GST/HST on Assignment of New Housing Agreements

On April 7th, 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 7th, 2022. If you have any further questions, the RLB team would be happy to assist you!

Authors: Eric Tuffnail and Blake De Luca