The following is quote from CRA handout. I will high light the points we can learn at the end. If you don't want to spend too much time to read the original, You can go to the end directly.
The important part of this handout start from here "
Proposed GST/HST Treatment of Assignment Sales
On April 7, 2022, the Minister of Finance Canada tabled Budget 2022 which proposed an amendment to Part IX of the Excise Tax Act. The proposed amendment would make all assignment sales in respect of a newly constructed or substantially renovated single unit residential complex or residential condominium unit taxable.
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. An assignment sale made by an individual is generally taxable if the individual had originally entered into the agreement of purchase and sale with the builder for the primary purpose of selling their interest in the real property. If, on the other hand, the individual had originally entered into the agreement of purchase and sale for another primary purpose (for example, to occupy the house as a place of residence), the assignment sale is generally exempt. Any amount an assignor paid as a deposit to a builder is included in the consideration for a taxable assignment sale. For more information on the current GST/HST rules, refer to GST/HST Info Sheet GI-120, Assignment of a Purchase and Sale Agreement for a New House or Condominium Unit.
The proposed amendment to the ETA would make all assignment sales, including those made by individuals, in respect of newly constructed or substantially renovated residential housing taxable for GST/HST purposes. Furthermore, the proposed amendment would exclude any amount attributable to a deposit paid by an assignor to a builder from the consideration for a taxable assignment sale, when certain conditions are met. The proposed amendment would apply to all assignment agreements entered into after May 6, 2022.
The proposed amendment adds section 192.1 to the ETA. Proposed section 192.1 states that if a taxable supply by way of sale of a single unit residential complex (as defined in subsection 254(1)) or of a residential condominium unit is made in Canada under an agreement of purchase and sale (in this section, referred to as the purchase agreement) entered into with a builder of the single unit residential complex or of the residential condominium unit and if another supply by way of assignment of the purchase agreement is made by a person (other than the builder) under another agreement, then the following rules apply:
- the other supply is deemed to be a taxable supply, by way of sale, of real property that is an interest in the single unit residential complex or residential condominium unit
- the consideration for the other supply is deemed to be equal to the amount determined by the formula:
|A||is the consideration for the other supply as otherwise determined for GST/HST purposes|
(i) if the other agreement indicates in writing that a part of the consideration for the other supply is attributable to the reimbursement of a deposit paid under the purchase agreement, the part of the consideration for the other supply that is solely attributable to the reimbursement of the deposit paid under the purchase agreement
(ii) in any other case, zero
Proposed section 192.1 applies in respect of any supply by way of assignment of an agreement of purchase and sale if the supply is made after May 6, 2022.
The important part of the handout of CRA end here.
Here is what we should pay attention for this article.
1. Since May 6, 2022, the followings should apply
2. in the assignment agreement, make it clear that the assignment amount contains deposit reimbursement and lift. the reimbursement amount is not the profit of the assignor.
3. for new properties or substantially renovated properties, there will no exception any more. All will be considered as taxable, no matter, business or individual, home purpose or flipping purpose.
4. only lift part is GST applicable if you did the #1 I mentioned above.
I am not an accountant and not responsible for your tax issue, problem or loss. If you have any question, please consult your accountant or lawyer.
Morning Lee Coach