MULLIN DEMEO ELECTRONIC LEGAL UPDATE
April 29, 2011
With the introduction of the Harmonized Sales Tax (the 'HST') in 2010, the amount of tax payable on certain HST qualifying real estate transactions increased substantially. To help offset some of these costs, the British Columbia government introduced the British Columbia New Housing Rebate (the 'BC Rebate'), in addition to the already-existing Federal GST/HST New Housing Rebate (the 'Federal Rebate'). The BC Rebate and the Federal Rebate both provide an assignable rebate to qualifying purchasers of new or substantially renovated real estate. A recent Tax Court of Canada clarified the circumstances in which a purchaser qualifies for the BC and Federal Rebates.
In Goyer v. The Queen, the appellant Debbie Goyer and two other individuals collectively purchased a vacant lot, entered into a construction mortgage with a lender, and built a new home on the property. As a result, the three purchasers were required to self-assess for GST. At that time, the appellant was living in the new home, but the two other purchasers were not. When self-assessing for HST, the appellant applied to receive the Federal Rebate based on the fact that she was occupying the new home as her primary place of residence, and included the two other owners' names on said application as well. The application was denied by the Canada Revenue Agency, on the grounds that two of the owners and applicants were not occupying the property as their primary place of residence. The Tax Court ultimately upheld this ruling, arguing that to receive the benefit of the Federal Rebate, all applicants must be occupying the home as their primary place of residence, or be one a class of people defined as a relation of that individual (i.e. spouse, child etc).
As a result, if a buyer wants to be able to claim the benefit of either of these rebates, or is contractually obligated to assign one of these rebates to the seller, the buyer needs to be certain that they will qualify for the rebates, prior to entering into a contract to purchase the property.
This discussion of a recent interpretation of the qualifying rules for the BC and Federal New Housing Rebates is intended only as a brief introduction to the subject. Mullin DeMeo are not tax advisers, and we strongly recommend that individuals consult tax professionals when considering the tax implications of their real estate transactions.
Should you have any questions or concerns with respect to this or any other aspect of real estate law, please contact Mullin DeMeo at lawyers@mdlawcorp.com, or (250) 477-3327.
Thank you for your time,
Mullin DeMeo
