We have just been advised by the Department of Finance of how the provincial government’s plans to increase the provincial portion of the Harmonized Sales Tax (HST) from 8% to 10% effective January 1, 2016 will be transitioned. Please note the following with respect to the purchase and sale of real property:

A builder’s sale of a new or substantially renovated single-unit home, duplex, mobile home, floating home or residential condominium unit, in respect of which both ownership and possession are transferred after December 31, 2015 under a written agreement of purchase and sale, would be grandparented (i.e., subject to HST at a rate of 13 per cent) if the agreement was entered into on or before July 15, 2015. For grandparenting to apply to the sale of a new or substantially renovated single-unit home, duplex or residential condominium unit, the land portion of the housing must be supplied by the builder together with the sale of the building portion under the same agreement.

If a written agreement of purchase and sale for a newly constructed or substantially renovated home (e.g., a single-unit home or residential condominium unit) is entered into after July 15, 2015 and before January 1, 2016 (the “transitional period”), the builder of the home would be required to disclose in the written agreement of purchase and sale either the total tax payable in respect of the sale and whether that total is net of the Goods and Services Tax (GST) new housing rebate, if applicable, or the total of the rates at which tax is payable in respect of the sale (e.g., HST at a rate of 15 per cent). If the builder does not make a disclosure as outlined above and ownership and possession of the home are transferred on or after January 1, 2016, the builder would be deemed to have collected tax based on a 15 per cent rate of HST and the purchaser would not be liable to pay any additional amount of HST in respect of the sale.

A link to the new transitional rules follows:

http://www.fin.gov.nl.ca/fin/tax_programs_incentives/personal/hst_rate_increase.html

The Law Society was not consulted nor provided with any advance notice of these transitional measures. Department of Finance contacts are Jay Griffin – 729-6847 and Dale Haynes – 729-0803 although we have been advised to contact the CRA’s business enquiries line at 1-800-959-5525 or, for further technical information on the transitional rules for sales of real property, the CRA’s technical GST/HST enquiries line at 1-800-959-8287.