{"id":437,"date":"2022-11-07T07:30:53","date_gmt":"2022-11-07T14:30:53","guid":{"rendered":"https:\/\/jacksonyoung.ca\/?p=437"},"modified":"2022-11-15T07:45:57","modified_gmt":"2022-11-15T14:45:57","slug":"can-home-builders-avoid-gst-via-principal-residence-declaration","status":"publish","type":"post","link":"https:\/\/jacksonyoung.ca\/can-home-builders-avoid-gst-via-principal-residence-declaration","title":{"rendered":"Can Home Builders Avoid the GST With a Principal Residence Declaration?"},"content":{"rendered":"

When a new home in BC, Vancouver, Burnaby, Coquitlam, Langley – anywhere in BC – is first made available for sale, the builder is required to collect the GST from the purchaser. What happens to the GST if the sale is no longer the best option? For example, let’s say a builder wants to live there, have a family member live there, or rent the property out? What are the GST rules then? Is it beneficial to declare the property as a principal residence and if so, for how long?<\/em><\/p>\n

This article will discuss these common questions and help explain the CRA’s treatment of the GST. <\/em><\/p>\n

Typical Scenario: Purchaser Acquires Property<\/p>\n

The Home Builder collects the GST from the purchaser when the property is sold. If the builder is non-resident, or the purchaser is registered for GST (eg a company) or the purchaser and builder make an election using election type 2 on Form GST 22 – under these circumstances, the builder doesn’t collect the GST, but rather the purchaser will report and pay the tax directly to the CRA. The key point is the purchaser pays the GST.<\/p>\n

New Scenario: Builder Maintains Title<\/p>\n

If a builder wishes to make the property available for use by an individual as a place of residence, the builder is deemed to have sold and repurchased (i.e., self-supplied) the property at its fair market value.<\/p>\n

The same treatment applies if the builder or relation occupies the property as his or her own place of residence; the builder is deemed to have sold and repurchased the property at its fair market value. <\/p>\n

CRA Self-Supply Rule:<\/p>\n

ss 191(1) & ss 191(3)- When a builder is deemed to have self-supplied a property, the builder is required to account for the GST based on the fair market value. <\/strong><\/p>\n

The purpose of the self-supply rules is to level the playing field by removing the potential tax advantage a builder would have in constructing a property and then offering the property for rent or appropriating it for personal use.<\/em><\/p>\n

Under the self-supply rule, the <\/span>builder is considered to have paid and collected the GST calculated on the fair market value of the property at the time of the self-supply and is required to remit that amount.<\/span><\/strong><\/p>\n

Self-supply occurs at later of substantially complete (90%), possession, usage or rental start date.<\/p>\n

EXCEPTION To The Self-Supply Rule:<\/p>\n

S 190 & S 256: Properties Eligible for Housing and Other Real Property Rebates- convert non-residential real property to residential housing for use as their own primary place of residence<\/p>\n

The self supply rule may not apply to a builder who is an individual where the individual or a relation uses the new property primarily as the individual\u2019s or relation\u2019s place of residence. However, to qualify for the this, three conditions must be met:<\/strong><\/p>\n