Language selection

  • Français fr

Assignment of a Purchase and Sale Agreement for a New House or Condominium Unit

From: Canada Revenue Agency

Effective May 7, 2022, all assignment sales in respect of newly constructed or substantially renovated residential housing are taxable for GST/HST purposes. This publication will be updated to reflect this legislative change. For more information about the legislative amendment, refer to  GST/HST Notice 323, Proposed GST/HST Treatment of Assignment Sales .

GST/HST Info Sheet GI-120 July 2011

This info sheet explains how the GST/HST applies to the assignment of a purchase and sale agreement for the construction and sale of a new house.

The term "new house" used in this info sheet refers to a newly constructed or substantially renovated house or condominium unit. A house that has been substantially renovated is generally given the same treatment under the GST/HST as a newly constructed house. Extensive modifications must be made to a previously occupied house in order to meet the definition of a "substantial renovation" for GST/HST purposes. For a full explanation of the factors to consider in deciding if a substantial renovation has taken place, refer to GST/HST Technical Information Bulletin B-092, Substantial Renovations and the GST/HST New Housing Rebate .

In this publication, a house includes a single unit house, a semi detached house, a duplex, a rowhouse unit and a residential condominium unit (condo unit), but does not include a mobile home or floating home.

Where a person enters into a purchase and sale agreement with a builder for the construction and sale of a new house, the person may be entitled to assign their rights and obligations under the agreement to another person (an assignee). Generally, the result of the assignment is that the purchase and sale agreement is then between the builder and the assignee.

This publication addresses the situation where

  • a purchaser (referred to as the first purchaser) enters into a purchase and sale agreement with a builder (Builder A) for the construction and sale of a new house, and
  • the first purchaser subsequently assigns the agreement to an assignee (referred to as the assignee purchaser) before Builder A transfers possession or ownership of the house to the first purchaser and before any individual has occupied the house as a place of residence or lodging.

Generally, upon entering into an agreement for the construction and sale of a new house, the first purchaser is considered to have acquired an interest in the house. For GST/HST purposes, the assignment of the agreement to the assignee purchaser is normally considered to be a sale of the first purchaser's interest in the new house. The sale of an interest in a new house is generally taxable where the person selling the interest is a builder of the house.

For GST/HST purposes, the term "builder" is specifically defined and is not limited to a person who physically constructs a house. There are several instances in which an individual or other person is a builder for GST/HST purposes. For more information on persons who are included in the definition of "builder", refer to GST/HST Memorandum 19.2, Residential Real Property .

This info sheet addresses only whether a person is a builder as described in the following paragraph.

Primary purpose: selling the house or an interest in the house or leasing the house in certain circumstances

A builder includes a person who acquires an interest in a new house before it has been occupied by an individual as a place of residence or lodging for the primary purpose of selling the house or an interest in the house or leasing the house, other than to an individual who is acquiring the house otherwise than in the course of a business or adventure or concern in the nature of trade. When that person is an individual, the individual must acquire the interest in the course of a business or an adventure or concern in the nature of trade in order to be a builder described by this paragraph.

Even if a person is not a builder as described in the preceding paragraph, the person may be a builder based on one of the other definitions of the term as described in GST/HST Memorandum 19.2.

Assignment of a purchase and sale agreement by a person other than an individual

Where a person other than an individual (e.g., a corporation) is a builder as described in the section "Primary purpose: selling the house or an interest in the house or leasing the house in certain circumstances" and the person assigns a purchase and sale agreement for a new house, the person's sale of the interest in the house is subject to the GST/HST whether the sale takes place in the course of a business, an adventure or concern in the nature of trade, or otherwise.

Assignment of a purchase and sale agreement by an individual

If an individual enters into a purchase and sale agreement for one of the primary purposes described in the section "Primary purpose: selling the house or an interest in the house or leasing the house in certain circumstances", the sale of the interest in the house (or the house itself) is normally considered to be made in the course of an adventure or concern in the nature of trade or, depending on all of the surrounding circumstances, in the course of a business. If it is established that an individual is selling an interest in a new house in the course of a business or adventure or concern in the nature of trade, the individual is considered to have entered into the purchase and sale agreement for the primary purpose of selling the house or an interest in the house.

Whether the activity of acquiring an interest in a house, as a result of entering into a purchase and sale agreement, is done in the course of a business or an adventure or concern in the nature of trade is a question of fact. For more information on how to determine whether an activity is done in the course of a business or an adventure or concern in the nature of trade, refer to Appendix C of GST/HST Memorandum 19.5, Land and Associated Real Property .

Factors in determining the primary purpose

All of the relevant factors surrounding entering into a purchase and sale agreement should be considered in determining the primary purpose for a person's acquisition of an interest in a new house.

The following factors may indicate that, for GST/HST purposes, a person entered into a purchase and sale agreement for the primary purpose of selling an interest in the new house or the house itself. The factors are not listed in any particular order and there is no intent to weigh one more heavily than another.

  • The person offers to sell their interest in the house or takes other actions to attract buyers before, or while, the house is under construction.
  • The person finances the purchase of the house by a short-term mortgage, or an open mortgage that can be paid off without penalty, rather than by a long-term or closed mortgage.
  • Financing of the house is beyond the person's means and that person is relying on the increased value and saleability of the house, or an interest in the house, in a rising housing market.
  • The person is an individual and their stated intention to occupy the house as a place of residence is not supported by the circumstances of the case. For example, an individual has a family of four and enters into a purchase and sale agreement for a one-bedroom condo unit where they are not contemplating any changes in family circumstances.
  • The person's pattern of activity is such that their occupancy of the house does not have the qualities or characteristics of being permanent. For example, the person purchases more than one house at or around the same time. This factor may be given extra weight where the person has previously entered into a purchase and sale agreement for purposes of selling the house or an interest in the house. There are no outward indicators to support a contrary primary intention (i.e., an intention contrary to an intention of resale). For example, an individual is selling a condo unit, one or more of the above factors are present, there are no physical actions or evidence that the individual's primary intention was to live in the condo unit, use it as a vacation home, or rent it to another individual for use as their place of residence, and no evidence that the sale of the condo unit was triggered by some unforeseen event.

In order for the acquisition of an interest in a new house to be for one of the primary purposes described in the section "Primary purpose: selling the house or an interest in the house or leasing the house in certain circumstances", the intention to sell the house or an interest in it, or to lease the house in the manner described in that section, must have existed at the time of acquiring the interest. Nonetheless, the intention at the time of acquisition may be demonstrated over a period of time.

If an individual acquired an interest in the house for the primary purpose of using it as a place of residence, the person is not considered to be a builder of the type described in this info sheet even if, at a later point in time, the person sells the house or an interest in the house. However, the person may still be a builder if the person meets one of the other definitions of that term as described in GST/HST Memorandum 19.2.

The following examples illustrate when a person may or may not be a builder of a new house.

Sarah, Francine, and Angela are roommates renting a three-bedroom house. They entered into a purchase and sale agreement with a builder in January 2010 for a one-bedroom condo unit in a new condominium complex that was to be built. The purchase price under the agreement was $300,000 and the closing date was July 31, 2013.

In March 2011, the fair market value of the new condo unit had increased by 50%. They entertained several offers for the sale of their interest in the condo unit before assigning it to James. No individual had occupied the condo unit as a place of residence or lodging when they sold their interest in the unit. They split the proceeds, which they each used as a down payment to buy their own homes.

As it would not be practical for the three individuals to live in the condo unit together, they considered several offers for their interest in the unit, and there are no indicators to support a contrary intention, Sarah, Francine and Angela are considered to have acquired their interest in the condo unit for the primary purpose of selling the unit or an interest in it. The sale is considered to be made in the course of a business or adventure or concern in the nature of trade. Accordingly, Sarah, Francine, and Angela are all builders of the condo unit for GST/HST purposes. As they are builders of the unit and the sale of their interest in the unit is not exempt, GST/HST applies to the sale of each of their interests.

Pascal and Chantal own a four-bedroom house where they live with their three children. This is the only home they have ever owned and lived in. They have never purchased any other real property.

In June 2009, they entered into a purchase and sale agreement with a builder for a 1-bedroom condo unit in a new high-rise condominium complex that was to be built. The purchase price under the agreement was $275,000 and the closing date was June 30, 2010. In May 2010, they sold their interest in the new condo unit for $400,000 before it had been occupied by any individual as a place of residence or lodging. They used the sale proceeds to build an addition to their current home.

Although Pascal and Chantal have no history of buying and selling real property, it would not be practical for their family of five to occupy the condo unit as their place of residence. Lacking evidence to support a contrary intention, their primary purpose in acquiring the interest in the condo unit is considered to be for the purpose of selling the condo unit or an interest in it in the course of a business or an adventure or concern in the nature of trade. Accordingly, they are builders of the new condo unit for GST/HST purposes. As the sale of their interest in the unit is not exempt, GST/HST applies to the sale of their interest.

Eric and Gina owned a 3-bedroom house where they lived with their 3 children. They entered into a purchase and sale agreement with a builder in October 2010 to purchase a new 4-bedroom house that was to be built. They intended to use the new house as their primary place of residence as it was located much closer to the children's school and to Eric and Gina's workplaces and had more space. The closing date is July 31, 2011.

Eric and Gina sold their current home in January 2011 and moved into a rented home they planned to live in until their new house was ready. However, in June 2011, Gina's mother became ill and moved in with them as she was no longer able to live on her own.

Eric and Gina decided that the new house would no longer be large enough and that they would now need a house with a granny suite. They sold their interest in the new 4-bedroom house so that they could buy a bigger home that would suit their changed needs.

Eric and Gina's sale of their original home and temporary move to a rented house during the construction of the new home and their choice to purchase a home located closer to school and work support that their intention in acquiring the interest in the new house was to use the house as their primary place of residence. Given this, and the fact that their only reason for selling the interest was due to a change in personal circumstance (i.e., the new house would no longer accommodate their family's needs), they are not considered to have acquired the interest in the house for the primary purpose of selling it. Accordingly, they are not builders of the new house for GST/HST purposes and the sale of their interest in the house is exempt.

Cindy entered into a purchase and sale agreement with a builder in November 2010 for a new house that was to be built. She intended to use the house as her primary place of residence. Her new home would be located within walking distance from her workplace and would be closer to her family than the apartment she is currently renting. The closing date for the purchase is September 30, 2011.

In July 2011, Cindy's employer announced that it was relocating to another city located three hours away. To keep her current job, Cindy had to move to that city. She sold her interest in the house to John.

Since Cindy had intended to use the house as her primary place of residence and her only reason for selling her interest in the house was due to work relocation, she did not acquire the interest in the house for the primary purpose of selling it. Therefore she is not a builder of the house for GST/HST purposes and the sale of her interest in the house is exempt.

Assignment fees

The consideration charged for the sale of an interest in a house generally includes amounts that a person paid to a builder (e.g., a deposit) and that the person wants to recover when assigning their interest in the house. The sale price for the interest may also include a profit, i.e., an amount over and above amounts the person had paid to the builder. If a person's sale of their interest to an assignee purchaser is taxable, the total amount payable for the sale of the interest is subject to GST/HST, including any amount the person paid as a deposit to the builder, whether or not such an amount is separately identified.

A first purchaser enters into a purchase and sale agreement for a new house with a builder (Builder A) and pays a deposit of $10,000 at that time. The first purchaser does not make any further payments to Builder A. The first purchaser subsequently assigns the agreement to an assignee purchaser for $15,000. If the sale of the interest in the house from the first purchaser to the assignee purchaser is subject to GST/HST, tax applies to the full $15,000. This is the case even if the assignment agreement identifies that the $10,000 is a recovery of the deposit that the first purchaser paid to Builder A.

The assignment of a purchase and sale agreement for a new house may be subject to the approval of the builder with whom the first purchaser originally entered into the agreement to construct and sell the new house. The agreement may list conditions related to the first purchaser's right to assign the agreement to an assignee purchaser and, in many cases, the builder charges a fee to the first purchaser for the assignment of the agreement to another person.

The fee charged by the builder in such circumstances is generally subject to the GST/HST.

Eligibility for a GST/HST new housing rebate and provincial new housing rebate (where applicable) where a purchase and sale agreement is assigned

The GST/HST new housing rebate, and where applicable, a provincial new housing rebate, may be available for a new house purchased from a builder and for owner-built new housing. Guide RC4028, GST/HST New Housing Rebate , sets out the eligibility criteria for both types of GST/HST new housing rebates and provincial new housing rebates.

If the first purchaser (the assignor) makes a taxable sale of an interest in a house, i.e., the first purchaser is a builder and assigns the purchase and sale agreement to an assignee purchaser, the first purchaser would not be eligible for either a GST/HST new housing rebate or provincial new housing rebate as they did not acquire the house for use as their primary place of residence. Even if the sale of the interest in the house by the first purchaser is not subject to GST/HST (i.e., in situations where the first purchaser is not a builder of the house), the first purchaser would generally not be eligible for either a GST/HST new housing rebate or a provincial new housing rebate as the conditions for claiming the rebates are not met (e.g., ownership of the house would not transfer to the first purchaser, but to the assignee purchaser).

The assignee purchaser, if an individual, may be eligible for a GST/HST new housing rebate, and where applicable a provincial new housing rebate, where the assignee purchaser receives an assignment of a purchase and sale agreement for a new house. The assignee purchaser would have to meet the eligibility conditions for the rebates as set out in Guide RC4028.

Where a purchase and sale agreement for a new house is assigned, there may be two builders of the house – the original builder (Builder A) and the first purchaser (the assignor). If that is the case, an assignee purchaser would generally have to pay the GST/HST to Builder A for the purchase of the new house and to the first purchaser for the purchase of the interest in the new house.

Claiming a GST/HST new housing rebate when there is more than one builder

In some cases, the builder of a new house pays or credits the amount of the GST/HST new housing rebate, and where applicable, a provincial new housing rebate, to the purchaser of the house. In this case, the builder credits the amount of the new housing rebates to the purchaser by reducing the total amount payable for the purchase of the house by the amount of the expected rebates.

Where this happens, the purchaser and the builder have to sign Form GST190, GST/HST New Housing Rebate Application for Houses Purchased from a Builder , and the builder has to send the form to the Canada Revenue Agency (CRA). As the purchaser receives the amount of the rebate from the builder, the builder may claim the amount as a credit against its net tax when it files its GST/HST return.

Only one new housing rebate application can be made for each new house. Therefore, an assignee purchaser cannot submit a rebate application through a builder (Builder A) for the tax paid to Builder A on the purchase of the house and submit a second rebate application through the first purchaser (the assignor), or directly to the CRA, for the tax paid to the first purchaser on the purchase of the interest in the house.

In such cases, the assignee purchaser may want to file their new housing rebate application directly with the CRA rather than through Builder A. In this way, the assignee purchaser can include in the new housing rebate application the tax paid to Builder A and the tax paid to the assignor in determining the amount of their GST/HST new housing rebate and, where applicable, a provincial new housing rebate.

This info sheet does not replace the law found in the Excise Tax Act (the Act) and its regulations. It is provided for your reference. As it may not completely address your particular operation, you may wish to refer to the Act or appropriate regulation, or contact any CRA GST/HST rulings office for additional information. A ruling should be requested for certainty in respect of any particular GST/HST matter. Pamphlet RC4405, GST/HST Rulings â€“ Experts in GST/HST Legislation explains how to obtain a ruling and lists the GST/HST rulings offices. If you wish to make a technical enquiry on the GST/HST by telephone, please call 1-800-959-8287.

Reference in this publication is made to supplies that are subject to the GST or the HST. The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 15% in Nova Scotia, and 12% in British Columbia. The GST applies in the rest of Canada at the rate of 5%. If you are uncertain as to whether a supply is made in a participating province, you may refer to GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax â€“ Place of Supply Rules for Determining Whether a Supply is Made in a Province .

If you are located in Quebec and wish to make a technical enquiry or request a ruling related to the GST/HST, please contact Revenu QuĂ©bec at 1-800-567-4692. You may also visit the Revenu QuĂ©bec Web site to obtain general information.

All technical publications related to GST/HST are available on the CRA Web site at www.cra.gc.ca/gsthsttech .

Page details

AdvotaxLaw Logo.jpg

ADVO TAX LAW 

PROFESSIONAL CORPORATION

  • May 11, 2022

Tax Implications of a Real Estate Assignment: a Tax Exposure Calculator

Real Estate Tax Calculator

This article provides an overview of GST/HST and Income Tax rules (current and proposed by the Federal Budget 2022) as they apply to real estate assignments sales.

In order to illustrate the points we discuss in the article, we have created a fun and interactive Assignment Tax Exposure Calculator for real estate assignments in Ontario (HST rate 13%) that result in business income for Income Tax purposes . If your assignment sale results in capital gain for Income Tax purposes, this calculator won't work for you (we might create one for our readers, if there is enough interest). Talk to your tax advisor to determine whether your assignment sale would result in business income or in capital gain.

We hope that our readers enjoy testing their business strategies with our Tax Exposure Calculator as they plan their assignment sales, but we caution them not to rely on the calculator in lieu of professional tax, legal or accounting advice.

Federal Budget 2022

A typical purchase agreement for a pre-construction residential property has a closing date scheduled months, often years in advance. As purchasers wait for the construction to complete/the transaction to close, some choose to assign their rights under the purchase agreement for the property for a fee. Federal Budget 2022 proposes new tax rules that will affect both such assignors and assignees.

Take, for example, Rebecca who purchased a pre-construction condominium in Downtown Toronto in 2017 for $300,000 (including HST) with a November 2022 tentative closing date. She provided a deposit of $60,000 to the builder. At the time of purchase, Rebecca’s intention was to live in the condo. As years went by, Rebecca changed her mind about living in Downtown; she decided to live in the suburbs instead. Lucky for Rebecca, the market value of her pre-construction condo surged to $500,000. In June 2022, Rebecca assigns her rights under the purchase agreement for the condo to a new purchaser who is willing to pay $260,000 ($60,000 to reimburse her for the deposit she made + $200,000 on account of the increase in price). Rebecca thinks she made an impressive profit of $200,000 but she did not consider taxes.

If you are like Rebecca, Federal Budget 2022 has some good news and some bad news for you (but mostly bad).

GST/HST to Apply on All Assignment Sales

The bad news is that effective May 7, 2022, under the Excise Tax Act (Canada) (“ETA”) every individual assignor of residential real estate would have to collect GST/HST on their assignment profit and remit it to the CRA. The rule will apply even to those who believe they are unrelated to the business of real estate and did not have a GST/HST number. Where an assignor is a non-resident, the assignee would be required to self-assess and pay the GST/HST to the CRA. In my example, Rebecca would have to remit 13% HST included in the $200,000 assignment profit ($23,008) directly to the CRA.

Before the Budget proposal, Rebecca’s HST liability depended on whether or not she purchased and assigned a condo in the course of a commercial activity. If Rebecca’s true intentions were to live in the condo, she would have been exempt from HST.

Income from Assignment: Business Income or Capital Gain?

Another element of bad news does not directly follow from the proposals, but raises concerns. Some commentators believe that, as an indirect effect of the Budget, we may see more assignment sales treated as business income (taxed at full rates) as opposed to capital gain (taxed at half rates) under the Income Tax Act (Canada) (“ITA”).

First, if all assignments are “taxable supplies” subject to GST/HST under the ETA, it generally implies the existence of a “commercial activity.” In its turn, a commercial activity generally implies business income treatment under the ITA. Granted, if an activity is deemed to be a “taxable supply” under the ETA, the deeming rule should not extend to a different Act, the ITA, but tax practitioners are watching carefully.

Second, Budget 2022 includes a new “anti-flipping” rule, which deems sales of residential properties owned for less than 12 months to generate business income under the ITA, subject to limited “life events” exceptions, such as a divorce or a job relocation. It is unclear whether the proposed “anti-flipping” rule would apply to assignments when taxpayers technically do not “own” the properties. Stay tuned.

In any event, the new “acceptable” list of life events replaces the current capital vs. income legal test entirely. Instead of determining whether the condo was Rebecca’s capital property or inventory, the focus shifts to merely checking whether her reason to sell/assign was on the list of the “acceptable” ones.

If Rebecca’s assignment profit is treated as business income for income tax purposes, her highest marginal tax rate would be 53.53% in Ontario. In very rough terms, Rebecca should budget well over 50% of her assignment profits for HST remittances and income tax. Depending on her marginal tax rate, she may be able to only keep about $88,000 of her original $200,000 assignment profit.

Before the Budget proposal, Rebecca’s intentions for the property (business or personal) would have been a question of fact. If she could prove that she intended to live in the condo, she would pay no HST and pay tax on capital gain. Her total tax liability would have been approximately $50,000 (25% of the $200,000 assignment profit).

No HST On Deposit Portion of Assignment Price

But there is also good news: the Budget proposes to exclude deposits from consideration for taxable supplies by assignment for GST/HST purposes. This means that GST/HST will only apply on the profit portion of the assignment price (in Rebecca’s case, $200,000), and not on the entire assignment price, which includes the deposit ($260,000). This is a welcome change that eliminates double taxation and is consistent with current caselaw ( Casa Blanca Homes Ltd. v. The Queen , 2013 TCC 338).

To generally estimate Income Tax and HST (Ontario) implications of an assignment that results in a business income, check out the Assignment Tax Exposure Calculator on our website .

IMPORTANT: Always speak to your tax professional to estimate or determine tax consequences applicable to your specific situation. DO NOT rely on our calculator for an accurate estimation of your tax liability. Nothing in this article constitutes legal advice and no solicitor-client relationship is created. If you require legal advice pertaining to your specific situation, please contact our tax lawyer . ​

If you enjoyed this article, please do not forget to s ubscribe to our blog and our social media for important updates.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

​ #advotaxlaw #annamalazhavaya #taxlawyer #taxlawyerToronto #taxlawyermississauga #taxlawyeretobicoke #taxlitigationlawyer #hst #realestate #gstcanada #torontotax #filingtaxescanada #revenuecanada #canadarevenueagency #taxcreditscanada #hstrebatecanada #hstcanadatax #realestatetoronto #realestatebuilder #residentialbuilder #buildertoronto #intention #principalresidence #craaudit #craappeal #taxcourt #penalties #assignment #preconstruction #budget2022 #businessincome #taxcalculator #taxexposurecalculator #hstonassignment

Recent Posts

Basic Guide on Bare Trusts for Canadian Taxpayers

The Future of Tax Audits Looks Digital

True or False? Political Rumours Around Taxing Gain on Principal Residence: The 2021 Edition

(844) 538-2937 or ( 416) 593-4357

Real Estate Assignment Sales – New Tax Rules

The Federal Budget for 2022 has made amendments to Part IX of the Excise Tax Act (“ETA”). Effective May 7, 2022, all assignment sales in respect of newly constructed or substantially renovated single unit residential complexes or residential condominium units are taxable. 

For clarity, with respect to residential housing transactions, the purchaser (assignor) enters into an agreement of Purchase and Sale with the builder and then sells (assigns) their “rights and obligations” in the agreement of Purchase and Sale to another person (assignee).

Typically, the closing date for a pre-constructions residential property can take several months or even years. During this time, purchasers may decide to assign their rights outlined in the Purchase and Sale agreement to an assignee. The Federal Budget for 2022 now imposes GST/HST tax obligations on assignors and assignees. Essentially, an individual assignor of residential real estate now must collect GST/HST remit it to the CRA. This rule is applicable even to those who do not have a GST/HST number and believe that they are not purchasing and assigning in the course of commercial activity. In cases where the assignor is a non-resident, the assignee is obligated to self-assess the GST/HST. Prior to this amendment, the GST/HST liability depended on whether an individual purchased and assigned their rights in the course of commercial activity and if the purchaser’s true intentions were to live in and use the property, then there would be no GST/HST liability.

Deposit Portion of Assignments

Where an assignment agreement is entered into on or after May 7, 2022, the Budget confirms that GST/HST would not be applicable to the deposit portion of the assignment price. However, it must be indicated in writing that a part of the consideration is attributable to the reimbursement of a deposit paid by the assignor to the builder under the Purchase and Sale agreement. This means that an assignor would only be liable for GST/HST on the amount above the deposit. This also eliminates double taxation and is consistent with the holding from current caselaw, Casa Blanca Homes Ltd. v. The Queen , 2013 TCC 338 .

Where an assignment agreement is entered into before May 7, 2022, and the assignment sale is taxable, the total amount payable for the sale is subject to the GST/HST, this includes any amount paid by the assignor as a deposit to the builder, whether or not this amount is separately identified.

“Anti-flipping” Rule

Budget 2022 further proposes that sales of residential properties owned for less than 12 months are deemed to generate business income under the Income Tax Act (“ITA”). These are subject to limited exceptions such as divorce, or relocation for employment purposes. In terms of assignment sales, it has not yet been determined whether the proposed “anti-flipping” rules would apply since taxpayers do not technically “own” the properties. Tax practitioners are carefully monitoring this. For more information see our previous blog discussing this .

If you have questions about the new rules contact us today !

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions, you should consult a lawyer.

Related posts:

  • Withholding Tax for Non-Residents on Real Estate Sales
  • Assigning Property and the GST/HST Implications
  • How Real Estate Agents can Incorporate a Company
  • Capital Gains – Canadians Selling U.S. Real Estate
  • Business Expenses for Real Estate Agents

Rafia Javaid

Jason rosen, leave a reply cancel reply.

Your email address will not be published. Required fields are marked *

Save my name, email, and website in this browser for the next time I comment.

real estate assignment hst

Rodney Harvey

Broker of record, fri clo crb c-rets cres mcne, service excellence guaranteed.

real estate assignment hst

Assigning Property and the GST/HST Implications

June 7, 2023

  • Industry News

The Federal Budget for 2022 has made amendments to Part IX of the Excise Tax Act (“ETA”). Effective May 7, 2022, all assignment sales in respect of newly constructed or substantially renovated single unit residential complexes or residential condominium units are taxable.

For clarity, with respect to residential housing transactions, the purchaser (assignor) enters into an agreement of Purchase and Sale with the builder and then sells (assigns) their “rights and obligations” in the agreement of Purchase and Sale to another person (assignee).

Assigning a property is selling the property before you even own it. So you are just selling the contract which contains the right to close on the property. You purchased a property pre-construction condominium with a builder, signed the contract, gave your deposit cheques, and then sold the property before gaining title. For the assignor (the person selling the property), there can be serious tax implications.

Typically, the closing date for a pre-constructions residential property can take several months or even years. During this time, purchasers may decide to assign their rights outlined in the Purchase and Sale agreement to an assignee. The Federal Budget for 2022 now imposes GST/HST tax obligations on assignors and assignees. Essentially, an individual assignor of residential real estate now must collect GST/HST remit it to the CRA. This rule is applicable even to those who do not have a GST/HST number and believe that they are not purchasing and assigning in the course of commercial activity. In cases where the assignor is a non-resident, the assignee is obligated to self-assess the GST/HST. Prior to this amendment, the GST/HST liability depended on whether an individual purchased and assigned their rights in the course of commercial activity and if the purchaser’s true intentions were to live in and use the property, then there would be no GST/HST liability.

Assigning a property and the CRA

Upon detecting an assignment, the Canada Revenue Agency (CRA) will decide whether or not you should be considered a “builder” of the property. The test the CRA uses is subjective: they try to determine what your intention were when you purchased the property and why you’re selling. They ask questions like:

  • Did the seller ever intend to live there; and
  • Was this transaction intended to generate profit?

More often than not, in our experience the CRA considers assignors builders if they never took occupancy of the property. And if you are found to be a builder by the CRA, they hold you liable for HST on the sale.

A “builder” is defined in a manner which can potentially include someone that is merely entering into an APS with a builder. For example, subject to a specific exclusion that only applies to individuals, someone that acquires an interest in a home before it is occupied (or a condominium before it is registered) can be a builder if their primary purpose was to either:

  • sell the home to any person
  • lease the home to someone other than an individual for their personal use

Individuals are excluded from being a builder if they did not acquire their interest in the course of a business or an adventure or concern in the nature of trade, which is determined by considering the following factors:

  • nature of the property sold
  • length of period of ownership
  • frequency or number of other similar transactions by the taxpayer
  • work expended on or in connection with the property realized
  • circumstances that were responsible for the sale of the property
  • taxpayer’s motive or intention

To the extent that the assignor is a “builder,” GST/HST will be payable on the value of consideration that is paid by the assignee and the assignor will be required to collect GST/HST unless the assignee is registered for GST/HST.

The Canada Revenue Agency (CRA) considers an amount paid by an assignee on account of the assignor’s deposit to be part of the consideration paid for the assignment of an APS, and is therefore subject to GST/HST if the assignor is a builder. Accordingly, unless the assignment is restructured to result in the builder refunding the deposit to the assignor and receiving a replacement deposit from the assignee, the assignee may pay double tax on the deposit.

Assigning a property and the GST/HST implications

If the CRA considers you to be a builder, they expect you to charge and remit sales tax (GST/HST) on the full sales price. The problem becomes almost no one does this on the original sale. Only once CRA has come and audited do they determine you to be a builder, and rule that GST/HST should have been charged.

Because this normally happens after the fact, most “builders” are unable to collect the GST/HST from the purchaser, and are now liable for the amount owing plus penalties and interest. This is typically where most people will file notices of objection, arguing that they are not “builders” and should not be responsible for GST/HST.

Can the assignee claim the GST/HST new housing rebate

The assignment of an APS may also impact the assignee’s eligibility to claim the new housing rebate, as evidenced by the Tax Court of Canada’s recent decision in  Chen Sun.  The federal new housing rebate is equal to 36% of the federal component of GST/HST paid, up to a maximum of $6,300 (for homes valued at $350,000), with the rebate being gradually reduced and phased out when the value of the home reaches $450,000. For properties in Ontario, the provincial new housing rebate is equal to 75% of the provincial component of GST/HST paid, up to a maximum of $24,000 (for homes valued at $400,000 or higher).

For a purchaser to be eligible for the new housing rebate, the following conditions must be met:

  • the purchaser must be an individual that is acquiring the home from a builder, as opposed to an assignor who may not be a builder
  • at the time the individual becomes liable or assumes liability, they must acquire the home as their primary place of residence or that of a relation
  • ownership of the property must be transferred to the individual after construction is substantially completed
  • the first person to occupy the home must be the individual or a relation
  • all persons named on the APS must meet the aforementioned conditions

When the purchaser qualifies for the new housing rebate, the builder is generally entitled to pay or credit the rebate amount to the purchaser pursuant to subsection 254(4) of the  Excise Tax Act.

In situations where a third party is acquiring ownership of a home or condominium and they receive title directly from the builder, it does not necessarily mean that the APS has been assigned to the third party and that the builder has sold the condominium to the assignee. As argued by the Crown in  Chen Sun,  if the builder has not accepted the assignment, then the assignee may not be the person that is acquiring the condominium from the builder. Fortunately, in  Chen Sun,  the court ultimately held that the APS was in fact assigned on the basis that the builder, by its conduct, accepted the assignment and therefore the builder did sell the condominium directly to the assignee. Accordingly, the assignee was eligible to claim the new housing rebate (and the builder was entitled to credit the assignee with the rebate) because the assignee acquired the condominium from the builder and the other conditions to claim the rebate were satisfied.

Deposit portion of assignments

Where an assignment agreement is entered into on or after May 7, 2022, the Budget confirms that GST/HST would not be applicable to the deposit portion of the assignment price. However, it must be indicated in writing that a part of the consideration is attributable to the reimbursement of a deposit paid by the assignor to the builder under the Purchase and Sale agreement. This means that an assignor would only be liable for GST/HST on the amount above the deposit. This also eliminates double taxation.

Where an assignment agreement is entered into before May 7, 2022, and the assignment sale is taxable, the total amount payable for the sale is subject to the GST/HST, this includes any amount paid by the assignor as a deposit to the builder, whether or not this amount is separately identified.

Additionally, once the CRA comes and audits you for one sale, they will review your entire history of buying and selling properties to see if they can determine that you are selling property as a business, and are therefore running a property selling business. They would further audit you to see if any use of the principal residence exemption was correct, if you are entitled to capital gains, or if you should have been claiming business income. Again, the issue with CRA determining that you should be claiming business income is that there are GST/HST implications as above.

How should builders deal with assignments

As the builder and purchaser are jointly and severally liable for housing rebates that have been claimed in error, it is important for builders to make sure that purchasers qualify for the rebate before they pay or credit the purchaser with the rebate. The CRA heavily scrutinizes rebate claims and, to the extent each and every condition to claim the rebate is not satisfied, the CRA will deny the rebate claim. In situations where an APS has been assigned, builders should consider whether:

  • they should credit the assignee with the housing rebate or advise the assignee to file the rebate claim directly with the CRA
  • it is easier to “tear” up the original APS and enter into a new APS with the assignee
  • the assignment has been clearly documented so that there is no dispute that the assignee has become the purchaser under the APS, which may not be the case when only the title is transferred to the assignee at the assignor’s direction

The takeaway

All parties to a transaction in which an APS is being assigned and a housing rebate is being claimed should consider the GST/HST implications of the assignment. Failure to structure these assignments in an appropriate manner can significantly increase GST/HST costs for the respective parties, including:

  • builders being assessed penalties for erroneously crediting the housing rebate to assignees
  • assignors being assessed penalties for failing to collect tax on the assignments
  • assignees paying GST/HST on the replacement deposits

“Anti-flipping” Rule

Budget 2022 further introduced that sales of residential properties owned for less than 12 months are deemed to generate business income under the Income Tax Act  (“ITA”). These are subject to limited exceptions such as divorce, or relocation for employment purposes.  For more information see our previous blog discussing this .

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal or tax questions, you should consult a tax accountant or lawyer.

Blog Archives

  • January 2024
  • December 2023
  • November 2023
  • October 2023
  • September 2023
  • August 2023
  • February 2023
  • January 2023

Blog Categories

  • Property Maintenance & Lifestyle
  • Residential

* Required Field.

Privacy Policy

Completing this form enables me to provide you with additional information as requested. You will only be contacted by me.

I will NEVER release, sell or give your name, e-mail address or telephone number to any other party or organization without your permission.

Click here for a copy of our Privacy Policy

Not intended to solicit Buyers or Sellers under contract.

Powered by IXACT Contact® Real Estate CRM Software

compliance logo

  • All Listings
  • Places with Parking
  • All of Ontario

Top Neighbourhoods

  • Innovation District, Kitchener
  • Bauer District, Kitchener
  • City Centre District, Kitchener
  • Midtown, Kitchener
  • Belmont District, Kitchener
  • Uptown, Waterloo
  • How We Help You Invest
  • Highest Appreciation Properties
  • Cash Flow vs ROI
  • Buying vs. Renting
  • How We Help Buyers
  • Renting vs. Buying - A Case Study
  • Buying An Assignment
  • Pet-Friendly Buildings
  • How We Help Tenants
  • How We Help Landlords
  • Ontario's Standardized Lease

Selling With Condo Culture

  • How We Help Sellers
  • Condo Sellers Guide
  • About Condo Assignment Selling
  • Selling Assignments and HST
  • Selling a Condo with a Tenant

Your Property

  • What's Your Condo Worth?
  • All Buildings

New Developments

Top buildings.

  • Caroline Street Private Residences
  • Midtown Lofts
  • Bauer Lofts

Top Communities

  • Station Park, Kitchener
  • Garment District, Kitchener
  • Kaufman Lofts, Kitchener
  • Blackstone, Waterloo
  • Seagram Lofts, Waterloo
  • DUO at Station Park

Buying in a New Development

  • 5 Things to Know when Buying Pre-Construction
  • Pre-Construction vs. Resale Investing

How HST Applies to Selling Assignments As of May 7th 2022

How HST Applies to Selling Assignments As of May 7th 2022

By Condo Culture

There have been plenty of conversations amongst the real estate community and assignment sellers regarding the Federal government announcing that they will be making HST payable on profits made by either end-user buyers or investors, effective May 7th, 2022.

Here’s What Has Changed

This additional charge has always been in place with HST on profits being the responsibility of the Seller. There were specific workarounds in place which won’t apply anymore. This regulation already applied to investors, so nothing changes with this particular type of purchaser. The government essentially wants to tighten up on end-users purchasing a pre-construction unit and subsequently assigning. So moving forward, regardless if the intention was to move into your unit as an end-user, any profit from any assignment sale will now be subject to HST .

Savings - Have a Professional Team On Your Side

Even if you’re an end-user buyer and need to sell your unit for whatever reason as an assignment sale, you can deduct certain expenses from your profit to reduce the amount of HST you pay. The commission of your REALTOR¼, lawyer and accountant fees, other assignment-related costs, upgrades to the property, and additional ones are potentially eligible. It’s certainly possible to save between 15% to 20% on what you need to pay for HST based on leveraging applicable deductions.

We highly recommend having an experienced REALTOR¼, accountant, and lawyer representing you who all have experience with assignment transactions. Your team can help you navigate through the process from start to finish and beyond, so there are no surprises along the way and to ensure you feel comfortable knowing that you didn’t pay more in HST than you need to in order to maximize your ROI.

Condo Culture has a vast amount of expertise handling all types of assignment transactions and we are all over new regulations as they morph and change over time, so be sure to reach out for any of your assignment selling or buying needs. Assignments can offer unique value given their off-market nature with less buyer competition. They are a great option to review as you explore all possible Condo purchase possibilities.

A Simple Assignment Selling Example

When selling an assignment unit, you pay HST on the deposits made on the purchase, plus the 13% on the home’s increase in value once the deal is complete.

Let’s look at an example - if you originally bought a condo for $450K and ultimately sold it as an assignment listing for $650K, then you will need to pay an additional 13% HST on the increase of $200K minus any deductions as outlined above.

Current Exclusive Assignment Opportunities

We have a bunch of fantastic assignment buying options available right now, including these two beauties.

Unit 1012 at Station Park in Tower 1

Unit 1012 at Station Park in Tower 1 floorplan

Highlights:

🛌 2 bedrooms 🛀 2 bathrooms 🚘 1 parking spot 🔐 1 locker âč 810 sq.ft. + a 45 sq.ft balcony ⬆ $18.5K in upgrades on the kitchen and bathroom. Corner unit facing King Street with stunning city views. Expected occupancy: Fall 2022 List price: $699,900

Analysis: This spectacular two-bedroom condo is in a highly sought-after corner unit looking out onto King Street. It’s well priced at $864/sq.ft. and that includes almost $20K in gorgeous upgrades along with a premium lighting package addition, plus a parking spot, as well.

Unit 512 at Station Park in Tower 2

Unit 512 at Station Park in Tower 2 Floorplan

🛌 1 bedroom 🛀 1 bathroom âč 625 sq.ft. + a 60 sq.ft balcony ⬆Entertainment package upgrade included. Corner unit facing both King and Wellington Street with nice 5th-floor views. Expected occupancy: Early 2023 List price: $510,000

Analysis: This wonderful corner unit has a solid price per square foot at $816 including an entertainment package that has been added. It has a generous amount of space for a 1 bedroom unit and a good-sized balcony to lounge, dine, and entertain

We have helped hundreds of clients navigate the unique assignment selling and buying process, and would love to leverage our deep experience to help you succeed with your future transactions. In addition to our Assignment expertise, we are also experts in Condo Resale and Pre-Construction transactions - we are a full spectrum condo brokerage that’s at your service!

To learn more about our assignment selling and buying approach and unique expertise, be sure to read this informative article and connect with us if you have any questions or got any type of condo business to take care of.

Share This Post

Thank you for your message

The New Proposed HST Treatment On Pre-Construction Assignment Of Sales

The New Proposed HST Treatment On Pre-Construction Assignment Of Sales

  • Our History
  • Diversity, Equity and Inclusion
  • Accessibility
  • Sustainability Statement
  • Land Acknowledgement
  • International
  • Our Expertise
  • Seminars & Events
  • PV Women’s Network
  • Blog – What’s Trending

Pallett Valo Lawyers

HST Issues in Commercial Real Estate Transactions: Assigning vs. Directing Title

June 2019 Published on: June 2019 | What's Trending

HST

HST errors result in disastrous problems for vendors in commercial real estate transactions because they are costly, as they invariably involve 13% of the purchase price. When the purchase price is relatively low (such as $300,000.00), a potential HST mistake has a correlatively lessened monetary effect (of $39,000.00).

However, in a 2017 case before the Tax Court of Canada, 2252493 Ontario Limited v. The Queen, [1] the purchase price of the property was $3,200,000.00 and an HST mistake was made. The vendor ended up being penalized, paying the sum of $416,881.83 to the Canada Revenue Agency (“CRA”) after closing. This post will explain how the vendor’s solicitor could have avoided the HST error by insisting on an assignment rather than accepting a purchaser’s direction regarding title (a “Direction Re: Title”).

How Was a $416,881.83 HST Mistake Made?

In a previous post , [2] I explained that vendors (as suppliers of commercial real property) are required to collect and remit HST to the CRA under the Excise Tax Act [3] (the “Act”), unless an exception applies such as the purchaser being a GST/HST-registered recipient that will self-assess. In 2252493 Ontario Limited , the analysis turned on the question of determining the correct identity of the GST/HST-registered recipient.

An Agreement of Purchase and Sale (“APS”) was signed with the boilerplate section 7 HST clause [4] that is typically included in Ontario Real Estate Association (“OREA”) forms, and the purchaser on the APS was listed as Mayling Holding Inc. (“Mayling”). [5] However, on closing, the purchaser’s solicitor delivered a Direction Re: Title indicating that the deed or transfer should be engrossed as follows: 840 Yonge Street Holdings Inc. (“840 Yonge”); [6] indeed, this Direction Re: Title appears to be the only document signed by Mayling other than the APS. Almost all of the other signed documents for the transaction referred to 840 Yonge as the purchaser, including the operative closing documents executed by the vendor, [7] despite the fact that 840 Yonge was not incorporated until after the APS was signed in the first place. [8]

The vendor’s solicitor testified that no collection of HST was listed on the statement of adjustments, since he believed that the Direction re: Title was sufficient to make 840 Yonge the GST/HST-registered recipient of the supply of real property. [9] He also obtained a statutory declaration containing 840 Yonge’s HST registration number and an HST Registry Search confirming 840 Yonge’s registrant status, so the vendor’s solicitor believed 840 Yonge “was legally required to self-assess and remit the HST on the sale of the Property”. [10]

The problem with the vendor’s solicitor’s analysis is that section 123(1) of the Act defines “the recipient of a supply of property
[as] the person who is liable under the agreement to pay” monetary consideration for that supply of property. [11] Thus, as per the APS, the recipient for HST purposes is still Mayling (and not 840 Yonge) according to the Act.

As a result, the Minister of National Revenue reassessed the vendor less than one year later and concluded that since Mayling was not an HST registrant on closing despite being the recipient, the vendor was required to have collected and remitted the HST of $416,881.83 with respect to the transaction. [12]

How Could an Assignment Have Helped the Vendor’s Solicitor?

“Where the ostensible recipient, the person obligated to pay the consideration, is named in the APS as “purchaser”, then something more concurrent with closing than a one page unilateral direction regarding title is necessary to dislodge the countervailing, mutual agreement, patent facts, logical conclusions and legal obligations in the APS”. [13]

One key word used by the judge here is “unilateral”. As a general rule, as affirmed by the Ontario Court of Appeal in Rodaro v. Royal Bank of Canada , a party can only unilaterally assign its ‘benefits’ or rights under the APS but will still remain liable for its ‘burdens’ or performance obligations. [14] Instead, contractual performance obligations can only be completely transferred and assumed with the consent of all parties to the APS, including at least 2252493 Ontario Limited and Mayling as original vendor and purchaser, [15] respectively (and preferably also including 840 Yonge as assignee). However, the judge does go on to state that such documentation need not be “onerous or complex [and a] one or two page assignment and assumption agreement” would be sufficient. [16]

At times, however, vendors are reluctant to allow for an APS to be assigned for other reasons. For example, if a purchaser has given significant representations, warranties, covenants, and indemnities, the vendor may be concerned that such an assignment could be construed as an express or implied release of the purchaser’s performance obligations and overall liability under the APS. To that end, an APS sometimes contains a negative covenant prohibiting assignments so that the vendor will always retain their right to sue the original purchaser if a problem arises.

A possible solution to protecting the vendor’s litigious interests while simultaneously avoiding making HST mistakes is to amend the APS, removing a negative covenant prohibiting assignments if necessary, but more importantly including a condition whereby the vendor’s solicitor shall only allow an assignment from the original purchaser to a third party upon receiving all of the signed closing documents, the entire balance due on closing, and any other requisite deliveries. In this way, a vendor only has to accept an assignment when the deal is practically closed anyway, while still obtaining the requisite documentation needed should the CRA ever try to reassess them for an additional 13% of the purchase price.

[1] 2017 TCC 20 [ 2252493 Ontario Limited ].

[2] “HST Issues in Commercial Real Estate Transactions: Potential Bad Bargains” (2019), online: Pallett Valo LLP .

[3] RSC 1985, c E-15 [ Excise Tax Act ].

[4] “7. GST/HST: If the sale of the property (Real Property as described above) is subject to Goods and Services Tax (GST) or Harmonized Sales Tax (HST), then such tax shall be in addition to the Purchase Price. The Seller will not collect GST or HST if the Buyer provides to the Seller a warranty that the Buyer is registered under the Excise Tax Act (“ETA”), together with a copy of the Buyer’s ETA registration, a warranty that the Buyer shall self‑assess and remit the GST or HST payable and file the prescribed form and shall indemnify the Seller in respect of any GST or HST payable. The foregoing warranties shall not merge but shall survive the completion of the transaction. If the sale of the property is not subject to GST or HST, Seller agrees to certify on or before closing, that the transaction is not subject to GST or HST. Any HST on chattels, if applicable, is not included in the purchase price” [emphasis added].

[5] 2252493 Ontario Limited , supra note 1 at para 4.

[6] Ibid at para 5.

[7] Ibid at para 6-9.

[8] Ibid at para 18.

[9] Ibid at para 13.

[10] Ibid .

[11] Excise Tax Act , supra note 3 at s.123(1).

[12] 2252493 Ontario Limited , supra note 1 at para 15, 40.

[13] Ibid at para 38.

[14] Rodaro v Royal Bank of Canada , [2002] 59 OR (3d) 74, 157 OAC 203 at para 33.

[15] 2252493 Ontario Limited , supra note 1 at para 26.

[16] Ibid at para 39.

  • Toronto Tax Lawyer
  • Articling Program
  • Canadian Tax Lawyers
  • Case Results
  • Case Studies
  • Certified Specialists in Taxation
  • Company Profile
  • Leadership Team
  • Articles & tips
  • Canadian Accountant Articles
  • Definitions
  • Media Appearances
  • News Releases
  • Related Links
  • CRA Tax Audits
  • Unfiled Taxes
  • Net Worth Audits
  • Taxes Owing & Liens
  • Tax Minimization
  • CRA & Bitcoin Taxation
  • Unreported Offshore Assets
  • Unreported Offshore Income
  • Unreported Foreign Pension
  • Unreported Internet Income
  • Unfiled GST/HST returns
  • Individual & Family Income Tax Planning
  • Succession Will, Estate and Tax Planning Ontario
  • Tax Problems & Representation
  • Tax Shelters
  • Corporate Reorganizations
  • Butterfly Transactions
  • Incorporations
  • Business Agreements
  • Business Startup Planning
  • Tax Consulting & Planning
  • CEWS Tax Audit Services
  • CERB Tax Audit Services
  • CEBA Tax Audit Services
  • Contact a Tax Lawyer

Tax Guidance for Assignors in Real Estate Assignment Transactions

Published: November 13, 2020

Last Updated: April 26, 2021

Tax Guidance for Assignors in a Real Estate Assignment Transaction – a Toronto Tax Lawyer Analysis

Introduction – what is real estate assignment.

Buying and Selling real estate assignments is a common form of transaction in the real estate market. An assignment is a transaction of the rights to a property before the legal ownership of the actual property is transferred. In the real estate context, the buyer of an assignment (the “assignee”) would purchase the rights to a real estate property, typically but not always a condo, that is being built under a Purchase and Sale Agreement, between the assignment seller and the builder, from the seller of the assignment (the “assignor”). This transaction would take place before the closing date of the property, and the ownership of the property legally remained with a third party, the builder, throughout the assignment transaction. Hence only contractual rights to a piece of property were assigned from one party to another in an assignment transaction and not the property itself.

Tax Guidance to Reporting Profits from an Assignment Sale – Capital Gains and GST/HST

The two main tax issues associated with the assignor in an assignment transaction are whether the profits from the sales are to be characterized as business income or taxable capital gain and whether the sales of assignments give rise to the obligation for the assignor to collect and remit GST/HST.

While many assignors would report their profits as taxable capital gains as well as taking the position that assignors are exempt from collecting and remitting GST/HST for sales of the assignments, over the past few years, the CRA has been aggressively going after assignment transactions, often auditing Canadian taxpayers for both unreported taxable business income and unremitted excise tax.

Whether a particular assignment sale will give rise to taxable business income will depend on the facts involved in the case. Similarly, whether the assignor has an obligation to collect and remit GST/HST will also depend on the facts. In short, there is no single answer and simple tax guidance as to how to report your taxes on every assignment transaction. We will breakdown the relevant tax factors below

Taxable Capital Gain vs. Taxable Income

The determination of income versus capital gain is a complex tax topic in which the Income Tax Act itself provides no tax guidance. This means the Tax Court will look to case law for a holistic set of relevant tax factors to determine taxable income vs. taxable capital gains. Please see our article on this general topic for a detailed breakdown (https://taxpage.com/articles-and-tips/a-canadian-tax-lawyers-introduction-to-business-income-vs-capital-gains/).

In the leading case on this issue, Happy Valley Farms Ltd v MNR, the Federal Court chose a set of holistic factors based on the principle of circumstantially determining the taxpayer’s intention at the time of the acquisition of the property. When a taxpayer acquired a property with the intention to resell at a higher value, such intention would strongly suggest the taxpayer has been carrying out business. Therefore, the taxpayer’s income should be characterized as taxable business income.

However, the mere fact an assignor ended up selling his or her legal interest in a piece of real estate property does not evidence that he or she had an intention to resell when he or she initially acquired the property. Usually, CRA has to prove an intention to resell through circumstantial evidence to make an inference that the taxpayer had an intention to resell upon acquisition. In the Happy Valley Farm case itself, the Federal Court determined the intention of the taxpayer by looking at his conduct while holding the property as well as his relevant past conducts.

Factors such as frequency or number of other similar transactions by the taxpayer and circumstances that were responsible for the sale of the property are ultimately tools to help the court to determine the taxpayer’s intention at the time of acquisition. No single Happy Valley Farms factor outside the motive factor is determinative, and the determination of taxable business income versus taxable capital gains in assignment transactions will depend on a holistic assessment of the facts.

GST/HST on Assignment Sales

Unlike the income tax implications of assignment sales, the GST/HST implication of assignment transactions is more clear. The seller in an assignment transaction can often be deemed as a “builder” under the Excise Tax Act, which gives rise to the obligation to collect and remit GST/HST upon the sales of the transaction.

However, even if the seller is not deemed to be a builder, an assignment sale is at the very least a transaction involving a “chose in action” which is considered an enforceable legal right in the property itself. A chose in action is specifically mentioned in the definition of “property” under section 123(1) of the Excise Tax Act

property means any property, whether real or personal, movable or immovable, tangible or intangible, corporeal or incorporeal, and includes a right or interest of any kind, a share and a chose in action, but does not include money; On the other hand, the seller of an assignment transaction can also claim Input Tax Credits for his or her initial purchase of the assignment rights from the builder. Since many buyers and sellers of real estate assignments are likely unaware of the GST/HST implications of assignment transactions, a crucial issue to keep in mind is the deadline and extension mechanism for claiming Input Tax Credit under subsection 225(5) of the Excise Tax Act.

Pro Tax Tips – Prepare for Different Tax Implication for Each Assignment Transaction

The tax implication of an assignment transaction for the assignor will depend on whether the assignor was legally engaging in business activities in the course of buying and selling his or her real estate property interest. Such determination will involve holistically looking at all the relevant facts surrounding the transaction. The nature of an assignment sale itself does not determine whether the profit from such sales should be reported as taxable income or taxable capital gains.

As CRA has been going after assignment transactions aggressively and will likely to continue doing so in the foreseeable future, it is important for Canadian taxpayers to be aware of his or her rights to objection under the Income Tax Act in order to make sure his or her right to file a notice of objection is preserved upon being audited by the CRA .

If you have been contacted by the CRA regarding your past assignment transactions or you have questions regarding a specific assignment transaction that you are contemplating and whether (or not) it constitutes a business transaction, please contact our office to speaking with one of our experienced Canadian tax lawyers.

Related Post

Disclaimer:.

"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."

About the Author

David j. rotfleisch.

David J. Rotfleisch, a leading Canadian tax lawyer, is not only a certified specialist in taxation but also a chartered professional accountant. Most recently, David is a pioneer in Canadian crypto taxation.

As of April 2020, he was one of 12 Ontario Certified Specialists In Taxationℱ.

Subscribe to our Newsletter

Looking for tax assistance.

Fill the form and we’ll get back to you.

Additional Areas Served

  • Brampton Tax Lawyer
  • Hamilton Tax Lawyer
  • London Tax Lawyer
  • Mississauga Tax Lawyer
  • Montreal Tax Lawyer
  • Ottawa Tax Lawyer
  • Tax Lawyer Calgary
  • Vancouver Tax Lawyer
  • Winnipeg Tax Lawyer
  • Edmonton Tax Lawyer

We are a Toronto tax law firm with a Canada wide full service income tax law practice.

Tax Solutions

  • Tax Appeals
  • Taxes Owning & Liens

Voluntary Disclosure

  • Offshore Assets
  • Offshore Income
  • Offshore Pension
  • Internet Income

Corporate Planning

  • Tax Reorganizations

Get your CRA tax issue solved

Address: Rotfleisch & Samulovitch P.C. 2822 Danforth Avenue Toronto, Ontario M4C 1M1

416-367-4222    OR    SCHEDULE ASSESSMENT

Copyright © 2024 Rotfleisch & Samulovitch Professional Corporation, Taxpage

Sukh Law

New Tax Rules for Real Estate Assignments and Flipping

real estate assignment hst

Written by Sukhman Sandhu

Blog | real estate law, june 6, 2022.

To combat the sharp rise in real estate prices, the Canadian government has proposed new GST/HST rules in relation to Assignments (effective May 7, 2022) and Income Tax rules in relation to flipping real estate in general (effective January 1, 2023).

GST/HST to Apply for all Assignment Sales

As of May 7, 2022, where an individual sells an assignment of a new build or substantially renovated residential property, the transaction will be subject to HST, regardless of original intentions, as per the Canadian Excise Tax Act (“ETA”). Every individual assignor of residential real estate will now have to collect GST/HST on their assignment profit and remit it to the CRA.

Previously, if the original intention of entering the pre-construction Agreement of Purchase and Sale (APS) was for personal use, GST/HST did not apply to the assignment agreement. GST/HST previously only applied if the original intention was to sell for profit or flip the property. Effective May 7, 2022, whatever your intention, GST/HST will apply on the assignment profit.

Accompanied with some good news, the new rules do clarify that HST is no longer charged on recovered deposits. Prior to May 7, 2022, despite the court ruling against the CRA in a previous case dealing with this issue, the CRA continued to represent to tax payers that if the assignment is subject to GST/HST, the amount provided from the assignee (new buyer) to the assignor (original buyer) which reimburses the assignor for the assignor’s deposit to the builder is also subject to GST/HST. This created double taxation as the deposit that the assignor paid to the seller/builder is already subject to GST/HST.

For illustration purposes, envision Carrol purchased a new construction residential property for $1,200,000 and paid the builder’s lawyer a deposit of $200,000. Subsequently, Carrol entered into an assignment agreement for the assignment sale price of $1,500,000. Carrol in this situation is known as the ‘assignor’ and the individual who purchased from her is known as the ‘assignee’. The assignee must pay $500,000 to Carrol ($300,000 for the difference between assignment sale price of $1,500,000 and original purchase price of $1,200,000 + $200,000 to reimburse the assignor for assignor’s previous deposit to builder/builder’s lawyer) and $1,000,000 to the builder to complete the purchase (not including any closing/miscellaneous fees).

Prior to May 7, 2022, if Carrol’s original intention was to purchase for personal use, she would not be responsible to pay any HST/GST in relation to the assignment sale.

Prior to May 7, 2022, If Carrol’s original intention was not for personal use (i.e. investment property), then she would be liable to pay GST/HST on $500,000 (both the profit and deposit) which at the rate of 13% would have equaled $65,000. It is important to note that Carrol, on advise of her accountant, could have only paid GST/HST on $300,000 (avoiding any tax on deposit) by only remitting $39,000 and citing previous case ruling against double taxation on recovered deposit to the CRA.

As of May 7, 2022, regardless of Carrol’s original intention, she is liable to pay GST/HST on $300,000 which at the rate of 13% would equal $39,000.

Business Income instead of Capital Gains for Residential Property Flipping

Effective January 1, 2023, a new residential property flipping rule will classify the appreciation amount of all residential properties that are owned for less than 12 months to be business income under the Canadian Income Tax Act (“ITA”). This new legislation change will be subject to limited “life events” exceptions, such as the growth of a household, separation, a disability or illness, an employment change, insolvency, or an involuntary disposition.

Prior to January 1, 2023, investment properties (i.e. rentals) sold within or after 12 months of ownership are subject to capital gains tax which is 50% of business income tax and principal residence properties (owner-occupied) sold within or after 12 months of ownership are entirely exempt from tax.

Growing commentators believe that this proposed Residential Property Flipping Rule may also result in assignment sales treated as business income as opposed to capital gains. This would result in the assignor not only paying GST/HST on the portion of their assignment profit but also adding 100% of the assignment profit amount (minus remitted GST/HST) onto their annual personal income amount. We look forward to receiving further clarification in the near future.

If you are buying or selling investment properties, or have questions or concerns about residential or commercial real estate law in general, contact us at Sukh Law .

Sukh Law publishes articles for information purposes only and is not intended to constitute legal advice.

Related Resources…

What Interest Rate Hikes mean for your Existing Mortgage?

What Interest Rate Hikes mean for your Existing Mortgage?

Aug 8, 2022

As recent month to month inflation rates for Canada continue to remain above 5%, with some months as high as 8% (in...

Corporation Minute Book – What is it and is it necessary?

Corporation Minute Book – What is it and is it necessary?

Jul 28, 2022

Does a corporation operating in Ontario require a minute book? Yes, all corporations (whether it is an Ontario...

Buying a New Construction Home Guide

Buying a New Construction Home Guide

Jul 6, 2022

For those who have already gone through the process of both purchasing a new construction home and purchasing a resale...

We're growing. Join our firm. Learn more about Careers at Schwarz Law.

Schwarz Law Partners LLP

  • Firm Profile
  • Testimonials
  • Environmental Actions
  • Jayson Brian Schwarz
  • Jacqueline Moneta
  • Konrad Grzymski
  • Patrick Squire
  • Corinne Lobe (Patent Counsel)
  • Corporate and Commercial Business Law
  • Commercial Real Estate, Financing & Land Development
  • Residential Real Estate
  • Articles & News
  • Associate Firms
  • Affiliated Firms

HST on Assignments

real estate assignment hst

By: Jayson Schwarz LLM and Hamza Ahmad JD

Many clients think that doing an assignment of a home purchase agreement is a simple transaction, but the reality is far different. It is an extremely complex transaction and if not handled properly can result in the loss of a lot of money.  This article describes two issues relating to HST that assignors (seller) and assignees (buyer) should consider when entering pre-construction freehold and condominium assignments.

HST on Assignment Fees

HST is payable on an assignment sale of an Agreement of Purchase and Sale (“APS”). Remember when you do an assignment you are not selling the house or property you are selling your APS. The issue is what you pay the HST on, who pays it and how much that will be. Generally the HST will be in addition to the price and paid for by the buyer.

Your assignment agreement must be clear to show what the profit is on the transaction, as it should only be the profit that is subject to HST.

The standard realtor’s form of an assignment agreement does not include sections on crucial issues regarding HST. It is important you get a lawyer to help carefully draft the assignment agreement to reduce the risk of future issues with CRA. In a resale home situation HST is payable on the profit only provided the assignment agreement is properly drafted.

As an interesting aside, most people would reasonably conclude that getting back your deposit is not subject to HST, but CRA takes the position it is, even after CRA lost in Court and the Court said there is no HST on deposit returns!!!!!!

HST New Housing Rebate

Adjustments on closing can surprise homebuyers new to pre-construction properties and assignments only add to the potential shock. The builder will want to collect the HST on closing of the original purchase where there has been an assignment sale and the buyer will need to get the HST back later.

Newly built properties are subject to HST but some or all the HST payable can be recovered immediately on closing through the HST New Housing Rebate (the “Rebate”). The Rebate has specific rules that may affect a purchaser whom’s circumstances change over time; the Rebate is provided if only the purchaser or an immediate family member resides at the property and if the builder accepts that this is correct and there has been no assignment outside that group.

In pre-construction condominium assignments with occupancy closings, an assignee must confirm whether the unit has ever been occupied. If a unit has been occupied then the assignee may not be eligible for the Rebate.

The moral of the story is that you really should retain an experienced lawyer to help you through these issues whether buying or selling. Realators are great but it is your lawyer who if hired to do so that will take the time to review everything properly and make sure you are protected and that there are no open questions.

Perhaps the most difficult part of writing these articles relates not the actual writing, but thinking of a topic to address. So help us!!! Mail, deliver or fax letters to the magazine or to us, use the web site ( www.schwarzlaw.ca ), email ( [email protected] ) and give us your questions, concerns, critiques and quandaries. We will try to deal with them in print or electronic form.

Also seen on NextHome.ca

real estate assignment hst

Docly Child

HST on Assignment of Pre-construction Residential Agreement of Purchase and Sale

Does the assignment of an agreement of purchase and sale for a pre-construction condo unit attract HST?

The answer depends on the intention of the Buyer/Assignor.

If at the time of acquiring the interest, Buyer’s/Assignor’s primary purpose was selling the condo or selling an interest in the condo or leasing the condo then sale is made in the course of an adventure or concern in the nature of trade and the assignment will attract HST.

If an individual acquired an interest in the condo for the primary purpose of using it as a place of residence, the Assignment won’t attract HST even if at a later point in time, the person sells the condo or an interest in the condo.

Or copy link

Powered By EazyDocs

A Guide to Pre-Construction Assignment Transactions

The process of “assigning” an interest in an agreement of purchase and sale is a relatively new concept in Waterloo Region and it is quickly gaining traction. The problem is that the average purchaser does not understand the intricacies of what is involved in order to successfully assign an interest in an Agreement with minimal tax implications. A further problem is that the form of the Assignment Agreement is quite complex. The purpose of this article is to break down an assignment transaction into a scenario that is frequently encountered by real estate lawyers and agents. 

In 2016, John (the “Assignor”) signs an Agreement of Purchase and Sale (the “Agreement”) to purchase a new condominium unit from Builder X (the “Builder”). He purchases this unit for $300,000.00 and, over the course of a year, he puts down a $45,000.00 deposit. The unit is scheduled to be completed in 2020. John predicts, that by the time the unit is built, it will be worth more than the $300,000.00 he originally paid. In 2019, John notices that the housing market in Waterloo Region is changing dramatically, that the Region has gained attention as a real estate hot spot and that John could stand to make a large profit if he sold his unit to a third party. Acting on these circumstances, John “assigns” his interest in the Agreement to Bob (the “Assignee”) for $380,000.00. In this process, Bob effectively steps into John’s shoes as the purchaser under the original Agreement with the Builder. 

John needs assistance to ensure that he assigns his unit properly. John, being a prudent purchaser, asks his real estate lawyer to review the original Agreement between John and Builder X to confirm whether the Agreement contains specific language which prohibits or restricts John from assigning the Agreement to Bob, and whether John can assign the Agreement without obtaining prior written consent from Builder X. Spoiler alert: most pre-construction agreements contain this prohibition. In fact, most pre-construction agreements will contain wording to the effect that consent may be “unreasonably and arbitrarily withheld” by the builder or consent may be “at the builder’s sole and unfettered discretion”. In the event that written consent is provided, the builder will likely collect a fee for authorizing the assignment, prohibit any subsequent assignments and insist that the original buyer remain on the hook until final closing if the Assignee, Bob in this case, fails to complete the transaction with the Builder.

It is fortunate that John engaged his real estate lawyer prior to finalizing his transaction with Bob. John has discovered that Builder X will charge John a fee of $5,000.00 to authorize the assignment.

John’s lawyer has also flagged another concern: John’s initial deposit AND his profit may be taxable by the Canada Revenue Agency (“CRA”). Let’s explore why John’s lawyer believes the assignment transaction is taxable. Whether an assignment is taxable or exempt from HST turns on the status of the Assignor as a “builder” for HST purposes. If the Assignor (in this case, John) is considered to be a “builder”, the Assignor will be required to collect and remit HST on the markup earned through the assignment (in this case, $80,000.00). Exactly how does the CRA make this determination? The CRA looks at intention. In investigating the Assignor’s intention, it is necessary to look at the Assignor’s circumstances at the time the original Agreement was signed. 

The CRA will look at several factors in determining John’s intentions. Here are a few:

  • Is the Assignor a corporation?
  • Does the Assignor take action to attract buyers while the property is under construction?
  • How is the Assignor financing the purchase?
  • Has the Assignor entered into multiple Agreements to purchase multiple units at around the same time?
  • Is the Assignor’s stated intention to occupy the residence supported by his/her circumstances?
  • Is the Assignor’s pattern of activity such that occupation of the property demonstrates that his/her use will not be permanent?
  • Was the assignment triggered by an unforeseen and intervening event?

John’s lawyer determines that John’s primary purpose of purchasing the unit was to sell his interest in the unit to a third party.  John lives and works in Toronto and is married with 4 children. The condominium unit he agreed to purchase from Builder X is in the heart of Uptown Waterloo – a stunning 600 Sq Ft studio. While John did not construct the unit, for GST/HST purposes, he is considered to be a builder as he was “intending to sell the property or an interest in it or to lease the property”. John doesn’t see how he can alter his circumstances to support an alternative intention. John is second guessing whether he should proceed with this assignment transaction as his profit margin is quickly declining. 

Fortunately, John’s lawyer has a solution. John’s lawyer recommends to John that the assignment agreement should be worded such that HST is “in addition to” the assignment price as the transaction is subject to HST. John’s lawyer also adds a clause into Schedule “A” of the assignment agreement to confirm John’s intent to sell or lease the property. John is happy again.

Let’s revisit our scenario and think about what we’ve just discovered. The initial deposit is $45,000.00. John wants Bob to reimburse him for the deposit paid to Builder X. John also wants $80,000.00 (the “Assignment Fee”) from Bob in exchange for Bob taking John’s place as purchaser under the Agreement with Builder X. The total consideration is therefore $125,000.00 and all of it (yes, all of it – not just the profit but the deposit as well) is subject to taxation. Now Bob is unhappy.

Bob is concerned about HST. Bob engages his own lawyer. Bob’s lawyer reconfirms the HST implications in relation to the Assignment Fee and informs Bob that the Assignment Fee does not reflect his total financial obligation as the Assignee. Bob is a player in two distinct transactions:

  • Transaction #1 = Bob’s Assignment from John
  • Transaction #2 = Bob’s Purchase with Builder X

Bob’s lawyer reminds Bob that by entering into an Assignment Agreement, he is stepping into the shoes of John as the purchaser. Bob is assuming the original purchaser’s financial obligations under the Agreement with Builder X, however, Bob has no opportunity to renegotiate any of the terms of the original Agreement. Bob’s lawyer wants to review the original Agreement, any amendments and notices to the Agreement and Builder X’s disclosure package. Bob’s lawyer brings the various closing adjustments to Bob’s attention. Bob will be on the hook for another $37,200.00 in adjustments to Builder X according to his lawyer’s estimations. 

That’s not all. Bob’s responsibility to pay Land Transfer Tax (“LTT”) is also increased. In addition to paying LTT on the original purchase price of $300,000.00, Bob will also have to pay LTT on the Assignment Fee under the Assignment Agreement. Now Bob is very unhappy.

Bob’s lawyer has a recommendation for Bob. He suggests that Bob take advantage of the HST New Housing Rebate (“New Housing Rebate”). Bob already knows about this rebate. Bob is aware that under most new construction agreements it is assumed that the purchaser qualifies for the rebate and therefore the purchase price is listed as inclusive of the rebate for marketing purposes. In doing so, the builder fronts the rebate as a credit to the purchaser and applies to CRA following closing in order to recover the rebate from CRA. What Bob does not know is that if he submits a rebate application after completing his purchase with Builder X (as opposed to in conjunction with the transaction with Builder X), he will be able to claim the rebate over the Assignment Fee as well. If the Assignee meets the qualifications of the New Housing Rebate, the Assignee can recover from CRA a rebate for up to $24,000.00.  Bob’s lawyer also tells him that only one New Housing Rebate application can be filed per dwelling. 

To qualify for the New Housing Rebate, the applicant must: 1. Intend to acquire the property as a primary place of residence; 2. the property must never have been occupied prior to title transfer; and 3. the applicant (or their relative) must occupy the property continuously for a minimum of one year.

Bob’s lawyer concludes that Bob would benefit from applying for the New Housing Rebate on his own following the completion of the purchase transaction. Bob would be eligible for a rebate of $22,243.35 on the original Agreement price of $300,000.00. However on $380,000.00, the Assignment price, Bob’s rebate would increase to the maximum amount available: $24,000.00. Bob will recover an additional $1,756.65 if he applies for the rebate on his own. Bob is happy again! 

As lawyers, it is important to ask our clients detailed questions prior to waiving a “lawyer review” condition in an agreement. Here is a list of questions a prudent lawyer would ask when presented with an assignment agreement:

  • Has the Assignor provided the Assignee with the builder’s written consent to authorize the assignment agreement? 
  • Have the parties determined who will be responsible to pay any assignment fees if such are due to the builder?
  • Is the Assignor’s deposit with the builder in good standing? 
  • If not, has the Assignor made arrangements to bring the deposit into good standing including any applicable NSF charges?
  • Has the Assignor contracted with the builder for any upgrades to the property that have not yet been paid as of the date of entering into the Assignment Agreement?
  • Is the Assignee permitted to contract for any additional upgrades with the builder?
  • Does the Assignment Fee include the cost of the upgrades contracted for to date? 
  • Does the Assignment Fee include the cost of any “incentives” offered by the builder to the Assignor under the original Agreement? Are these incentives transferrable to the Assignee?  
  • Has the Assignee reviewed the disclosure statement and original Agreement? Has the Assignee noted the additional adjustments that may be payable to the builder upon final closing and is the Assignee aware that such adjustments are the Assignee’s responsibility?
  • Has the Assignor provided the Assignee with all amendments, waivers and notices as provided by the Vendor?
  • Has the Assignee ensured with its lender that the Assignee will qualify for financing to complete the transaction? 
  • Has proof of the Assignee’s financing been provided to the Assignor and to the Vendor?
  • Does the Assignee qualify for the New Housing Rebate?
  • Has the Assignee obtained confirmation from the builder that the Assignee will be credited with the New Housing Rebate on the builder’s statement of adjustments if the Assignee qualifies for rebate? 
  • Is it in the Assignee’s best interest to collect the New Housing Rebate through the purchase transaction?
  • Have the parties agreed when the Assignment Fee will be paid by the Assignee to the Assignor? Will it be at completion of the purchase transaction or at the time the Assignment Agreement is accepted?

So, what happens to John, Bob and Builder X? After conferring with their respective lawyers and after serious negotiation, the parties agree as follows: Bob will purchase John’s interest in the unit for $380,000.00 + HST as further set out in Schedule “A” of the Assignment Agreement. John agrees to assume responsibility for HST on the deposit to be recovered ($45,000.00) from Bob. Bob agrees to remit HST on the $80,000.00 Assignment Fee. As Builder X has had little dealing with Bob to date, Builder X is happy to add the potential rebate amount ($22,243.35) back into the sale price of the unit ($300,000.00). Out of caution, Builder X’s consent to permit the assignment continues to hold John liable to complete the transaction in the event that Bob fails to do so. Bob completes both transactions and applies for the New Housing Rebate post-closing. 

Related Team

Slonee Malhotra

Slonee Malhotra

[email protected]

519.749.4606

Related Services

  • Commercial Real Estate

Recent Knowledge

Overtime pay on the rise, collaborative family law, estates pitfall: former spouses and beneficiary designations.

real estate assignment hst

Tax on Assignment Sales: What You Need to Know

Tax on Assignment Sales: What You Need to Know

Real estate assignment sales and flipping pre-construction condos have become popular strategies for investors looking to make a quick return. And CRA has noticed. In this blog, I will explain two ways CRA is cracking down on pre-construction investors and what you can do to minimize your tax paid on assignment sales.

#1 – CRA May Tax Assignment Sales as Business Income

Similar to selling a resale home, you are required to report an assignment sale on your tax return and pay the necessary tax. Many real estate investors are quick to assume that the profit from an assignment sale is a capital gain.

However, CRA may tax assignment sales in two ways:

  • Capital gain – where only 50% of the profit is taxable
  • Business income – where 100% of the profit is taxable

To make its determination, CRA will consider factors such as:

  • What was your motive or intention in buying the property?
  • How long did you hold the property before selling?
  • Do you have a history of similar transactions?
  • What is your reason for selling?

Based on past court cases, we know that CRA will generally consider the profit from assignment sales to be business income unless you have a compelling explanation.

With the potential to double its tax collection, you can bet that CRA is watching this closely!

#2 – CRA May Assess GST/HST on Assignment Sales

This is probably one of the most overlooked tax implications when it comes to assignment sales.

While resale homes are generally exempt from GST/HST, you may be surprised to learn that this may not be the case with assignments.

Similar to income tax, CRA will look at your intentions in buying the property to determine whether GST/HST applies to you.

For example, you are likely considered a “builder” and will have to charge GST/HST if you assign a pre-construction unit that you bought for the purpose of flipping to make a quick profit.

And it gets worse:

Not only do you have to charge GST/HST on your profit, you also have to charge GST/HST on the deposit you recoup from the buyer!

Since most real estate contracts embed GST/HST into the sales price, this cost will likely be borne by the assignor.

Let’s look at an example:

Scenario Luca purchased a pre-construction condo unit for $450,000 a couple of years ago. He paid a deposit of $90,000 to the builder. The unit is currently worth $575,000. Luca had always planned to buy this unit as an investment and assign it for a profit. He has a personal tax rate of 50%.

On the surface, it looks like Luca stands to make a great profit. But, let’s see how that holds up:

What Can You Do to Save Tax on Assignment Sales?

Firstly, if you are unsure whether you have a capital gain or business income, you should reach out to a tax professional for advice.

Secondly, if the profit on your assignment sale is in fact business income because of the factors discussed above, then you should consider incorporating.

The benefit here is that business income is usually taxed at low rates inside a corporation (about 12.2% in Ontario and 11% in British Columbia). This is much lower than the the top tax rate of 53% paid by individuals.

Now be warned:

Setting up a corporation for real estate investing is not for everyone. Be sure to consult with a tax professional before implementing this strategy.

Lastly, it is important to work with an experienced real estate lawyer to discuss your GST/HST options. In my experience, it may be possible to restructure an assignment sale to reduce the GST/HST you pay as an assignor.

In Luca’s case, with the right professionals on his team, he was able to restructure the deal to reduce his taxes by about 38% (50% less 12.2%), pay less GST/HST and put this money into his next real estate project.

Have qu estions about flipping pre-construction real estate? Contact us for a consultation.

The content of this blog is intended to provide a general guide to the subject matter. Professional advice should be sought about your specific circumstances.

Joseph Kwan, CPA, CA

95 Mural St., Suite 600, Richmond Hill, ON L4B 3G2

905.731.8108

[email protected]

real estate assignment hst

Canada: Tax Assistance

real estate assignment hst

Introduction – What is Real Estate Assignment

Buying and Selling real estate assignments is a common form of transaction in the real estate market. An assignment is a transaction of the rights to a property before the legal ownership of the actual property is transferred. In the real estate context, the buyer of an assignment (the "assignee") would purchase the rights to a real estate property, typically but not always a condo, that is being built under a Purchase and Sale Agreement, between the assignment seller and the builder, from the seller of the assignment (the "assignor"). This transaction would take place before the closing date of the property, and the ownership of the property legally remained with a third party, the builder, throughout the assignment transaction. Hence only contractual rights to a piece of property were assigned from one party to another in an assignment transaction and not the property itself.

Tax Guidance to Reporting Profits from an Assignment Sale – Capital Gains and GST/HST

The two main tax issues associated with the assignor in an assignment transaction are whether the profits from the sales are to be characterized as business income or taxable capital gain and whether the sales of assignments give rise to the obligation for the assignor to collect and remit GST/HST.

While many assignors would report their profits as taxable capital gains as well as taking the position that assignors are exempt from collecting and remitting GST/HST for sales of the assignments, over the past few years, the CRA has been aggressively going after assignment transactions, often auditing Canadian taxpayers for both unreported taxable business income and unremitted excise tax.

Whether a particular assignment sale will give rise to taxable business income will depend on the facts involved in the case. Similarly, whether the assignor has an obligation to collect and remit GST/HST will also depend on the facts. In short, there is no single answer and simple tax guidance as to how to report your taxes on every assignment transaction. We will breakdown the relevant tax factors below

Taxable Capital Gain vs. Taxable Income

The determination of income versus capital gain is a complex tax topic in which the Income Tax Act itself provides no tax guidance. This means the Tax Court will look to case law for a holistic set of relevant tax factors to determine taxable income vs. taxable capital gains. Please see our article on this general topic for a detailed breakdown (https://taxpage.com/articles-and-tips/a-canadian-tax-lawyers-introduction-to-business-income-vs-capital-gains/).

In the leading case on this issue, Happy Valley Farms Ltd v MNR, the Federal Court chose a set of holistic factors based on the principle of circumstantially determining the taxpayer's intention at the time of the acquisition of the property. When a taxpayer acquired a property with the intention to resell at a higher value, such intention would strongly suggest the taxpayer has been carrying out business. Therefore, the taxpayer's income should be characterized as taxable business income.

However, the mere fact an assignor ended up selling his or her legal interest in a piece of real estate property does not evidence that he or she had an intention to resell when he or she initially acquired the property. Usually, CRA has to prove an intention to resell through circumstantial evidence to make an inference that the taxpayer had an intention to resell upon acquisition. In the Happy Valley Farm case itself, the Federal Court determined the intention of the taxpayer by looking at his conduct while holding the property as well as his relevant past conducts.

Factors such as frequency or number of other similar transactions by the taxpayer and circumstances that were responsible for the sale of the property are ultimately tools to help the court to determine the taxpayer's intention at the time of acquisition. No single Happy Valley Farms factor outside the motive factor is determinative, and the determination of taxable business income versus taxable capital gains in assignment transactions will depend on a holistic assessment of the facts.

GST/HST on Assignment Sales

Unlike the income tax implications of assignment sales, the GST/HST implication of assignment transactions is more clear. The seller in an assignment transaction can often be deemed as a "builder" under the Excise Tax Act, which gives rise to the obligation to collect and remit GST/HST upon the sales of the transaction.

However, even if the seller is not deemed to be a builder, an assignment sale is at the very least a transaction involving a "chose in action" which is considered an enforceable legal right in the property itself. A chose in action is specifically mentioned in the definition of "property" under section 123(1) of the Excise Tax Act

property means any property, whether real or personal, movable or immovable, tangible or intangible, corporeal or incorporeal, and includes a right or interest of any kind, a share and a chose in action, but does not include money; On the other hand, the seller of an assignment transaction can also claim Input Tax Credits for his or her initial purchase of the assignment rights from the builder. Since many buyers and sellers of real estate assignments are likely unaware of the GST/HST implications of assignment transactions, a crucial issue to keep in mind is the deadline and extension mechanism for claiming Input Tax Credit under subsection 225(5) of the Excise Tax Act.

Pro Tax Tips – Prepare for Different Tax Implication for Each Assignment Transaction

The tax implication of an assignment transaction for the assignor will depend on whether the assignor was legally engaging in business activities in the course of buying and selling his or her real estate property interest. Such determination will involve holistically looking at all the relevant facts surrounding the transaction. The nature of an assignment sale itself does not determine whether the profit from such sales should be reported as taxable income or taxable capital gains.

As CRA has been going after assignment transactions aggressively and will likely to continue doing so in the foreseeable future, it is important for Canadian taxpayers to be aware of his or her rights to objection under the Income Tax Act in order to make sure his or her right to file a notice of objection is preserved upon being audited by the CRA .

If you have been contacted by the CRA regarding your past assignment transactions or you have questions regarding a specific assignment transaction that you are contemplating and whether (or not) it constitutes a business transaction, please contact our office to speaking with one of our experienced Canadian tax lawyers.

real estate assignment hst

  © MondaqÂź Ltd 1994 - 2024. All Rights Reserved .

Login to Mondaq.com

Password Passwords are Case Sensitive

Forgot your password?

Why Register with Mondaq

Free, unlimited access to more than half a million articles (one-article limit removed) from the diverse perspectives of 5,000 leading law, accountancy and advisory firms

Articles tailored to your interests and optional alerts about important changes

Receive priority invitations to relevant webinars and events

You’ll only need to do it once, and readership information is just for authors and is never sold to third parties.

Your Organisation

We need this to enable us to match you with other users from the same organisation. It is also part of the information that we share to our content providers ("Contributors") who contribute Content for free for your use.

real estate assignment hst

real estate assignment hst

  • Services Overview
  • Accounting Services
  • Tax Planning
  • Business Planning
  • Business Valuation
  • Mergers and Acquisitions
  • Corporate Finance
  • Litigation Support and Dispute Resolution
  • Succession & Estate Planning
  • HR Consulting
  • IT Consulting & Workflow Automation
  • Agriculture
  • Condominiums
  • Construction
  • Not-For-Profit
  • Real Estate
  • See the Difference
  • Delivering Difficult Conversations
  • RLB People & RLB Digital Presents: Building Your Team & Tech
  • Careers Overview
  • Career Opportunities
  • Guelph Office
  • Fergus Office
  • Kitchener Office
  • Orangeville Office
  • Shelburne Office
  • IT Consulting & Workflow Automation
  • Events/Trainings
  • The RLB Difference
  • Events & Training

Home » Blog » GST/HST on Assignment of New Housing Agreements

GST/HST on Assignment of New Housing Agreements

  GST/HST on Assignment of New Housing Agreements

On April 7 th , the Government of Canada released the federal budget for 2022 which included several new proposals with the goal of growing the economy and making life more affordable. One of the changes pertains to GST/HST on assignments of a purchase and sale agreement for newly constructed housing, including condominium units.

Often upon entering into a purchase and sale agreement with a builder for the construction and sale of a new house, the purchaser may be entitled to assign their rights under the agreement to another person (an assignee). Following the assignment, the purchase and sale agreement is generally then between the builder and the assignee.

Previous Legislation

Whether or not GST/HST applies on the assignment of a purchase and sale agreement depends on whether the person selling the interest is considered a “builder” for GST/HST purposes. This typically depends on the person’s original intention at the time of acquiring the interest, when entering into the agreement. Generally, only if the original purchaser entered into the agreement with the builder for a purpose other than that of selling the interest, may an exemption from GST/HST be available. These rules often depend on the specific facts of the circumstance and leave room for ambiguity.

New/Current Legislation

Under the new legislation, GST/HST will apply to all assignments. From the purchaser’s perspective, GST/HST will only apply to their profit, and they are not required to apply GST/HST on their original deposit, to prevent double taxation. The GST/HST on the deposits previously made should be handled by the original builder. For example, if the purchaser previously made a $50,000 deposit to the original builder and agrees to sell the contract for $100,000, the GST/HST applies only to the $50,000 of profit.

Form GST62 

Form GST62 is a non-personalized GST/HST form that should be prepared and remitted with the taxes owing. This form, along with the taxes owing, will be due by the end of next month after the sale occurs.

GST/HST Rebate

Typically, homeowners who intend to move into the housing or property can assign the rebate to the home builder and have that amount credited from their purchase price. In the assignment situation, the second purchaser can choose to consider GST/HST paid to both the builder and the assignor when they file their rebate. Whether or not that is beneficial will depend on the value of the property.

The timing of the new legislation is set for one month after the budget was announced which would be May 7 th , 2022. If you have any further questions, the RLB team would be happy to assist you!

Authors: Eric Tuffnail and Blake De Luca

' src=

View Related Articles

Nanda & Associate Lawyers

HST Fact Summary Sheet

  • Sign-up to our newsletter?

Real Estate Lawyers Brampton

Harmonized Sales Tax or HST, was implemented on July 1, 2010, harmonizing the Federal GST of 5% with the Provincial PST of 8% into HST of 13%. Get Advice for HST Fact Summary Sheet.

The HST can form a large part of the Home Closing Costs or Home Legal Costs in your Purchase Transaction. Depending on your type of property purchase, the HST implications may differ. The following is a brief summary of HST to be paid on closing. You are advised to speak to a real estate lawyer to clarify the HST payable on your purchase transaction.

Purchase of a Used Resale Residential Properties

For Purchases of used resale residential properties, the transaction is generally exempt from HST under the Excise Tax Act. Your purchase price in your Agreement of Purchase and Sale should be inclusive of HST.

Purchase of a Newly Built Residential Property from a Builder

HST will apply to the purchase of newly constructed houses and condominiums when the closing occurs after July 1, 2010. For purchases of newly built residential houses or condominiums, the purchase price on the Agreement of Purchase and Sale with the Builder is generally already inclusive of HST and an HST New Housing Rebate for persons who purchase new homes to use as a primary residence.

If you are purchasing a newly built property from a Builder as an investment and you do not move into the property, you are not eligible for the HST New Housing Rebate portion of the Purchase Price. In this scenario, you will have to repay the lost HST New Housing Rebate to the Builder as an adjustment on the final closing. For properties with a Purchase Price of over $450,000.00, the HST New Housing Rebate amount lost is likely to be approximately $24,000.00. If the Property’s purchase price is less than $450,000.00, then the rebate can range from $20,000.00 to $30,000.00.

While you are not eligible for HST New Housing Rebate when you are buying for investment, you will be eligible for an HST Rental Rebate, if you enter into a lease to a Tenant to move into the property for at least a one-year period and apply for the HST Rental Rebate within 2 years of your final closing. The HST Rental Rebate is in the same amount as the lost HST New Housing Rebate that you would have paid to the builder as an adjustment on closing.

You are advised to speak to a real estate lawyer about the HST Rebate applicable to your purchase from a Builder.

Purchase of a Newly Built Residential Property on Assignment from a Builder

The same rules apply when you buy from a Builder on Assignment. The purchase price on the Agreement of Purchase and Sale with the Builder is already inclusive of HST and an HST New Housing Rebate. However, there are some cases where the Builder will not credit the HST new Housing Rebate on closing as a result of an Assignment, despite the eligibility of the Assignee/Purchaser for the Rebate. If you are buying on Assignment and the Builder does not credit you the HST New Housing Rebate, you will need to pay the same to the Builder as an Adjustment on final closing.

To recover your HST New Housing Rebate, you will need to apply for the HST New Housing Rebate yourself after final closing with the Builder. To be eligible for the same, you will need to have acquired the property with the intention of moving into the property and that you will have actually moved into the property after closing with the Builder. Please note that if the Assignor had used the property for rental purposes after taking possession on occupancy, it will affect your eligibility for the HST New Housing Rebate and it is important to ensure the Assignor has not done so.

If you are buying on Assignment for investment purposes, you will need to obtain an HST Rental Rebate by entering into a lease to a Tenant to move into the property for at least a one-year period and apply for the HST Rental Rebate within 2 years of your final closing.

You are advised to speak to a real estate lawyer about the HST Rebate applicable to your Assignment purchase.

Purchase of a Commercial Property

HST applies to purchases of commercial real estate. If you are purchasing property through a Corporation, you may choose to remit HST payable directly to the Canada Revenue Agency after closing and sign an HST Indemnity to be provided to the Seller on closing. To do so, your Corporation must have an active HST Number on the day of closing.

If you do not have a valid HST Number on closing or you do not provide an HST Indemnity, the Seller will charge the HST on closing to be remitted to the Canada Revenue Agency.

After closing, you will need to work with your Accountant to determine if there is any HST due payable to the Canada Revenue Agency to be remitted and self-assessed after the closing of the transaction.

Purchase of a Business (Asset Purchase)

On an asset purchase of a Business, HST is due payable on the business being sold. However, the if both the Vendor (supplier) and the Purchaser (recipient) have a valid HST Number and are both HST registrants, the parties would be eligible to jointly elect so that the HST does not apply to the supply of the business. An HST Election can be jointly made by the Vender and the Purchaser if:

  • The Vendor sells the business or part of it that was established by the Vendor or was established by another person and acquired by the Vendor.
  • Under the Agreement of Purchase and Sale, the Purchaser acquires ownership, possession, or use of all, or substantially all (at least 90% or more), of the property necessary for the Purchaser to be capable of carrying on the business or part as a business.
  • Both the vendor and the purchaser are HST registrants with a valid HST number.

Other HST to be paid on all types of transactions

For any type of real estate transaction, you will need to pay HST on the commission payable to the Real Estate Brokerage on the closing of a sale transaction. You will also need to pay the applicable HST on your Legal Fees due payable to your lawyer for completing the transaction. HST is also paid for your title insurance policy that is obtained for your purchase or refinances closing. Contact us for HST Fact Summary Sheet.

The aforementioned is a non-exhaustive list and you are encouraged to speak to one of our real estate lawyers to discuss any HST applicable to your real estate purchase or real estate sale transaction. Call us today to set up an appointment or to ask for a quote for your real estate closing and HST Fact Summary Sheet.

real estate assignment hst

Fill In the form below, We will get in touch with you as soon as possible.

Demo Description

This will close in 0 seconds

real estate assignment hst

Site logo

Homes for Sale

Logo

  • Skyscrapers
  • Apartments for Sale
  • Apartments for Rent
  • Houses for Sale
  • Houses for Rent
  • Luxury Real Estate
  • Mansions in Russia
  • Palaces in Russia
  • Watch Video
  • Residence permit in Russia

logo

Apartment for sale in Moscow

Four Seasons near the Kremlin 742

128 sqm apartment near the Kremlin with a view of Theatre Square

  • 3 Bathrooms
  • Contact for price

Apartment 530 Knightsbridge Private Park

Apartment 76 sqm on the 34th floor in NEVA TOWER

Penthouse 284 Zvenigorodskoe highway 11

Penthouse 284 sqm on Zvenigorodskoe highway

Apartment on Mytnaya street 24

Apartment 108 sqm on Mytnaya street

  • 2 Bathrooms

3-room apartment with brand new renovation in Art Deco style

Apartment 193 sqm on the 52nd floor in Moscow City

Apartment near Petrovsky park 203

4 room apartment 203 sqm in the house with a swimming pool

  • 4 Bathrooms

Housing complex Art Residence in Moscow

3-room apartment 93 sqm near Belorusskaya metro station

Apartment 66 sqm on Leningradsky prospect 36s36

2-room apartment 66 sqm on the 11th floor

real estate assignment hst

3-room apartment 72 sqm in the elite Filevsky district

Apartment 880 in the Headliner residential complex on the 8th floor

3-room apartment on the 7th floor next to skyscrapers

Apartment 68 sqm in a building near the metro station Dynamo

3-room apartment on the 8th floor near Dinamo metro station

Apartment 105 in Trikolov residential complex near VDNKh metro station

3-room apartment 105 sqm near VDNKh metro station

Novodmitrovskaya street 2k5

Penthouse 140 sqm on the 46th floor

  • $4,700/one square meter

Residential complex Sky Garden in Moscow

New residential complex Sky Garden in Moscow

  • $15,000/one square meter

Skyscraper under construction in Moscow Capital Towers

New residential skyscraper Capital Tower in Moscow City for investors

Apartment on Nikolskaya street 10/2s2B

Penthouse 200 sqm with a terrace and a fireplace near Red Square

Apartment in Bryusov lane 19

5 room apartment 457 sqm in the center of Moscow

Apartment near Okhotny Ryad metro station

Apartment overlooking the Kremlin and Red Square

Apartment 207 sqm in the residential complex Triumph Palace

Apartment on the 35th floor in the Triumph Palace

Apartment 177 sqm at Leningradsky prospect 36c31

3-room apartment 177 sqm in Hyatt Regency

Apartment on the 6th floor on Bolshaya Sadovaya street 5k1

3-room apartment 123 sqm in Tverskoy district

Apartment in Filevsky district on Beregovoy proezd 5k1

Cheap apartment 42 sqm on the 28th floor

Apartment overlooking an Orthodox church near the Kremlin

Duplex penthouse 307 sqm near the Kremlin

Apartment at 3rd Yamskoe Pole 9

5 room apartment 236 sqm in the center of Moscow

Apartment 7 minutes from GUM

3-room apartment 158 sqm near the Kremlin

Apartment in Luzhniki on Mosfilmovskaya street

Apartment 170 sqm on the 36th floor

Apartment in Match Point Residential Complex on Vasilisa Kozhina Street

Apartment 72 sqm near metro Park Pobedy

3-room apartment in the residential complex City Park on Mantulinskaya street 9k1

3-room apartment in City Park residential complex

Apartment 101 sqm in the Mercury Tower Moscow City

Apartment in the Mercury Tower / on the 43rd floor

Looking for apartments for buying in russia.

Choosing the neighborhood of your future residence is a task to be treated with diligence. Poor transport accessibility, a lacking infrastructure and unsatisfactory ecological parameters may noticeably dampen the joy a new property owner is sure to feel from their purchase. To help you avoid such a scenario, we have put together a short overview of the areas in Moscow where you may be considering the purchase of a home , complete with the pros and cons of each of the different locations:

Arbat District – the cultural and business center of Moscow. One of the most prestigious locations in the capital. It boasts a very good infrastructure and high transport accessibility. Unsurprisingly, the property costs here are the highest in Moscow. Despite its small size, the district contains around 10% of all of the capital’s new elite residential buildings, and apartments for sale make up 96% of the properties on the market in this neighborhood. The price of a square meter (3.28 sqft) for an apartment in a new building with penthouses is, on average, 12 000 USD, while the cost of the same in an old building is 9 000 USD. One can even find luxury condos with open terraces for sale in the area.

Kuntsevo District – a beautiful locality surrounded by vast areas of woodland and river beaches on the banks of Moskva River. A strong point of this neighborhood is its good environmental conditions. Brand new and modern residential compounds have been erected here. One square meter (3.28 sqft) of an apartment in a new housing complex in Kuntsevo District currently costs 3 000 USD.

Cozy russian apartment for sale in Moscow

Yakimanka District – one of the most interesting and prestigious areas of Moscow by popular opinion. It is packed full of well-known historic monuments, museums and large parks. The Yakimanka District changed drastically during the Soviet era: most of the centuries-old low-rise houses and mansions were completely demolished or restructured. By the beginning of the 1990’s, new residential and public complexes had already taken their place. Today, one can find condos for sale in Yakimanka’s new residential complexes for the average price of 11 000 USD per square meter (3.28 sqft). The price of a square meter in a Soviet era panel building is 4 000 USD.

Here in Russia’s capital we have our own skyscrapers – grouped together in the compound famously dubbed Moscow-City (the Moscow International Business Center). Many large corporations have their headquarters here. For 1 million US dollars you can purchase a 3-room apartment with a floor area of 607 sqft (185 mÂČ) in one of the towers. This particular listing is located on the 25 th floor.

Where Can I Find Cheap Flats?

If you happen to be a student or if your budget is capped at 300 000 USD and you are looking for cheap condos for sale in Moscow, then the Mitino, Nekrasovka, Cheryomushki, Butovo and Novogireyevo Districts will best suit your needs. These neighborhoods each contain a great number of residential complexes inhabited by Moscow’s middle class. They also have everything one might need for a comfortable life: many schools, kindergartens, big supermarkets, public pools, hospitals, etc. One of Moscow’s Metro stations is also usually just a short walk away. The minimum price of a furnished studio flat in a location within the Moscow Ring Road (a.k.a. MKAD) is currently 100 000 USD.

Compare listings

Reset Password

Please enter your username or email address. You will receive a link to create a new password via email.

Send a Request

IMAGES

  1. Assignment of Real Estate Contract Template

    real estate assignment hst

  2. 3-3 Assignment Real Estate Analysis Part 2

    real estate assignment hst

  3. Real Estate Assignment Help By Professional Experts Australia

    real estate assignment hst

  4. Assignment of Real Estate Contract and Sale Agreement

    real estate assignment hst

  5. Real Estate Assignment Help, Homework Help in the UK

    real estate assignment hst

  6. Homeworks Real Estate

    real estate assignment hst

VIDEO

  1. Tina

  2. Lease Listing Agreement (C.A.R. Form LL)

  3. As a homebuyer, it's essential to negotiate for the best deal

  4. Calm Before the Storm

  5. Live Real Estate Cold Call to Seller that Owns an Apartment Building

  6. Programming Assignment 2: Real Estate Management System

COMMENTS

  1. Assignment of a Purchase and Sale Agreement for a New House or

    Assignment of a Purchase and Sale Agreement for a New House or Condominium Unit From: Canada Revenue Agency Effective May 7, 2022, all assignment sales in respect of newly constructed or substantially renovated residential housing are taxable for GST/HST purposes. This publication will be updated to reflect this legislative change.

  2. Tax Implications of a Real Estate Assignment: a Tax Exposure Calculator

    The bad news is that effective May 7, 2022, under the Excise Tax Act (Canada) ("ETA") every individual assignor of residential real estate would have to collect GST/HST on their assignment profit and remit it to the CRA.

  3. Real Estate Assignment Sales

    Essentially, an individual assignor of residential real estate now must collect GST/HST remit it to the CRA. This rule is applicable even to those who do not have a GST/HST number and believe that they are not purchasing and assigning in the course of commercial activity.

  4. Assigning Property and the GST/HST Implications

    During this time, purchasers may decide to assign their rights outlined in the Purchase and Sale agreement to an assignee. The Federal Budget for 2022 now imposes GST/HST tax obligations on assignors and assignees. Essentially, an individual assignor of residential real estate now must collect GST/HST remit it to the CRA.

  5. HST on Assignment

    HST on Assignments An assignment is a sales transaction that is carried out between the owner (assignor) and the buyer (assignee). The original owner sells the property to the buyer before the original buyer closes on the property.

  6. How HST Applies to Selling Assignments As of May 7th 2022

    Unit 1012 at Station Park in Tower 1 Highlights: 🛌 2 bedrooms 🛀 2 bathrooms 🚘 1 parking spot 🔐 1 locker âč 810 sq.ft. + a 45 sq.ft balcony ⬆ $18.5K in upgrades on the kitchen and bathroom. Corner unit facing King Street with stunning city views. Expected occupancy: Fall 2022 List price: $699,900

  7. The New Proposed HST Treatment On Pre-Construction Assignment Of Sales

    An assignment sale made by an individual is generally taxable if the assignor had originally entered into the pre-construction agreement of purchase and sale with the builder for the primary purpose of investment, in other words, selling their interest in the property for a profit.

  8. HST Issues in Commercial Real Estate Transactions: Assigning vs

    HST errors result in disastrous problems for vendors in commercial real estate transactions because they are costly, as they invariably involve 13% of the purchase price. When the purchase price is relatively low (such as $300,000.00), a potential HST mistake has a correlatively lessened monetary effect (of $39,000.00).

  9. Tax Guidance for Assignors in Real Estate Assignments.

    Introduction - What is Real Estate Assignment Discover how to reporting profits from an assignment sale, the difference between capital gain and taxable income, and the GST/HST implication on sales.

  10. New Tax Rules for Real Estate Assignments and Flipping

    GST/HST previously only applied if the original intention was to sell for profit or flip the property. Effective May 7, 2022, whatever your intention, GST/HST will apply on the assignment profit. Accompanied with some good news, the new rules do clarify that HST is no longer charged on recovered deposits. Prior to May 7, 2022, despite the court ...

  11. HST on Assignments

    HST is payable on an assignment sale of an Agreement of Purchase and Sale ("APS"). Remember when you do an assignment you are not selling the house or property you are selling your APS. The issue is what you pay the HST on, who pays it and how much that will be. Generally the HST will be in addition to the price and paid for by the buyer.

  12. HST on Assignment of Pre-construction Residential Agreement of Purchase

    Does the assignment of an agreement of purchase and sale for a pre-construction condo unit attract HST? The answer depends on the intention of the Buyer/Assignor. If at the time of acquiring the interest, Buyer's/Assignor's primary purpose was selling the condo or selling an interest in the condo or leasing the condo then sale is [
]

  13. Assignment of New Home Agreements

    The 2022 Federal Budget was tabled on April 7, 2022 (the "Budget"). Given the growing demand for new homes, it comes as little surprise that the government has proposed various new rules aimed at addressing affordability in the real estate market.

  14. A Guide to Pre-Construction Assignment Transactions

    If the Assignor (in this case, John) is considered to be a "builder", the Assignor will be required to collect and remit HST on the markup earned through the assignment (in this case, $80,000.00). Exactly how does the CRA make this determination? The CRA looks at intention.

  15. Tax on Assignment Sales: What You Need to Know

    Real estate assignment sales and flipping pre-construction condos have become popular strategies for investors looking to make a quick return. And CRA has noticed. In this blog, I will explain two ways CRA is cracking down on pre-construction investors and what you can do to minimize your tax paid on assignment sales.

  16. Real Estate Assignment

    Introduction - What is Real Estate Assignment Buying and Selling real estate assignments is a common form of transaction in the real estate market. An assignment is a transaction of the rights to a property before the legal ownership of the actual property is transferred.

  17. GST/HST on Assignment of New Housing Agreements

    GST/HST on Assignment of New Housing Agreements. On April 7 th, the Government of Canada released the federal budget for 2022 which included several new proposals with the goal of growing the economy and making life more affordable.One of the changes pertains to GST/HST on assignments of a purchase and sale agreement for newly constructed housing, including condominium units.

  18. HST Fact Summary Sheet

    Harmonized Sales Tax or HST, was implemented on July 1, 2010, harmonizing the Federal GST of 5% with the Provincial PST of 8% into HST of 13%. ... You are advised to speak to a real estate lawyer about the HST Rebate applicable to your Assignment purchase. ... Call us today to set up an appointment or to ask for a quote for your real estate ...

  19. Homes for Sale

    Search for real estate and find real estate listings. Homes for Sale | Century 21Âź. Get details of properties and view photos. Connect to real estate Agents on Century 21Âź

  20. Moscow, ID Real Estate & Homes for Sale

    Brokered by United Country Real Estate - Team Idaho. tour available. House for sale. $749,999. 4 bed; 3 bath; 2,838 sqft 2,838 square feet; 1.14 acre lot 1.14 acre lot; 2929 Cameron Rd. Moscow, ID ...

  21. Apartment for Sale in Moscow Russia & Flats

    Looking for Apartments for Buying in Russia? Choosing the neighborhood of your future residence is a task to be treated with diligence. Poor transport accessibility, a lacking infrastructure and unsatisfactory ecological parameters may noticeably dampen the joy a new property owner is sure to feel from their purchase.

  22. Intermark Real Estate

    Intermark Real Estate (ex Savills) - Intermark Real Estate (formerly Savills) - international real estate agency. Luxury residential and commercial property for rent and sale in Moscow and around the world. English руссĐșĐžĐč Contacts +7 (495) 252 00 99. Callback. Menu ...