 5% federal part and a 10% provincial part.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
You have provided with your letter copies of the agreement of purchase and sale dated April [...], 2010, Addendum Schedule [...] and Addendum Schedule [...] both dated April [...], 2010, a counter offer dated April [...], 2010, and a Notice of Removal of Schedule [...] dated May [...], 2010. You also subsequently sent us copies of Addendum Schedule [...] and Addendum Schedule [...] both undated and copies of the Statement of Sale and the Statement of Funds Received and Disbursed prepared by the vendor's solicitor.
Based on these documents and [...] telephone conversation with [...] of our Halifax office on September 27, 2010, we understand the following:
1. Both of you entered into a written agreement of purchase and sale with [...] (the builder) for the purchase of a newly constructed house located at [...], Nova Scotia.
2. The agreement was entered into on April [...], 2010, and both ownership and possession were to be transferred to both of you on June [...], 2010.
3. The purchase price in the agreement of purchase and sale is $[...] including HST (identified as 13%) and reduced by the GST/HST new housing rebate in respect of the federal part of the HST that was credited by the builder. Neither of you is entitled to claim the Nova Scotia new housing rebate.
4. Addendum [...] states that the purchase price is to read $[...] including applicable tax, and the closing date is to read on or before August [...], 2010.
5. The Statement of Sale indicates that an additional amount of $[...] is payable to the builder in respect of additional upgrades.
6. The actual closing date was August [...], 2010. Ownership and possession of the house transferred to both of you on that date.
7. Addendum Schedule [...] states the buyers and the seller agree that the buyers are to provide a certified cheque in the amount of $[...].
Ruling Requested
You would like confirmation that the purchase of the new house is subject to the HST at 15% and whether relief can be provided with respect to the 2% increase.
Ruling Given
Based on the facts set out above, we rule that the supply of the new house by the builder is subject to the HST at 15% and that there is no provision under the ETA that would allow the CRA to reduce the amount of HST payable in respect of this transaction.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
Pursuant to paragraph 19(2)(e) of the Nova Scotia HST Regulations, 2010 (the Regulations), a supply by way of sale of a new house in Nova Scotia is subject to the HST at 15% if ownership and possession of the house are transferred on or after July 1, 2010. Since ownership and possession of the new house transferred to both of you on August [...], 2010, the supply of the new house is subject to the HST at 15%.
We are also providing the following information on additional transitional rules that are applicable in respect of a sale of a residential complex in Nova Scotia.
Section 13 of the Regulations sets out specific disclosure requirements for builders who enter into agreements of purchase and sale for supplies of residential complexes in Nova Scotia after April 6, 2010 and before July 1, 2010.
Subsection 13(1) of the Regulations requires a builder to indicate in the agreement of purchase and sale either:
a) the total tax payable in respect of the supply in a manner that clearly indicates the amount of that total and whether or not that amount is net of the GST/HST new housing rebate in respect of the federal part of the HST, or
b) the HST rate that applies in respect of the supply.
Subsection 13(2) of the Regulations provides that if a builder fails to disclose the above information, the tax payable by the recipient in respect of the supply is to be calculated as if the HST applied in respect of the supply at a rate of 13% and not at a rate of 15%; and the builder is deemed to have collected the tax in respect of the supply at a rate of 15%.
It is a question of fact whether the disclosure requirement discussed above is met given the changes that have been made to the original agreement of purchase and sale in an effort to collect the HST at the rate of 15%. The determination of the total amount payable under the purchase and sale agreement is a matter to be resolved between you and the builder.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9587. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Béatrice Mulinda
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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