When is HST Applicable on Property Sale in Ontario – Facts 101

You undoubtedly want to know how much tax you will have to pay on top of the purchase price if you’re buying a house. It is likely that you would like to know what kind of taxes you will have to pay while the property is yours, as well as what your tax obligations will be upon selling it. 

When buying a property and being the owner of real estate, there are numerous tax types that can apply at different times. One must ask, who pays HST on sale of a rental property? When is HST applicable on property sale in Ontario? Do I have to pay HST when I sell my house in Ontario?

HST Applicable on Property Sale

In summary, unless a property sale qualifies for one of two exemptions—used residential property or personal use property—the basic rule is that HST is applicable on all property sales in Ontario. Not how the buyer plans to use the property, but rather how the seller used it, determines this. Whether HST is added to or included in the purchase price should be made crystal clear in the Agreement of Purchase and Sale. If you are unsure whether HST is due, you should also consult your accountant or lawyer.

In the event that you purchase or sell used residential real estate, the property is GST-free. This exemption would apply to a variety of properties, such as row houses, detached and semi-detached homes, mobile homes, residential condominium units, and multi-unit housing. The property must be used as a place of residence or, in the case that it was vacant, must have been utilized as such most recently in order to be eligible. 

Note: HST may apply if the property has been rented out for a brief period of time. Who pays HST on sale of a rental property? This we will discuss in the latter part of the read. Your accountant and lawyer should be consulted on this in order to help you ascertain the potential HST consequences of selling this property.

You may also read: What is the HST on New Homes

Possible Taxes to Pay in Canada When Selling a Home

In Canada, how much tax is charged when a house is sold? When is HST applicable on a property sale in Ontario? Do I have to pay HST when I sell my house in Ontario? The following three could surface during the sale of your property:

GST and HST

Are you selling a house that was recently built or extensively remodeled? If so, you may have to charge the sales tax (GST or HST). This answers the question Do I have to pay HST when I sell my house in Ontario?

You may also be eligible to ask for a refund of all or part of the GST/HST you paid if the property was your primary residence at the same time. Furthermore, the amount of the rebate will be determined by the sale price of your house as well as the amount of GST or HST that was paid.

Note: In the end, in order to ascertain your eligibility, you must be submitted to the Canada Revenue Agency (CRA) for a GST/HST new dwelling rebate application within two years of the selling date.

GST/HST Calculations When Selling Your Property in Ontario

 Additionally, keep in mind that GST/HST must be paid even if the house you sell is your principal residence. GST/HST is applicable to the commissions you pay to your real estate agent. For instance, in Ontario, if you pay a five percent commission ($25,000) on the sale of a $500,000 home, you need to budget an extra $3,250 for HST.

HST is charged at a rate of 13% of the purchase price of commercial real estate. When buying commercial real estate, certain regulations are in place for HST registrants. This will enable the buyer to pay Revenue Canada directly for HST instead of sending it to the vendor. The input tax credit that the buyer may claim will balance this obligation to pay. We advise you to discuss your HST choices with your accountant when buying or selling commercial real estate.

If You Buy a Secondhand Home, Do You Have to Pay HST?

Let’s first examine what constitutes a resale home. Resale homes are also those that have been owned in the past. The good news is that you can purchase a resale home without having to pay the HST tax. The buyer and seller would determine and agree the real price at which it would be sold. Only when the buyer purchases the house in brand-new condition will HST be applied. However, the HST is not applied if the genuine owner resells it. This implies that if you’re buying a freshly built home or one that has had extensive renovations, you will have to pay.

You may also read: How Property Taxes Are Calculated

GST/HST on Sale of Your Rental Property

Who pays HST on sale of a rental property? More and more people are becoming property owners since it’s a wise investment. You should be reading this blog if you own one or are considering buying one.

House Rentals

The simplest option is always the best place to start. To put it briefly, home rents are excluded from GST and HST. For those who are not familiar, residential rentals are those which have been in place for more than one month. With these, you are not able to collect input tax credits (ITCs) on your purchases or charge GST/HST on the rental revenue you get from your tenants.

Short-Term Rentals for Vacations

It’s a little different with vacation rentals. You are seen as offering a taxable supply if you own one. As a result, you must charge GST/HST for all of the services you render. Positively, you can write off GST/HST on whatever you buy. Who finds that unappealing?