GST/HST Notices - Notice 323
May 2022

Except as otherwise noted, all statutory references in this publication are to the provisions of the Excise Tax Act (ETA). The information in this publication does not replace the law found in the ETA and its regulations.

If this information does not completely address your particular situation, you may wish to refer to the ETA 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.

If you are located in Quebec and wish to request a ruling related to the GST/HST, please call Revenu Québec at 1‑800‑567‑4692. You may also visit the Revenu Québec website at revenuquebec.ca to obtain general information.

For listed financial institutions that are selected listed financial institutions (SLFIs) for GST/HST or Quebec sales tax (QST) purposes or both, whether or not they are located in Quebec, the CRA administers the GST/HST and the QST. If you wish to make a technical GST/HST or QST enquiry related to SLFIs, please call 1‑855‑666‑5166.

GST/HST rates

Reference in this publication is made to supplies that are subject to the GST or the HST. The HST applies in the participating provinces at the following rates: 13% in Ontario and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%. 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.

Table of Contents

• Overview
• Proposed amendment
• Definitions
• Questions and Answers

Overview

An assignment sale in respect of residential housing is a transaction in which a purchaser (an assignor) that has entered into an agreement of purchase and sale with a builder of a new house sells (assigns) their rights and obligations under the agreement of purchase and sale to another person (an assignee). The agreement that details the terms of the assignment of an agreement of purchase and sale (the assignment sale) is generally referred to as the assignment agreement.

Under the current GST/HST rules, an assignment sale made by a person that is not an individual in respect of newly constructed or substantially renovated residential housing is generally taxable, whereas an assignment sale made by an individual may be either taxable or exempt. An assignment sale made by an individual is generally taxable if the individual had originally entered into the agreement of purchase and sale with the builder for the primary purpose of selling their interest in the real property. If, on the other hand, the individual had originally entered into the agreement of purchase and sale for another primary purpose (for example, to occupy the house as a place of residence), the assignment sale is generally exempt. Any amount an assignor paid as a deposit to a builder is included in the consideration for a taxable assignment sale. For more information on the current GST/HST rules, refer to GST/HST Info Sheet GI-120, Assignment of a Purchase and Sale Agreement for a New House or Condominium Unit.

The proposed amendment to the ETA would make all assignment sales, including those made by individuals, in respect of newly constructed or substantially renovated residential housing taxable for GST/HST purposes. Furthermore, the proposed amendment would exclude any amount attributable to a deposit paid by an assignor to a builder from the consideration for a taxable assignment sale, when certain conditions are met. The proposed amendment would apply to all assignment agreements entered into after May 6, 2022.

Proposed amendment

The proposed amendment adds section 192.1 to the ETA. Proposed section 192.1 states that if a taxable supply by way of sale of a single unit residential complex (as defined in subsection 254(1)) or of a residential condominium unit is made in Canada under an agreement of purchase and sale (in this section, referred to as the purchase agreement) entered into with a builder of the single unit residential complex or of the residential condominium unit and if another supply by way of assignment of the purchase agreement is made by a person (other than the builder) under another agreement, then the following rules apply:

1. the other supply is deemed to be a taxable supply, by way of sale, of real property that is an interest in the single unit residential complex or residential condominium unit
2. the consideration for the other supply is deemed to be equal to the amount determined by the formula:

Proposed section 192.1 applies in respect of any supply by way of assignment of an agreement of purchase and sale if the supply is made after May 6, 2022.

Definitions

Proposed section 192.1 applies to a single unit residential complex or a residential condominium unit.

Single unit residential complex means a residential complex that does not contain more than one residential unit, but does not include a residential condominium unit.

For the purposes of the proposed amendment, a single unit residential complex also includes:

• a multiple unit residential complex that does not contain more than two residential units (for example, a duplex)
• any other multiple unit residential complex if it is described by paragraph (c) of the definition of residential complex in subsection 123(1) and contains one or more residential units that are for supply as rooms in a hotel, motel, inn, boarding house, lodging house or similar premises and that would be excluded from being part of the residential complex if the complex were a residential complex not described by that paragraph (for example, a bed and breakfast establishment)

Residential condominium unit means a residential complex that is, or is intended to be, a bounded space in a building designated or described as a separate unit on a registered condominium or strata lot plan or description, or a similar plan or description registered under the laws of a province, and includes any interest in land pertaining to ownership of the unit.

Questions and Answers

1. I am an individual who entered into an assignment agreement before May 7, 2022. Is the assignment sale taxable?

If an assignment agreement is entered into before May 7, 2022, the current GST/HST rules apply. This means that the assignment sale may be either taxable or exempt. An assignment sale made by an individual is generally taxable if the individual had originally entered into the agreement of purchase and sale with the builder for the primary purpose of selling their interest in the real property. If, on the other hand, the individual had originally entered into the agreement of purchase and sale for another primary purpose (for example, to occupy the property as a place of residence), the assignment sale is generally exempt.

Under the current GST/HST rules, if an assignor’s sale of their interest in the real property to an assignee is taxable, the total amount payable for the sale of the interest is subject to the GST/HST, including any amount the assignor paid as a deposit to the builder, whether or not such an amount is separately identified.

For more information, refer to GST/HST Info Sheet GI-120.

2. The assignor already paid a deposit under the purchase and sale agreement. Is the portion of the assignment sale that is attributable to the deposit taxable?

Typically, the consideration for an assignment sale includes an amount attributable to a deposit that had previously been paid to the builder by the assignor. The application of the GST/HST to the amount attributable to the deposit in the context of the assignment sale depends on the date the assignment agreement was entered into and not on the date the deposit was paid to the builder.

Where an assignment agreement is entered into before May 7, 2022, and the assignment sale is taxable, the total amount payable for the sale of the assignor’s interest to the assignee is subject to the GST/HST, including any amount the assignor paid as a deposit to the builder, whether or not such an amount is separately identified.

Where an assignment agreement is entered into on or after May 7, 2022, and the assignment agreement indicates in writing that a part of the consideration is attributable to the reimbursement of a deposit paid by the assignor to the builder under the purchase and sale agreement, the proposed amendment excludes the amount attributable to the deposit from the consideration for a taxable assignment sale.

3. Who is responsible for remitting the tax on the assignment sale under the proposed amendment?

The proposed amendment does not change who is responsible for remitting the tax on the assignment sale. The assignor in respect of a taxable assignment sale would generally continue to be responsible for collecting the GST/HST and remitting the tax to the Canada Revenue Agency (CRA). Where the assignor is a non-resident of Canada, the assignee would continue to be required to self-assess and pay the GST/HST directly to the CRA.

For more information, refer to Guide RC4022, General Information for GST/HST Registrants.

4. Will the proposed amendment affect the new housing rebate?

The amount of a new housing rebate under the GST/HST legislation is determined based, in part, on the total tax paid and the total consideration for a taxable supply of a house, which includes any other taxable supply of an interest in the house (for example, the tax and consideration paid by an assignee for a taxable assignment sale). As a result of the proposed amendment, where an assignment agreement is entered into after May 6, 2022, the GST/HST applies to assignment sales that were not otherwise taxable, and the amount attributable to a deposit is excluded from the consideration for all taxable assignment sales. Consequently, the proposed amendment may have an impact on both the total tax paid and the total consideration for the taxable supply of a new house, which may affect the amount of a GST/HST new housing rebate in respect of the GST or the federal part of the HST, or of a new housing rebate in respect of the provincial part of the HST, that may be available in respect of a new house.

Only one new housing rebate application can be made for each new house. Therefore, an assignee purchaser cannot submit a rebate application through a builder (Builder A) for the tax paid to Builder A on the purchase of the house and submit a second rebate application for the tax paid to the assignor on the purchase of the interest in the house. In such cases, the assignee purchaser may want to file their new housing rebate application directly with the CRA rather than through Builder A. In this way, the assignee purchaser can include in the new housing rebate application the tax paid to Builder A and the tax paid to the assignor in determining the amount of their GST/HST new housing rebate and, where applicable, a provincial new housing rebate.

For more information, refer to Guide RC4028, GST/HST New Housing Rebate.

5. Will the proposed amendment affect the new residential rental property rebate?

The amount of a new residential rental property rebate (NRRPR) under the GST/HST legislation is determined based, in part, on the total tax payable in respect of a residential complex and the fair market value of the qualifying residential unit that forms part of the complex at the time the GST/HST becomes payable on the purchase of the complex. As a result of the proposed amendment, where an assignment agreement is entered into after May 6, 2022, the GST/HST applies to assignment sales that were not otherwise taxable, and the amount attributable to a deposit is excluded from the consideration for all taxable assignment sales. Consequently, the proposed amendment may have an impact on the total tax payable in respect of the complex, which may affect the amount of a GST/HST NRRPR in respect of the GST or the federal part of the HST, or of an NRRPR in respect of the provincial part of the HST.

For more information, refer to Guide RC4231, GST/HST New Residential Rental Property Rebate.

Further information