The vast majority of real estate developers in Ontario include the HST in the sale price of new condo when they release their new developments for sale to the general public -- but, NOT thte HST Rebate protion of the HST.   This is because the Purchase Agreement is written to assume that the purchaser will be using the new construction property as their primary residence and therefore, will be credited the amount for the HST New Housing Rebate on final closing and not owe anything anyway.  In the many pages of the legal document known as the Agreement of Purchase and Sale that the purchaser signed with the builder, one of the terms outlined is a statement of confirmation that the purchaser will move into the new condo as their primary residence. In this case, the right to claim the HST rebate has been assigned from the purchaser to the builder and the builder covers the HST Rebate for a short time on closing until they adjust it with CRA. Essentially, the owner-occupier purchaser has no responsibility for the portion of HST due on closing for the new condo as it will be used as a primary residence.  But, what happens to the investor on closing?

 

 

Note that condo investors wrongfully claiming their new condos as their primary residence are being audited these days. CRA estimates that about 70% of new build primary residence claims are false. They have recently embarked on a new mission to audit for HST rebates but importantly, CRA uses the information that they collect through the HST Rebate Programs to also audit for capital gains (sometimes demanding tax be paid on a new construction property as business income instead of a capital gain). This past April, a CRA spokesperson reported to the Toronto Star that CRA is focusing on real estate as there is much unclaimed return on investment and HST fraud as a result of the condo boom. What is our advice? Plan your real estate investments ahead of time. Understand the HST rules and regulations and stay off CRA’s delinquent list.

 

Call HST Relief: Rebates and Loans for a free consultation to help you understand these rules and regulations. We offer 2 services that aim to support condo investors:

• We provide loans for HST so that you aren’t tempted to wrongfully claim a new condo as your primary residence. You don’t want to be flagged and audited by CRA.  Worse, you don't want to receive a letter in the mail from CRA clawing back the HST Rebate because they have discovered that you do not qualify.
• We provide the service of filing your HST Rebate to ensure that you reclaim the HST you paid on closing for your new investment property.

There are several considerations that affect your eligibility in reclaiming the HST through CRA’s New Residential Rental Rebate Program. Make sure you understand the rules before closing. Some of the issues to watch out for are:

• When your condo will be occupied (during occupancy period or after closing)
• Who will occupy your condo – not all blood relatives may occupy your new condo as a primary residence without HST implications
• Whether or not all people on title will occupy the unit as their primary residence
• Whether or not you purchased your condo on assignment before closing
• When you plan to sell the condo as CRA reserves the right to claw back the HST Rebate that was issued to you

Call us for specific advice that pertains to your particular condo purchasing scenario. It should be noted that these same principles apply to purchasing new build houses, townhomes, duplexes and condos all across Ontario.  We can be reached at 1.866.832.1990. 

 

For more online reading, check out our clients’ FAQs with our team’s detailed answers posted here.