GST/HST for transactions that straddle July 1, 2010
(Information Provided by CREA – Click here to see full document)
In general, GST would apply to the supply of a REALTORS® commission to the extent that the services were performed prior to July 1. HST will apply to a REALTORS® commission paid or payable on or after May 1, 2010 to the extent the services are performed on or after July 1, 2010. However, if 90% or more of the services are performed prior to July 1, GST would apply to the entire transaction, including the services provided after June 30.
The Canada Revenue Agency (CRA) has verbally agreed that a reasonable method of prorating could be based on the number of calendar days covered by the service agreement. This would save REALTORS® from having to keep track of the actual amount of time spent providing services to their clients.
The beginning of the service period is the date of the Listing Agreement. The most conservative approach to determining the end date to use for the calculation would be to use the date of closing of the transaction. This ensures that any additional or incidental services are captured after the Purchase and Sale Agreement is concluded and is also consistent with the point in time that the commissions become payable.
If a REALTOR® feels that all of the services are provided once the Purchase and Sale Agreement is concluded, the REALTOR® could use the Purchase and Sale Agreement as the final date in the calculation. However, a REALTOR® should be prepared to prove to a CRA auditor through documentation that the last day on which services were supplied was the date of the Purchase and Sale Agreement, and that no further services were provided after this date. This could be difficult to prove in practice.
Transitional Rules for New Housing
- Generally, sales of new homes under written agreements of purchase and sale entered into on or before June 18, 2009 would not be subject to the provincial portion of the single sales tax, even if both ownership and possession are transferred on or after July 1, 2010.
- The tax would also not apply to sales of new homes under written agreements of purchase and sale entered into after June 18, 2009 where ownership or possession is transferred before July 1, 2010.
Additional Transitional Rules
- Where services straddle the HST implementation date of July 1, 2010, the tax charged for the service may have to be split between the pre-July 2010 and post-June 2010 periods. However, the HST will generally not apply to a service if all or substantially all (90% or more) of the service is performed before July 2010.
- Four key timelines are important (see below). All are based on the earlier of the time the consideration is either due (In general, an amount is due on the date of the invoice or the day required to be paid pursuant to a written agreement), or is paid without having become due. If consideration is due or paid,
- Before October 15, 2009, HST will generally not apply (however, see above transition rules for new housing).
- From October 15, 2009 to April 30, 2010, certain business that are not entitled to recover all of their GST/HST paid as input tax credit may be required to self-assess the provincial component of the HST with respect to goods or services supplied after June 30, 2010.
- From May 1, 2010 to June 30, 2010, HST will generally apply for services supplied after June 30, 2010.
- After June 30, 2010, HST will generally apply. An exception to this rule would be where ownership of the property is transferred before July 2010 or the invoice relates to services provided before July 2010.
- With regard to the lease or license of goods, including non-residential real property, HST will generally apply to lease intervals or payment periods on or after July 1, 2010 and the general rules noted above will apply. However, where a lease interval begins before July 2010 and ends before July 31, 2010, it is not subject to HST.
- With regard to the sale of non-residential property, HST is due where both possession and ownership of non-residential property occurs on or after July 1, 2010.