government relations
HST – Proposed Transitional rules
The Province has released proposed General Transition Rules for the HST which provide details about how the:
- Harmonized Sales Tax (HST) applies in the case of transactions that straddle July 1, 2010; and
- Provincial Sales Tax (PST) applies in the case of transactions that straddle July 1, 2010.
- The 12% HST replaces the 5% Goods and Services Tax (GST) and the 7% PST on July 1, 2010.
New Homes
The general transitional rules do not include transitional rules for new residential real property. The Province is finalizing these rules and will release them in the coming months.
Real Property (Residential resale and Commercial)
The HST will apply to real property sales if both ownership and possession of the property are transferred to the purchaser on or after July 1, 2010.
Example: in January 2010, a corporation enters into an agreement to sell a small shopping mall to a purchaser. Ownership and possession of the mall will transfer to the purchaser in August 2010. The HST applies to the sale.
Leases and Licences
This includes non-residential real property such as short term accommodations and commercial real property that is supplied by way of a lease, licence or similar arrangement where rent or similar payments are made.
The PST does not apply on real property including commercial leases.
The HST will apply for the part of a lease that occurs on or after July 1, 2010.
Example: On May 1, 2010, a lease payment becomes due and is paid for a small commercial warehouse. The lease interval is six months - May 1, 2010 through October 31, 2010. The part of the payment for the months of May and June would not be subject to the HST but the part of the payment for the months of July, August, September and October would be subject to the HST.
Commercial parking will be treated as a lease under the transitional rules, as will short term accommodation rentals (now currently subject to hotel room tax). Long-term residential accommodation leases are exempt from GST/HST.
Consideration due or paid after October 14, 2009 and before May 2010
Certain businesses, for example, small businesses using simplified procedures under the Excise Tax Act for calculating net tax, may be required to self-assess the BC component of the HST on consideration for a supply of property by way of a lease, licence or similar arrangement that becomes due or is paid without having become due, after October 14, 2009 and before May 2010, to the extent that the consideration is for the part of a lease interval that occurs on or after July 1, 2010 unless the lease interval begins before July 2010 and ends before July 31, 2010.
Real Estate Related Services
The HST will apply to the portion of services performed on or after July 1, 2010. The HST will not apply, however, to a service where 90 per cent or more of the service is performed before July 2010. Instead, the PST will continue to apply, where applicable.
Example: a property buyer hires a property inspector who performs an inspection on June 25, 2010. The inspection report is completed June 30, 2010. Your client is not invoiced until August 3, 2010. Since the majority of the work was done on June 25, 2010, the client pays only the GST.
Transitional PST inventory rebate for residential contracts
A rebate will be available for PST embedded in construction materials purchased before July 1, 2010, and used in residential property contracts that are subject to the HST.
Transitional rules for new residential real property
These are expected to be released soon. We will be providing in-depth information.
For information now available, visit www.gov.bc.ca/hst and read the Harmonized Sales Tax Proposed Transitional Rules, or if you have specific questions about your business, email CTBTaxQuestions@gov.bc.ca.
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