Nova Scotia HST Rate Increase: Sales and Rentals of New Housing

GST/HST Info Sheet GI-104
November 2010

The Government of Nova Scotia increased the provincial part of the harmonized sales tax (HST) from 8% to 10% effective July 1, 2010. The HST rate in Nova Scotia effective as of that date is 15% of which 5% represents the federal part and 10% the provincial part.

This info sheet reflects tax changes included in the Nova Scotia HST Regulations, 2010.

This info sheet explains the rules for the Nova Scotia HST rate increase that apply to the taxable sale, "self-supply", or rental of new housing in Nova Scotia, including new single family homes, semi-detached houses, townhouses, residential condominium units, mobile homes, floating homes, duplexes, and multi-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, e.g., builder, mobile home, floating home, residential complex, residential condominium unit, single unit residential complex, and substantial renovation, continue to apply, as do the Canada Revenue Agency's (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. Also, all supplies of housing referred to in the examples are made in Nova Scotia.

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.

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 Technical Information Bulletin B-092, Substantial Renovations and the GST/HST New Housing Rebate.

Taxable sales of new housing

The sale, or resale, of new housing by a builder is generally taxable even if the builder is a non-registrant. For more information, see Guide RC4052.

Application of the HST rate increase to sales of new housing

The HST applies at the rate of 13% to a taxable sale of new housing if either ownership or possession is transferred to the purchaser before July 2010.

Generally, the HST applies at the rate of 15% to a taxable sale of new housing in Nova Scotia if both ownership and possession are transferred to the purchaser on or after July 1, 2010. This general rule applies to sales of all housing types, including mobile homes and floating homes, residential condominium units, and 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 April 6, 2010. For more information, refer to the heading "Grandparented sales of housing".

If a builder and purchaser sign a written agreement of purchase and sale on different dates, for purposes of applying the transitional rules, the agreement is entered into on the date of the last signature of a party (i.e., the builder or purchaser) to the written 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 possession is transferred before the condominium has been registered under Nova Scotia's Condominium Act, the HST becomes payable when ownership of the unit is transferred, or 60 days following the date of registration of the condominium, whichever is earlier.

Example 1

You are the builder of a newly constructed residential condominium unit. On April 30, 2010, you enter into a written agreement of purchase and sale, to sell the unit. Under the agreement, ownership and possession transfer to the purchaser in May 2010.

Since possession or ownership (in this case, both) transfers before July 2010, the HST applies at 13% to the sale.


Example 2

You are the builder of a newly constructed house. In March 2010 you enter into a written agreement of purchase and sale to sell the house, possession of which transfers to the purchaser under the agreement on June 30, 2010. Ownership transfers on July 31, 2010.

Since possession transfers before July 2010, the HST applies at 13% to the sale, regardless of when you and the purchaser entered into the agreement.


Example 3

You are the builder of a newly constructed house. On April 30, 2010, you enter into a written agreement of purchase and sale, to sell the house. Under the agreement, ownership and possession of the house transfer to the purchaser in July 2010.
Since the written agreement was entered into after April 6, 2010, and both ownership and possession of the house transfer to the purchaser after June 2010, the HST applies at 15% to the sale.

Refer to Appendix A for a summary chart of the application of the general rule in examples 1 to 3.

Grandparented sales of housing

A builder's taxable sale of a new single unit house or residential condominium unit may be grandparented where both ownership and possession of the housing are transferred after June 2010, under a written agreement of purchase and sale that was entered into on or before April 6, 2010. Grandparented sales of such housing are subject to the HST at the rate of 13%.

The grandparenting rule applies regardless of who the purchaser is (e.g., whether the person is an individual or a corporation) and how the purchaser plans to use the housing (e.g., 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 single unit detached house. In February 2010, you enter into a written agreement of purchase and sale for the house. Under the agreement, the individual takes ownership and possession of the housing in August 2010.

Although both ownership and possession of the house transfer under the agreement to the purchaser after June 2010, the sale of the house is grandparented because the written agreement was entered into on or before April 6, 2010. The sale of the house is subject to the HST at 13%.


Example 5

You are a mobile home retailer. In March 2009, you enter into a written agreement of purchase and sale for the sale of a new mobile home to a corporation. Under the agreement, the purchaser takes ownership and possession of the mobile home in July 2010.

The sale of the mobile home is grandparented because the written agreement was entered into on or before April 6, 2010, and both ownership and possession of the mobile home transfer under the agreement to the purchaser after June 2010. The sale of the mobile home is subject to the HST at 13%.


Example 6

You are the builder of a new apartment building. In March 2010 you enter into a written agreement of purchase and sale to sell the building. Under the agreement, the purchaser takes ownership and possession of the building in August 2010.

Although the written agreement of purchase and sale was entered into on or before April 6, 2010, the general rule applies to the sale because the sale of a traditional apartment building does not qualify for grandparenting. Since both ownership and possession transfer under the agreement to the purchaser after June 2010, the sale of the apartment building is subject to the HST at 15%.

Refer to Appendix B for a summary chart of the application of the grandparenting rule in examples 4, 5 and 6.

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 housing such as a detached house or 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 purchase of the housing.

Example 7

A builder enters into a written agreement of purchase and sale for the sale of a new house on April 5, 2010. On April 8, 2010, the purchaser requests some flooring and lighting fixture upgrades. The agreement of purchase and sale is amended to reflect these upgrades and their additional cost. Ownership and possession of the house transfer to the purchaser under the agreement after June 2010.

As the written agreement was entered into on or before April 6, 2010, and both ownership and possession of the house transfer under the agreement to the purchaser after June 2010, the sale of the house is grandparented. The HST applies at 13% 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 (i.e., novation has occurred), the application of the grandparenting rule will be based on the date that the new agreement is entered into. Refer to GST/HST Policy Statement P-249, Agreements and Novation for information on when novation occurs.

If a builder and purchaser renegotiate the terms of a written agreement of purchase and sale for new housing that was entered into on or before April 6, 2010, 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

A builder enters into a written agreement of purchase and sale with an individual for the sale of a new residential condominium unit, Unit #5, on January 2, 2010. Under the agreement, ownership and possession of the condo unit transfer to the individual after June 2010. On April 15, 2010, the purchaser requests that the agreement be amended such that the purchaser will acquire Unit #17 and not Unit #5. The written agreement is amended to reflect this change and there is no additional cost to the purchaser to make this change.

Given that the individual is purchasing a different condo unit, the builder and the individual have entered into a new agreement on April 15, 2010. Since this agreement was entered into after April 6, 2010, the sale of the condo unit (Unit #17) is not grandparented and the HST applies at 15% to the sale of the condo unit.

Builder disclosure requirements for new housing

If a builder entered into a written agreement of purchase and sale for a taxable sale of new housing after April 6, 2010, and before July 2010, the builder must disclose in the agreement whether the HST applies at 15% to the sale.

If the HST applies at 15% to the sale, the builder must clearly disclose in the written agreement of purchase and sale:

  • the total amount of the HST payable on the sale and whether that total takes into account the GST/HST new housing rebate and the Nova Scotia 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 to be calculated at the HST rate of 13% 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 2% increase in the HST rate.

Example 9

You are the builder of a new house. In June 2010 you enter into a written agreement of purchase and sale for the house. In accordance with the agreement, ownership and possession of the house transfer to the purchaser on August 15, 2010. The purchaser agrees to pay you $350,000 on the purchase, and this is identified as the total price (total amount payable) in the agreement, including the HST. The agreement does not indicate whether the HST applies at 13% or 15%. 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 applies at 15% to the sale. However, because the written agreement of purchase and sale was entered into after April 6, 2010 and before July 2010 and the agreement does not meet the disclosure requirement, the tax payable by the purchaser is to be calculated at the HST rate of 13%:
    $309,734.51    (consideration for the purchase of the new house)

  + $ 40,265.49    (13% HST payable by purchaser)
    $350,000.00    (total amount payable by purchaser)

However, the builder is considered to have collected the HST at the rate of 15%, i.e., HST of $46,460.18 ($309,734.51 × 15%).

Nova Scotia new housing rebate

A builder no longer has the option of paying or crediting the Nova Scotia new housing rebate to a purchaser for any written agreement of purchase and sale entered into after April 6, 2010, where both ownership and possession of the housing are transferred after June 2010. In this case, the purchaser must apply for the rebate directly with Service Nova Scotia and Municipal Relations.

GST/HST Info Sheet GI-087,Harmonized Sales Tax: Stated Price Net of GST/HST New Housing Rebate in Nova Scotia explains how to calculate the consideration, the HST, and the GST/HST new housing rebate when the builder's price includes the HST at 15% and is net of the GST/HST new housing rebate. The info sheet also explains the changes to the administration of the Nova Scotia new housing rebate.

Self-supply of new housing

A builder that constructs or substantially renovates housing is generally considered to have made a taxable "self-supply" (sale and repurchase) of the housing when the builder first gives possession or use of the housing, or a unit in it, under a lease, licence or similar arrangement for its use as a place of residence by an individual.

A self-supply may also occur where:

  • the builder constructs an addition (e.g., floor or wing) to multiple-unit rental housing and first rents a unit in the addition for its use as a place of residence by an individual;
  • the builder first rents new housing to a person who, in turn, will rent it to an individual as a place of residence;
  • the 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); and
  • the 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 rental housing is substantially complete and the time possession or use of the rental property 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, 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 building (e.g., traditional apartment building) or an addition to that building, the self-supply occurs at the later of the time construction or substantial renovation of the entire building (or addition) is substantially complete 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. See Guide RC4052 for more information on the self-supply of new housing.

A builder who is considered to have collected HST on a self-supply is required to report that amount on their 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 the self-supply occurs before July 2010, the HST applies at 13%, calculated on the fair market value of the house, condominium unit, apartment building or addition, as the case may be, including the building (or addition) and the land reasonably necessary for the use of that housing as a place of residence for individuals.

Generally, where the self-supply occurs after June 2010, the HST applies at 15% 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.

An exception exists for certain self-supplies of housing where the builder makes a sale of new housing together with leased land. For more information, refer to 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 may be grandparented if:

  • the builder has sold the building part under a written agreement of purchase and sale that was entered into on or before April 6, 2010, and leased the related land to the purchaser under that same agreement; and
  • the builder's self-supply occurs after June 2010.

Grandparented self-supplies of such housing are subject to the HST at 13%.

If the builder and purchaser sign the written agreement of purchase and sale on different dates, for purposes of applying the transitional rules, the agreement is entered into on the date of the last signature of a party (i.e., the builder or purchaser) to the written agreement.

Where the written agreement was entered into after April 6, 2010, the general rule for self-supplies of new housing applies, i.e., where the self-supply by the builder occurs on or after July 1, 2010, the HST applies at 15%; where the self-supply occurs before July 2010, the HST applies at 13%.

Example 10

You are a builder who constructs a new condominium unit. On March 15, 2010, you enter into a written agreement with an individual for the sale of the unit together with the 40-year lease of the related land. Construction of the unit is substantially completed on June 30, 2010, and possession of the unit is transferred to the individual, under the agreement, on July 15, 2010.

You are considered to have self-supplied (sold and repurchased) the unit on July 15, 2010, this being the later of the time the construction of the unit is substantially complete and the time that possession of the unit is given to the individual. Although the self-supply occurs after June 2010, the self-supply is subject to the HST at 13% because the written agreement was entered into on or before April 6, 2010.


Example 11

You are a builder who constructs a new condominium unit. On April 15, 2010, you enter into a written agreement with an individual for the sale of the unit together with the 40-year lease of the related land. Construction of the unit is substantially completed on June 30, 2010, and possession of the unit is transferred to the individual, under the agreement, on July 15, 2010.

You are considered to have self-supplied (sold and repurchased) the unit on July 15, 2010, this being the later of the time construction of the unit is substantially complete and the time possession of the unit is given to the individual. As the written agreement for the unit was entered into after April 6, 2010, the general rule for the self-supply of new housing applies. In this case, the self-supply is subject to the HST at 15% because the self-supply occurs after June 30, 2010.

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 (as opposed to 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 applies at 13% or 15% 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-102, Nova Scotia HST Rate Increase: Sales and Rentals of Non-residential Real Property.

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 by calling 1-800-567-4692. You may also visit their Web site at www.revenu.gouv.qc.ca to obtain general information.

All technical publications related to GST/HST are available on the CRA Web site at www.cra.gc.ca/gsthsttech.

Appendix A

Appendix B

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