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  • May 11, 2022

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

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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 . ​

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HST on Assignments

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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. In short, the buyer sells the property to gain any interest or profit on the house by selling the property before they close on the property.

HST on Assignment Sale

The assignor pays the HST on the assignment sale along with the original price. The assignment agreement is prepared, clearly stating the profit on a transaction.  It is advisable to hire a  Real Estate lawyer to prepare the agreement with all the necessary information.

Important Changes in the HST on Assignment Sales

In the 2022 Federal Budget, two important changes were introduced in the HST on assignments. The changes that will govern the New Home Contract are as follows:

HST on Assignments is Applicable on all New Home Contracts

The government announced that all Assignment agreements for New Homes entered in on or after May 7 th,  2022 are now subject to  HST. In the past, the HST on assignments was decided based on the intention of the original buyer, who often paid no HST on assignments. In short, the government has now removed all exemptions, and every New Home Assignment is subject to HST now.

The intention of the original owner is no longer taken into consideration, and all New Home Assignments are now deemed to be a taxable supply to HST.

Deposits are Exempt from HST under Conditions

The government has removed another confusion that often clouded the judgment of whether or not HST is to be paid on the deposit. To exempt the deposit from HST, the Assignment Agreement must include that part of the assignment price is the reimbursement of the deposit paid by the original buyer under the purchase agreement. In short, the writing must clearly state that the assignment price already includes the deposit, so the HST can be exempt.

As stated in the HST Info Sheet GI-120, the HST is only charged to the extent the assignment price exceeds the deposits paid by the assignor in the New Home Contract. The HST does not apply to the original deposit paid by the assignor. However, the above condition must be met. The HST is only payable on any other amount paid to Assignor over and above the deposit.

Nanda & Associate Lawyers Professional Corporation assists Canadian residents and businesses with their HST needs. Get in touch with us today for more details.

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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 REALTOR®, 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 REALTOR®, 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 ⏹ 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 ⏹ 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.

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Everything you need to know about Preconstruction Assignment Sales

Everything you need to know about Preconstruction Assignment Sales

Have you sold pre-construction homes before closing on assignments?

Have you wondered about what are the tax implications on selling pre-construction homes before closing?

We often advise our clients to not to sell their pre-construction homes before closing if possible.  It can trigger a series of tax implications – HST and income tax implications. 

Before the announcement of Budget 2022, CRA had adopted the policies that HST would be applicable on not just the assignment fees, but also the deposit. 

This could be a huge tax cost that most investors weren’t aware of.

Now, let’s use an example to explain .

Say you agree to purchase a pre-construction home for $700,000.  You sign the agreement of purchase and sale and pay a deposit of $100,000 to the builder. 

The new home is expected to be completed a few years later.

You decided to sell the property on assignment before it’s ready for closing for an additional $50,000.

Scenario 1:  When you signed the agreement of purchase and sale, you intended to move into the property and use it as your primary residence.  

Life circumstances change.  You now decided to sell the property before closing.  You sold it on assignment before May 6, 2022 .

HST: As your intention was to move into the property as your primary residence, you had no HST liability obligation.

Again, intention is subjective.  If you’re questioned in court, you would have to provide evidence to prove your own intention. 

Most clients thought that the CRA would have to prove that they were wrong.  The truth however is that the taxpayers are the one who have the responsibility to prove to CRA their own filing position. 

Make sure your have documentation proving your initial intention.   

Income Tax: Assuming you have strong documentation proving that you did intend to purchase this pre-construction home as your primary residence, the $50,000 assignment fees could be reported as capital gain.

Scenario 2:  When you signed the agreement of purchase and sale, you intended to move into the property and use it as your primary residence.  

Life circumstances change.  You now decided to sell the property before closing.  You sold it on assignment after May 6, 2022 .

Budget 2022 changed the rule.  For all assignment sales happened after May 6, 2022, regardless of your intention, you’re required to pay HST on the assignment sales.

HST implication:

This means that the $50,000 collected is no longer all yours.  This $50,000 collected, if you don’t charge HST on top, is inclusive of HST.  

You must remit the HST to CRA on sale on assignment.  In this case, it would have been $5.8K. 

Presumably, you would also be able to claim Input Tax Credit, which is the HST you paid on services that you used to allow you to sell the property.  This includes the HST you paid on your legal cost and HST you paid on brokerage fees. 

The net amount can be remitted to CRA.

Income Tax Implication:

Budget 2022 also made some rule changes when it comes down to sale of property.  The sale of a property within one year of ownership is considered on income account, meaning 100% of the profit you make is taxable, with some exceptions allowed, effective Jan 1, 2023.

When you apply this new rule to this scenario, it is unknown as to whether an assignment sale is considered a flipped property.  It’s difficult to say whether this rule is applicable to assignment sale at this point.

Regardless, you still would need to keep proper and relevant documentation supporting your intention that you were trying to move into the property as your primary residence.  With proper documentation, you could still report the net income from assignment sale on capital account, meaning only 50% of the profit you make is taxable.

In our example, assuming client didn’t incur other cost of selling, the client would be reporting $44K of capital gain, 50% of which would be taxable.

Scenario 3:  When you signed the agreement of purchase and sale, you intended to rent out your property.  

Interest rate changed.  You now decided to sell the property before closing.  You sold it on assignment before May 6, 2022 .

Your intent was never to move into the property as your primary residence or have any of your family members moving in, as a result HST is applicable on assignment sale.

Assignment fees are subject to HST. $50,000 assignment fees you collected are subjected to HST.

CRA also adopted the position that the deposits $100K are also subject to HST as well.  Ouch!

You thought you made $50,000 – but after considering the HST on assignment fees $5.8K and HST on deposits $11.5K, you really only net $33K.

This calculation hasn’t considered the brokerage fees as well as the lawyer fees yet.  Yikes!

Income Tax implication:

The net amount profit of $33K (assuming there’s no brokerage fees or lawyer fees, if you have, the net profit is lower) would likely have to be reported as income, 100% of it is taxable. 

If you own the property in your personal name, the entire amount is added to your job income or whatever income you have in your personal name.  You’re taxed at the respective marginal tax rates, which can be as high as 53.5% in Ontario.

Triple Yikes!

If you own the property in the corporation, the profit is taxed as regular business income, most likely at 12.2% for qualified small businesses. 

Scenario 4:  When you signed the agreement of purchase and sale, you intended to rent out your property.  

Interest rate changed.  You now decided to sell the property before closing.  You sold it on assignment AFTER May 12, 2022 .

The Government also recognized that charging HST on deposits were not right.  Budget 2022 specified that HST would no longer be charged on deposits .

Assignment fees are subject to HST but deposits are not subject to HST anymore to avoid double taxation.

Assignment fees are reported as income 100% taxable.

So continuing with the same example, HST is applicable on the $50,000 assignment fees, meaning that you would incur HST liability of $5.8K as calculated above. 

Again, you could offset the HST liability with the HST you pay on realtor commission as well as lawyer fees on closing. 

The net amount would have to be paid to CRA.

The net profit of $44K (assuming there’s no brokerage fees or lawyer fees, if you have, the net profit is lower) would likely have to be reported as income, 100% of it is taxable. 

Similar to Scenario 3, if you own the property in your personal name, the entire amount is added to your job income or whatever income you have in your personal name.  You’re taxed at the respective marginal tax rates, which can be as high as 53.5% in Ontario.

Now that we’ve gone through the assignment sales tax implication in details – Are you still planning to sell your properties on assignment?

Let us know below.

Lastly, our team has been working tirelessly to prepare for the upcoming Wealth Hacker Conference on preparing everyone for the upcoming recession.  We have experts such as Dalia sharing her insights on how to protect your portfolio and grow from this recession.  If you are lost, join us at the upcoming Wealth Hacker Conference.  

Visit WealthHacker.ca now to get your tickets. 

Until next time, happy Canadian Real Estate Investing.

Cherry Chan, CPA, CA

Your Real Estate Accountant

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Tax Insights: GST/HST issues relating to the assignment of agreements to purchase newly constructed condominiums

February 01, 2021

Issue 2021-03

The combination of rising home prices and the financial stress and uncertainty created by the COVID-19 pandemic is resulting in more condominium purchasers reconsidering their acquisition. While some buyers always planned to assign their agreements of purchase and sale (APS) to a third party, many other buyers that originally intended to lease or reside in their condominium units are also assigning their APS. There are a number of reasons for this, one of which is a reduction in the demand for rental condominiums in many Canadian cities. As discussed in a recent Tax Court of Canada decision, Chen Sun v. The Queen, 2020 TCC 112, there are many Goods and Services Tax/Harmonized Sales Tax (GST/HST) issues to consider when an APS is assigned to a third party, including whether:

  • GST/HST is payable by the assignee on the assignment fee and the amount attributable to the deposit that was paid by the assignor to the builder of the property
  • the assignee is eligible to claim the GST/HST new housing rebate
  • the new housing rebate can be assigned to the builder and credited against the purchase price

Is the assignment of an APS a taxable supply

The assignment of an APS will constitute a taxable supply, unless it qualifies for an exemption. This is because “real property” is defined to include an interest in real property, and the making of a supply of real property (other than an exempt supply) is deemed to be made in the course of a “commercial activity.” The sale of an interest in a residential complex by a person that is not a “builder” is generally exempt; however, the sale of an interest in a new home or condominium is generally subject to GST/HST when the assignor is a “builder.”

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. It is also important to note that the Tax Court of Canada’s decision in Casa Blanca Homes Ltd. v. The Queen, 2013 TCC 338 contradicts the CRA’s view. In Casa Blanca Homes Ltd., the Tax Court of Canada held that the amount paid to the assignor relating to the deposit constituted an exempt supply of a financial service and would therefore not be subject to 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.

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

PwC can help structure these assignments in a tax-efficient manner.

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Brent Murray

Partner, PwC Law LLP

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Condo assignments – what you need to know about HST

Many people 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. There are two issues relating to harmonized sales tax (HST) in Ontario that assignors (sellers) and assignees (buyers) should consider when entering pre-construction freehold and condominium assignments.

HST on assignment fees

In Ontario, 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 only 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 that it is – even though CRA lost in a court ruling that 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 of 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 whose circumstances change over time; the Rebate is provided only if 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. Realtors provide an important service, but a lawyer will take the time to review everything properly and make sure you are protected, and that there are no open questions.

About Jayson Schwarz

Jayson Schwarz LL.M is a Toronto real estate lawyer and partner in the law firm Schwarz Law Partners LLP. Visit the website at schwarzlaw.ca or email your questions about real estate to [email protected]

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HST on Assignments

hst on assignment sale calculator

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.

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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]

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

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

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Assignment Sales and HST

An assignment sale is a type of real estate transaction that occurs when a buyer of a pre- construction home or condo decides to sell their rights to purchase the property to another buyer before the construction of the building is complete. This type of sale transfers the purchase agreement from the original buyer to the new buyer (known as the “assignee”)

As of May 2022, the government introduced a new rule requiring HST (Harmonized Sales Tax) to be paid on all assignment sales of single-unit residential or condo properties that are newly constructed or renovated. This means that the assignee must pay HST on the difference between the original purchase price and the resale price.

For example, if a pre-construction home was originally purchased for $500,000 and then sold as an assignment sale for $600,000, the assignee must pay $13,000 in HST (calculated as 13% of $100,000, which is the difference between the original purchase price and the resale price).

It is the responsibility of the lawyers involved in the transaction to make sure that the HST portion is remitted correctly, taking into account various factors such as the date of the assignment and the completion date of the building.

Despite the introduction of HST, an assignment sale still continues to have many benefits, such as being a more convenient way for original buyers to sell their rights to the property without having to go through hurdles of selling a fully completed property.

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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.

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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 Taxation™.

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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. 

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New Assignment Rule 2022

New Assignment Rule 2022

New Assignment Rule 2022 – Buyer to Pay HST on Profit

New assignment rule 2022 – 13% hst in ontario, assignment sales entered into after may 7, 2022 are now subject to hst on the profit portion of the final price..

Pre-construction assignment sales are now subject to 13% HST in Ontario . This has to be paid only on the first buyer’s profit when the contract is sold to a second purchaser.

The HST is not charged on the total price of the property but only on the profit portion. It has to be paid by the second purchaser.

What is an Assignment Sale?

Assignment sale is when a buyer wishes to sell or offload his or her builder’s new condo at pre-construction stage to another interested buyer.

So there are three parties involved in an assignment sale: the builder, the first buyer and the second buyer. The first buyer has an “Agreement of Purchase and Sale” with the builder. The first buyer sells his “Agreement of Purchase and Sale” to the second buyer.

In a pre-construction assignment sale, since the property is not yet built, it is merely a transaction of “the interest in the Agreement of Purchase and Sale” of that property. The second buyer is not buying the property, he or she is buying the Agreement of Purchase and Sale of that property. This is known as an assignment sale.

Most of the builders of new condos permit assignment sales, often free of cost, or at a predetermined cost.

Get some tips and read more about the pros and cons of assignment sales.

What do the terms Assignor and Assignee mean?

Assignor (or the first buyer) is a person who is the original purchaser of a pre-construction home or condo directly from the builder. When the assignor sells the pre-construction unit to another purchaser before closing, that purchaser is known as an assignee.

An example of an Assignment Transaction

In simple terms, if an assignor bought a pre-construction home or condo for $500,000 and sells it as an assignment sale to an assignee for $600,000, then the assignee has to pay 13% HST on $100,000 to the government. It is the job of the lawyers to ensure that the HST portion is remitted to the government.

Why have these changes been introduced?

These measures have been introduced by our government to get more money into their coffers as they see a lot of speculation going on in the real estate market with people making handsome profits in recent years. It is aimed at curbing the rampant speculation and to slow down the feisty real estate market.

This rule intends to tax the assignee, just like any other buyer who purchases any goods and services from the market and pays 13% tax in Ontario.

As for the assignor, he or she will have to pay tax on the total income or the profit he or she makes from the transaction.

Note: This blog post and the contents herein DO NOT serve as legal or financial advice. Kindly consult with your professional accountant and lawyer before making any decision regarding sale or purchase of an assignment home or condo, and payment of taxes arising out of it.

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HST Calculator

Canadian Harmonized Sales Tax Calculator

  • CRA deferred GST/HST tax remittances and payments
  • Tax returns of individuals due date also deferred
  • Relief measures for individuals and businesses by Revenu Québec
  • $5.5 billion GST rebates to help who lost income due to COVID-19

This is very simple universal HST calculator for any Canadian province where Harmonized Sales Tax is used. This calculator can be used as well as reverse HST calculator .

Select the province you need to calculate HST for and then enter any value you know – HST value OR price including HST OR price exclusive HST – the other values will be calculated instantly.

Current HST rates are listed below the HST calculator.

Current (2024) HST rates are:

History of HST implementation in Canada

In 1997 Harmonized Sales Tax (HST) was introduced in three provinces – New Brunswick , Newfoundland and Labrador , and Nova Scotia .

In 2010 HST was implemented in Ontario and British Columbia.

In 2013 Prince Edward Island Prince Edward Island harmonized its PST (Provincial Sales Tax) with the GST (Goods and Services Tax) to implement the HST. But British Columbia replaced HST back to GST/PST.

From 1st of July, 2016 HST rate increased to 15% in New Brunswick and Newfoundland and Labrador .

From 1st of October, 2016 Prince Edward Island HST rate was increased from 10% to 15%.

So currently five Canadian provinces have HST (Harmonized Sales Tax) implementation – New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario and Prince Edward Island.

Latest news

  • CRA deferred GST/HST tax remittances and payments (COVID-19 Measures) CRA will allow all businesses to defer until the end of June 2020 any GST/HST payments or remittances that become owing on or after March 27, 2020, and before June 2020.
  • On 1st of October, 2016 HST was increased in PEI From 1st of October 2016 Province of Prince Edward Island increased the provincial component of the harmonized sales tax (HST). HST rate increased from 14% to …
  • HST rate increased in NB and NL From 1st of July 2016 HST rate in New Brunswick and Newfoundland and Labrador increased from 13% to …
  • Fixed cents entry problem Thanks to our users who noticed HST Calculator was not accepting cents while entering any amount and all numbers were rounded to integer amount. It is fixed now.

18 Replies to “HST Calculator”

Over the years I have used many online HST Calculators when it came time to do my books. Some were easy others were complicated…But this one is simple, easy to use And gives you both answers…if you have receipts with or without the HST included!! I love this feature!! Great job!!

Thank you, Sharelynne, for your feedback

Why does Quebec not appear? no longer a part of Canada?

Hi Tony, Quebec is still part of Canada, but they don’t charge HST. Check GST Calculator https://gstcalculator.ca/ instead.

PEI’s HST increased on Oct. 1, 2016 from 14 to 15 per cent.

Thank you Andrew. We updated our calculator.

I am trying to figure out what amount of HST was paid to me on my commission. My contractor just sent me the total amount with HST in it. I need for income tax purposes to break the HST out as I am self employed.

Hi Jeannie,

All you need to do – enter your amount into third field “Price including HST” and other values will be populated automatically and you will see what amount is without HST

Hi i order package online and it cost 58US $ just heard i jave to pay import duty charges on it its 4 lipsticks how much they are gona charge me for handling mean how much is duty charges thanks

Why am I unable to use a decimal?

Sarah, please use dot as decimal separator but not a comma. I.e. enter 10.45, but not 10,45

Hi Sara, the issue should be fixed by now. Let us know if you still experience any problems.

Thanks for this calculator – simple and quick to use. A HUGE timesaver. 🙂

You are welcome!

This calculator is very helpful and accurate and secondly the operating management is very concerned and reply fast.

Thank you Zia.

No decimal point to put in accurate figures! Please remedy quickly!!! Thanks. Love this tool:)

It was fixed.

Comments are closed.

IMAGES

  1. The A-to-Z Guide to Buying a Condo Assignment in Toronto, Ontario

    hst on assignment sale calculator

  2. Best HST Sales Tax Calculator

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  3. HST Calculator (Pro)

    hst on assignment sale calculator

  4. Calculating HST in Ontario: HST Calculator

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  5. HST Calculator / Harmonized Sales Tax Calculator

    hst on assignment sale calculator

  6. Reverse HST calculator

    hst on assignment sale calculator

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COMMENTS

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

    May 11, 2022 Tax Implications of a Real Estate Assignment: a Tax Exposure 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.

  2. Proposed GST/HST Treatment of Assignment Sales

    Under the current GST/HST rules, an assignment sale made by a person that is not an individual in respect of newly constructed or substantially renovated residential housing is generally taxable, whereas an assignment sale made by an individual may be either taxable or exempt.

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

    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. Builder

  4. 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.

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

    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.

  6. Everything you need to know about Preconstruction Assignment Sales

    You decided to sell the property on assignment before it's ready for closing for an additional $50,000. Scenario 1: When you signed the agreement of purchase and sale, you intended to move into the property and use it as your primary residence. Life circumstances change. You now decided to sell the property before closing.

  7. Tax Implications on Assignment of a Purchase Contract

    The profit made from an assignment of purchase agreement will either be designated as business income, which is fully taxable, or as a capital gain, which is currently taxed at 50 percent. The tax treatment depends on the initial buyer's intention on signing the contract on the new build.

  8. Tax Insights: GST/HST issues relating to the assignment of ...

    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.

  9. Condo assignments

    HST on assignment fees. In Ontario, 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 only 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 ...

  10. 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.

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

    Posted May 13, 2021 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.

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

    In other words, now all assignment agreements entered into after May 6, 2022, will be subject to the 13% HST in Ontario. Previously, there were different tax treatments for assignment sales based on the assignor's intended usage of the subject property, if you were an investor versus an end-user intending to purchase the property as a primary ...

  13. Assignment Sales and HST

    constructed or renovated. This means that the assignee must pay HST on the difference. between the original purchase price and the resale price. For example, if a pre-construction home was originally purchased for $500,000 and then sold as. an assignment sale for $600,000, the assignee must pay $13,000 in HST (calculated as 13% of.

  14. Tax Guidance for Assignors in Real Estate Assignments.

    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 ...

  15. GST/HST calculator (and rates)

    GST/HST calculator Use this calculator to find out the amount of tax that applies to sales in Canada. Province or territory Amount Amount entered is: Before taxes After taxes Calculate GST/HST provincial rates table The following table provides the GST and HST provincial rates since July 1, 2010.

  16. Real Estate & Construction

    Income tax implications for the assignor. With an assignment sale, the assignor must report any profit realized from an assignment sale in the tax year in which the right is assigned. The profit will either be treated as fully taxable business income, which is fully taxable, or income from a capital gain, only 50% of which is taxable.

  17. Take Caution When Selling or Purchasing a Condo Assignment

    Here is a link to an online calculator that calculates the HST Rebate component of the purchase price. Therefore, on Closing Day, she only needs to pay the purchase price stated in the builder's purchase agreement plus land transfer taxes, levies, lawyers fees, etc. ... The Assignor is required to collect from the Assignee HST on the profit she ...

  18. 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.

  19. Assignment Sale

    HST on Profit On April 7, 2022, the Government of Canada unveiled Budget 2022: A Plan to Grow Our Economy and Make Life More Affordable. As a result, GST will be added to all assignment sales of newly constructed properties as part of the government's effort to curb housing speculation.

  20. New Assignment Rule 2022

    In simple terms, if an assignor bought a pre-construction home or condo for $500,000 and sells it as an assignment sale to an assignee for $600,000, then the assignee has to pay 13% HST on $100,000 to the government. It is the job of the lawyers to ensure that the HST portion is remitted to the government. Why have these changes been introduced?

  21. How to calculate HST on assignment sale? : r/PersonalFinanceCanada

    How to calculate HST on assignment sale? I have purchased at $859060. I have placed down payment of $85906 (10%). If I sell at $950K, what would be the HST? I can't find an online calculator. 0 Sort by: mercurialdude • 2 yr. ago Hst is 13%… rayvn • 2 yr. ago In Ontario. It's 15% in NB, NL, NS, and PEI. More replies r/PersonalFinanceCanada

  22. HST Calculator / Harmonized Sales Tax Calculator

    This free online HST calculator allows calculate Harmonized Sales Tax for any Canadian province where Harmonized Sales Tax (HST) is implemented. It can be used as reverse HST calculator as well