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Condo HST Rebate

What is condo HST Rebate?
When you purchase a pre-construction condo, you often come across the statement “Prices include H.S.T.”, while this is a true statement, there is a deeper meaning to it and requires different actions from condo end-users and investors. We know that HST is 13% in Ontario, but because the government is offering HST rebate for new housing, in most cases, we don’t pay all 13% for new condos and so we should view the HST as having 2 portions: 1) the Non-Rebatable Portion and 2) the Rebatable Portion . What the “Prices include H.S.T” statement really means is that the Non-Rebatable Portion of the HST is already included in the purchase price.

How is the Non-Rebatable Portion calculated?
Net Purchase Price = Purchase Price – Non-Rebatable Portion of HST

The net purchase price is calculated using a set of formulas depending on the range that the purchase price falls into. Let's do an example:
Purchase Price = $319,400
Net Purchase Price = $319,400 / 1.052 = $303,612.17
Total HST Payable = Net Purchase Price * 13% = $39,469.58
Non-Rebatable Portion of HST = Purchase Price – Net Purchase Price = $15,787.83
Total HST Payable – Non-Rebatable Portion = $23,681.75

This means that when we purchase a condo of purchase price $319,400 from a developer, the price has already included a tax amount of $15,787.83, which is the non-rebatable portion of the HST. So what’s going to happen with the rebatable portion?

Who can be qualified to claim the Rebatable Portion?
1. An end user who lives in the new condo unit as his/her primary residence – in this case, the developer will claim the Rebatable Portion from the government on behalf of the end user. In other words, if you’re an end user, you don’t need to do anything, you simply pay the purchase price and the developer takes care of all the HST.
2. An investor who rented out his/her new condo unit to a tenant with a minimum 1 year lease – in this case, the investor would have to pre-pay the Rebatable Portion of the HST on final closing and then file the HST rebate application to the CRA to claim it back. In the end, you’re not paying anything extra because you will get the rebatable portion back, the only difference though is that you need to budget the amount of money to pre-pay to the CRA and then get it back as a rebate. The expected time to get the rebate is 4-6 weeks.

What’s the purpose of this rebate process?
Sounds like you just pre-pay and get back what you paid, so what’s the point of this complicated rebate process? The purpose is to discourage Condo Flippers. If you are a Condo Flipper, you are NOT qualified to claim the rebate. This is also one of the reasons why we discourage condo assignments. We believe that a healthy condo investment should be to buy and hold.

The goal of www.CondoHSTRebate.com
If you’re qualified to claim the HST rebate, you would have to fill out an applicatio and mail it to the CRA. The application involves some steps of calculations and can get complicated, so we have designed a very straight forward and simple to use system to help you with the application. You simply enter a few pieces of basic information and our online engine will take care of all the complicated calculations for you. Your completed application will be generated and available for you to download in pdf format instantly. All you need to do is to print it out, sign and mail to the CRA.

Who is Eligible for a Condo HST Rebate?
Most people are aware of the HST rebate for principal residence. This rebate is offered only to purchasers who make the property their principal residence. However, many people do not know about the rental rebate that is offered to purchasers who intend to use the property as an investment and therefore lease the property.
If you’ve purchased a newly built condominium or any other type of residential property as an income property, you may be eligible for a rental rebate of up to $30,000. The criteria are that you have at least a one year lease agreement and that the final closing took place in the past two years.

Most people who purchase brand new properties are asked on closing whether they intend on making it their principal residence. The reason is that builders include a portion of an HST rebate for principle residences in the original purchase price, which can be up to $30,000. This is a credit on a portion of the total HST payable on the property. Many are confused because they are told that the final purchase price includes the HST – be aware that most builders present prices that include HST, minus a rebate which is only applicable to purchasers who move into their properties. Since many purchasers, especially condo investors do not move into their units, they are required to add extra HST on closing.

Rebate4U can help you pay the extra HST and recover the condo rebate from the government. Our Rental Rebate Loan Service helps you avoid headaches, borrowing fees, and potential liens on your property.

Very often, purchasers receive the HST rebate for principle residences in error. This may happen, for example, if they or an immediate family member intends to make this property their permanent residence but fails to do so. In this case, the purchaser receives a credit from the government that he or she was not eligible for. The government looks for such cases and demands that the money will be returned with heavy interests and penalties. As well, in most cases, the government only contacts those purchasers two years after final closing- when it’s too late to apply for the rental rebate!

We can help purchasers avoid this situation all together: we can communicate with the government, explain the misunderstanding and file a rental rebate instead of the rebate application for principle residences submitted in error by the builder. In this case, the rental rebate will be deducted from the purchaser’s owing.

Whether you just bought your first condominium or are a seasoned real estate investor, there is money to be made by pursuing HST rebates.


 


 
Kevin Zhao
BROKER
Direct: 416.999.9339
Bus: 905.940.3428
kevin@kevinzhao.ca

 
   
 
   
  Direct: 416.999.9339
Bus: 905.940.3428
kevin@kevinzhao.ca
   
 
   
 
 
Century 21 King's Quay
Real Estate Inc., Brokerage
  Markham, Ontario
Canada, L3R 9Z6
  Phone: 905-940-3428
Fax: 905-940-0293
 
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