Real Estate Law: Goods and Services Tax/Harmonized Sales Tax (GST/HST)
In the OREA standard form agreement (“OREA Agreement”), there is a blank space provided where it should be indicated whether taxes are “included in” or “in addition to” the purchase price. Generally in residential resale transactions, this space is completed with “included in”, but it is essential to be correct because even though a used-residential property is not subject to HST, if the property is commercial or has a commercial component, it would be subject to the tax.
The problem often arises with commercial properties because sometimes the agreements are prepared on the wrong OREA form and the section for HST is overlooked as a formality. As stated above, commercial properties and even mixed residential/commercial (although only the commercial part would be subject) are subject to the tax. A commercial property can be a storefront, an office building, a condominium office or store, etc. There are ways to off-set the HST payable by the purchaser however it is extremely important to be clear that the purchaser and seller are aware of the tax consequences and therefore understand whether the purchase price is “included in” or “in addition to”. Having regard to this, if there is any doubt, advice should be sought from professionals with specific knowledge such as lawyers or accountants.
Remember, it is always the sellers responsibility to remit the HST payable, however the purchaser can provide the seller with an undertaking and indemnity to remit the HST directly to the Canada Revenue Agency (CRA) so that the purchaser can use their input tax credits and off-set the amount payable resulting in less tax payable to the CRA. In this case the purchaser will need to be an HST registrant and provide their HST number in the form undertaking and indemnity.
If you have any questions with regards to either paying or remitting HST on the sale of your property, contact the lawyers at Levy Zavet for free consultation.