Harmonized Sales Tax: 

Implication for Owning Real Estate in Ontario

Resource:

Ontario Real Estate Association Political Affairs Conference

What Is Happening:

HST will replace the 5% GST and the 8% Retail Sales Tax

HST will apply at a 13% rate effective July 1, 2010.

Harmonized Sales Tax (HST) - A Bit of History ...

January 1991  - Federal Government introduces GST at 7% replacing the Federal Manufacturer's Sales Tax

April, 1997   - Three Atlantic Provinces eliminate sales taxes and replaces GST with 15% HST

Then .. Some Good News

July 1, 2006 GST rates was reduced from 7% to 6%.  The HST was reduced from 15% to 14%.

January 1, 2008 the GST rate was reduced from 6% to 5% and the HST rate was reduced from 14% to 13%

The Future - On July 1, 2010 Ontario will eliminate the 8% retail sales tax and replae the GST with a 13% Harmonized Sales Tax (HST).

On July 1, 2010  British Columbia will eliminate the 7% sales tax and replace the GST with a 12% Harmonized Sales Tax (HST).

 Affected Items

• GST was previously applied on gasoline and diesel which will no longer be taxed under the Harmonized Sales Tax.
• Items from haircuts to carpet cleaning that today include only the 5% GST will see an increase in costs. 
• However, the PST portion of the HST will be exempt on newspapers and fast food items not exceeding $4.00 per purchase
• In Ontario, a rebate compensating for the HST will leave the first $400,000 of a new home purchase unaffected, whereas the portion of a home above $400,000 will be charged the full HST
  

The Landscape for HST on July 1, 2010

Alberta                               5% GST

British Columbia             12% GST

Manitoba                            5% GST + 7% Sales Tax

New Brunswick                13% HST

North West Territories      5% GST

Nova Scotia                     13% HST

Nunavut                              5% GST

Ontario                           13% HST

Quebec                              5% GST + 7.5% QST

Saskatchewan                  5% GST + 5% Sales Tax

Yukon                                 5% GST

GST vs. HST - What's The Difference?

There is not much difference, other than:

• HST applies at a (much) higher rate
• Extra tax revenues go to the Province

 GST/HST vs. Sales Tax:  What's the Main Difference?

                   Ontario Sales Tax                                  GST/HST

                     Appled to:                                                Apply to:

                     Many goods                                            almost all goods

                     A few services                                        almost all services

                     Not buildings or land                              buildings and land

Implications for Buying Used Homes

 Many previously tax-free services will be HST taxable, including:  

• home inspection fees
• real estate commissions
• legal fees
• home appraisals
• moving costs
• mandatory home energy audits

OREA estimates HST will add $1,449.00 in tax to acquiring an existing home.

Implications for Maintaining Homes

Many previously tax-free services for maintaining a home will be HST taxable:

• utilities
• home renovation labour
• lawn upkeep or landscaping
• snow removal

OREA estimates HST will add $480 in annual tax (budgeting $500 per month for such costs).

Implications for (Expensive) New Homes

GST/HST applies on the first sale of a new home

HST rebate intended to limit addidtional HST cost to Retail Sales Tax equivalent, estimated at 2%

But, full 8% Provincial component of HST applies to new homes above $400,000, which is an additional $24,000 for an $800,000 home.