Finance Minister Kevin Falcon introduced legislation setting out the transitional rules for newly built residential housing, providing certainty about the application of tax for purchasers and the residential construction industry, and ensuring purchasers are treated equitably during the transition from the HST back to the PST.

These measures were first announced on Feb. 17, 2012.

Bill 56, the New Housing Transition Tax and Rebate Act, provides temporary, transitional rules designed to help ensure the amount of tax payable on a newly constructed home during the transition period is comparable to the amount of tax payable on a home fully constructed under the PST, regardless of when construction begins.

For newly built homes where construction begins before April 1, 2013, but ownership and possession transfer after, purchasers will not pay the seven per cent provincial portion of the HST. Instead, purchasers will pay a temporary, transitional provincial tax of two per cent on the full house price. This ensures equitable treatment among purchasers and will help mitigate distortive market behaviour. Eligible builders will receive transition rebates to offset PST on materials to help prevent double-taxation on homebuyers.

For newly built homes where construction begins on or after April 1, 2013, the B.C. portion of HST will not apply. Builders will once again pay seven per cent PST on their building materials. On average, about two per cent of a new home's final price will again be embedded PST.

• The B.C. portion of the HST will continue to apply to purchases of newly constructed residential housing where ownership or possession transfers before April 1, 2013.

The Province has put in place temporary measures to help mitigate the effects of the HST until the return to PST on April 1, 2013. These include:

Increased the B.C. HST New Housing Rebate threshold to $850,000 from $525,000 for new housing used as a primary residence where the HST is payable between April 1, 2012, and April 1, 2013, raising the maximum rebate available to $42,500. More than 90 per cent of newly built homes sold in B.C. are below this new higher rebate threshold. The net tax paid by purchasers on an $850,000-newly built home after the HST rebate is two per cent.

• Provided a grant of up to $42,500 to purchasers of new residential housing purchased as a secondary or recreational residence in qualifying areas of the province. The grant applies where the HST is paid on new homes purchased on or after April 1, 2012, and before April 1, 2013. The Province is now taking applications for the grant.

The temporary measures during the transition back to the PST and the transition rules give certainty to the housing sector and help ensure whether people buy a newly built home constructed under the HST, under the PST, or partly under the HST and partly under the PST, they will pay a consistent and equitable amount of tax.

Quotes:

Finance Minister Kevin Falcon -

"These transition rules are part of a comprehensive package designed to provide equity for buyers of newly built homes and clarity and certainty for the construction industry-an important job creator in our province."

"The transitional relief measures we've also put in place - including the B.C. First-Time Home Buyers' Bonus, which provides up to $10,000 to eligible buyers - support families and an important part of our economy during the transition to the PST."

Quick Facts:

• It's important to note that the HST does not apply to resale housing.
• Average amount of embedded sales tax in newly built homes under PST: two per cent.
• Tax paid by purchasers of a newly built home priced up to $850,000 after HST rebate: two per cent.
• Average tax on a newly built home during transition: two per cent.
• The temporary, transitional tax on new housing will be in place for two years, from April 1, 2013 until March 31, 2015. The tax only applies to homes where construction begins before April 1, 2013 and ownership and possession transfer after.
• To help ensure there is no double taxation, eligible builders of newly constructed housing will be able to claim a transition rebate if they pay PST on construction materials used in housing subject to the temporary housing transition tax.
• To ensure transparency and consumer protection, builders will be required to provide information to purchasers to help to ensure a shared understanding of the taxes and rebates that apply under the transition rules. The specific information requirements will be set out in regulations.
• The temporary housing transition tax and rebate will be administered by the Canada Revenue Agency on behalf of the government of B.C.

Learn More:

www.pstinbc.ca/buying_goods/buying_a_home/new_home_purchases

Media Contact:

Jamie Edwardson
Communications Director
Ministry of Finance
250 356-2821