GST and your real estate transactions – Think Local

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Although many people don’t realize it, unless an exemption applies, the purchase of real estate is subject to GST.

To determine whether the exemption applies, the seller must consider how the property was used while it was owned.

Buyers are often unable to know whether GST will apply to their purchase when entering into a contract, leading to feelings of uncertainty and lack of clarity. The situation is further complicated by the fact that under the Canada Excise Tax Act, the responsibility for collecting and remitting GST lies with the seller.

Today, the question of whether VAT is subject to payment and who is responsible for paying it is often resolved by adding specific provisions to the contract.

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Paul Tonita

In an effort to simplify matters, the Real Estate Association of British Columbia and the Canadian Bar Association (BC Affiliate) recently made changes to their standard real estate contracts that add special provisions regarding GST.

The new provisions state that unless otherwise agreed in writing, the purchase price of the property is inclusive of GST and therefore, in the event that GST does apply to the transaction, the buyer will be responsible for paying the purchase price (which will include GST) to the seller. and the seller, in turn, will be responsible for deducting GST from the agreed purchase price and remitting it to the Canada Revenue Agency.

In many contracts this will not change the underlying agreement, but for agreements where the parties or their estate agents are not considering the potential application of GST, it will add some welcome clarity.

My only caution at this stage is that if the intention is for the buyer to pay GST to the seller on top of the purchase price, this should be clearly stated in the contract.

For more information about GST and your upcoming real estate transaction, or any common law real estate or business matters, contact Paul Tonita at: (email protected) or call him at 250-869-1226.

Paul Tonita is an attorney practicing in the areas of business law, real estate, estate planning and estate management in Pushor Mitchell LLP. His real estate practice involves working with developers to navigate complex waters that are unique to each project and vary from municipality to municipality. Paul also assists residential and commercial clients with purchases, sales, financing and leasing.

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