Substantial renovations, conversions, and major additions

Builders

Sales of substantially renovated houses, buildings converted from commercial to residential use, or houses with a major addition are treated in the same way as sales of new houses. Generally, the GST/HST applies to the selling price of these houses. For more information on substantial renovations, see GST/HST Technical Information Bulletin B-092, Substantial Renovations and the GST/HST New Housing Rebate.

Example
You are a GST/HST-registered builder in the renovation business, and you buy an older house (generally, the GST/HST does not apply to the sale of previously occupied houses). You completely gut and replace the interior with new walls, ceilings, floors, kitchen, wiring, and plumbing. When you sell this substantially renovated house, you will charge the buyer the GST/HST. Since you are registered for GST/HST, you can claim input tax credits to recover the GST/HST you paid on the goods and services you used in the substantial renovation.

Homeowners

We do not consider renovations or improvements made by homeowners, such as replacing a kitchen, to be substantial renovations. If homeowners renovate a house (not substantially), they pay the GST/HST on the materials and services they use in the renovation. However, when they later sell the house, the sale is exempt from the GST/HST.

Homeowners who hire someone to substantially renovate their house, convert it from non-residential to residential use, or add a major addition to their house may qualify for a rebate of part of the GST or HST they pay on labour and materials. To find out if they qualify for the rebate, see Guide RC4028, GST/HST New Housing Rebate.

Also, a provincial new housing rebate may be available to an individual for some of the provincial part of the HST the individual paid to buy, build or substantially renovate their primary place of residence that is located in Ontario or BC. For more information see, Ontario new housing rebate or BC new housing rebate.

Effective January 1, 2008, the GST rate is reduced from 6% to 5%, and the HST rate from 14% to 13%. In certain cases, GST at 6% or 7% or HST at 14% or 15% will apply to the purchase of a new house even where ownership and possession are transferred after December 31, 2007. In this case, you may be entitled to claim a transitional rebate. For more information, see GST/HST transitional rebates.

Forms and publications

• Guide RC4028, GST/HST New Housing Rebate
• Guide RC4231, GST/HST New Residential Rental Property Rebate
• Form GST190, GST/HST New Housing Rebate Application for Houses Purchased from a Builder
• Form GST191, GST/HST New Housing Rebate Application for Owner-Built Homes
• Form GST191WS Construction Summary Worksheet
• Form GST524, GST/HST New Residential Rental Property Rebate Application
• GST/HST Technical Information Bulletin B-092, Substantial Renovations and the GST/HST New Housing Rebate
• GST/HST Memoranda Series Chapter 19-0, Special Sectors: Real Property
• GST/HST Info Sheet GI-043, The 2008 GST/HST Rate Reduction and Purchases of New Housing