Formulas for Calculating HST Payable and HST Rebates on Investment Properties.
Unlike purchasing a property for personal use, where the builder applies for the HST rebates, in the case of purchases of new construction condo or residential units as investments, the Investor is responsible for paying the full HST amount payable on new construction condo or residence at the time of closing and then applying for the HST rebates provided certain conditions are met.
To understand how HST and HST rebates are calculated, one first needs to review the Canada Revenue Agency terminology for the builder’s list price, being the price that the buyer set’s which includes all HST and HST rebates and the builder’s base price, which is the price used to calculate the total HST payable before any rebate calculations are undertaken.
In CRA terms, the List price or “stated price net of rebates (SPNR)” means the stated price for the housing net of any GST/HST new housing rebate and the Ontario new housing rebate credited by the builder.
As well, the Base Price or the "consideration" payable for the purchase of the housing is the amount to be paid for the housing before any calculation of the tax payable and housing rebate entitlements for the purchaser.
Where a stated price net of rebates is used, a calculation must first be made to determine the value of the consideration payable for the housing. The value of the consideration must be calculated before the tax payable can be determined. Similarly, the tax payable must be calculated before the amount of the rebates can be determined.
An additional consideration is that although the Provincial component of the HST rebate is fixed at 6% to a maximum of $24,000, the Federal component of the HST rebate is on a sliding scale, reducing to zero once the builder’s base price or “consideration” exceeds $450,000.
Using the Builder’s List Prices as a starting point, and specific CRA formula’s for each of the four value bands (being <$368,200, $368,200 to $424,850, $424,850 to $484,500, and >$484,500) it is possible to calculate how much HST is already included in the purchase price and what the federal and provincial HST rebate components will be.
However, these formulas can only be used if all of the following conditions are met:
• the purchaser is buying a newly constructed or substantially renovated single unit residential complex or residential condominium unit from a builder, together with the related land;
• the housing is situated in Ontario;
• HST at 13% applies to the sale;
• the purchaser meets the conditions for claiming the Ontario new housing rebate; the builder pays or credits the Ontario new housing rebate and, where applicable, the GST/HST new housing rebate in respect of the federal part of the HST to the purchaser; and
• the builder and the purchaser have agreed to a stated price net of the Ontario new housing rebate and, where applicable, the GST/HST new housing rebate in respect of the federal part of the HST.
To calculate the additional HST payable upon close for an investment property, refer to the formulas and examples below.
Formula #1 for Properties Priced Under $368,200
Provided the Builder’s List Price or “Stated Price Net of Rebates (SPNR)” is not more that $368,200 (meaning that the consideration (i.e. builder’s purchase price) is not more than $350,000):
Base Price / Consideration = SPNR ÷ 1.052
Example 1
The stated builder’s list price net of rebates is $325,000 and all of the above conditions are satisfied. The “consideration” or builder’s base price would be calculated as:
Builder’s base price
= builder’s list price ÷ 1.052
= $325,000 ÷ 1.052
= $308,935.36 (indicating that $16,064.64 in HST is already included in the builder’s list price)
Once the Builder’s base price is determined the tax payable and the new housing rebates may be calculated.
Total HST payable
= builder’s base price x 13%
= $308,935.36 × 13%
= $40,161.60
Less GST/HST new housing rebate in respect of the federal part of the HST
= (builder’s base price x 5%) x 36%
= ($308,935.36 × 5%) x 36%
= $5,560.84
Less Ontario new housing rebate in respect of the provincial part of the HST
= (builder’s base price x 8%) x 75%
= ($308,935.36 × 8%) × 75%
= $18,536.12
For an investor, on closing they would be required to remit the $24,096.96 in additional HST and then apply for the rebate of that HST amount, a process which typically takes about 6 to 8 weeks and requires that the property be leased to a tenant for a minimum of one year.
Formula #2 for Properties Priced Between $368,200 and $424,850
If the Builder’s list price is more than $368,200 but not more than $424,850 (meaning that the base price is more than $350,000 but not more than $400,000), then:
The base price = (List price + $28,350) ÷ 1.133
Example 2
The stated price net of rebates is $410,000 and all of the above conditions are satisfied. The builder’s base price would be calculated as:
Builder’s base price
= ($410,000 + $28,350) ÷ 1.133
= $386,893.20 (indicating that $23,106.80 in HST is already included in the builder’s list price)
Once the consideration is determined the tax payable and the new housing rebates may be calculated.
Total HST payable
= $386,893.20 × 13%
= $50,296.12
GST/HST new housing rebate in respect of the federal part of the HST
= $6,300 × [($450,000 - $386,893.20)] ÷ $100,000
= $3,975.73
Ontario new housing rebate in respect of the provincial part of the HST
= ($386,893.20 × 8%) × 75%
= $23,213.59
Formula #3 for Properties Priced Between $424,850 and $484,500
If the Builder’s list price is more than is more than $424,850 and not more than $484,500 (meaning that the base price is more than $400,000 but not more than $450,000):
The base price = (Builder’s List price + $52,350) ÷ 1.193
Example 3
The stated price net of rebates is $460,000 and all of the above conditions are satisfied. The builder’s base price would be calculated as:
Builder’s base price
= ($460,000 + $52,350) ÷ 1.193
= $429,463.54 (indicating that $30,536.46 in HST is already included in the builder’s list price)
Once the consideration is determined the tax payable and the new housing rebates may be calculated.
Total HST payable
= $429,463.54 × 13%
= $55,830.26
GST/HST new housing rebate in respect of the federal part of the HST
= $6,300 × [($450,000 - $429,463.54)] ÷ $100,000
= $1,293.80
Ontario new housing rebate in respect of the provincial part of the HST
= ($429,463.54 × 8%) × 75%
= $24,000 (maximum provincial rebate)
Formula #4 for Properties Priced Over $484,500
If the Builder’s list price is more than is more than $484,500 (meaning that the base price is more than $450,000):
Builder’s base price = (Builder’s List price + $24,000) ÷ 1.13
Note: there is no rebate of the Federal proportion of the HST for houses, priced above $484,500.
Example 4
The stated price net of rebates is $700,000 and all of the above conditions are satisfied. . The builder’s base price would be calculated as:
Builder’s base price
= ($700,000 + $24,000) ÷ 1.13
= $640,707.96 (indicating that $59,292.04 in HST is already included in the builder’s list price)
Once the consideration is determined the tax payable and the new housing rebates may be calculated.
Total HST payable
= $640,707.96 × 13%
= $83,292.03
GST/HST new housing rebate in respect of the federal part of the HST
= $6,300 × [($450,000 - $640,707.96)] ÷ $100,000
= $0
Ontario new housing rebate
= ($640,707.96 × 8%) × 75%
= $24,000 (maximum provincial rebate)
To understand how HST and HST rebates are calculated, one first needs to review the Canada Revenue Agency terminology for the builder’s list price, being the price that the buyer set’s which includes all HST and HST rebates and the builder’s base price, which is the price used to calculate the total HST payable before any rebate calculations are undertaken.
In CRA terms, the List price or “stated price net of rebates (SPNR)” means the stated price for the housing net of any GST/HST new housing rebate and the Ontario new housing rebate credited by the builder.
As well, the Base Price or the "consideration" payable for the purchase of the housing is the amount to be paid for the housing before any calculation of the tax payable and housing rebate entitlements for the purchaser.
Where a stated price net of rebates is used, a calculation must first be made to determine the value of the consideration payable for the housing. The value of the consideration must be calculated before the tax payable can be determined. Similarly, the tax payable must be calculated before the amount of the rebates can be determined.
An additional consideration is that although the Provincial component of the HST rebate is fixed at 6% to a maximum of $24,000, the Federal component of the HST rebate is on a sliding scale, reducing to zero once the builder’s base price or “consideration” exceeds $450,000.
Using the Builder’s List Prices as a starting point, and specific CRA formula’s for each of the four value bands (being <$368,200, $368,200 to $424,850, $424,850 to $484,500, and >$484,500) it is possible to calculate how much HST is already included in the purchase price and what the federal and provincial HST rebate components will be.
However, these formulas can only be used if all of the following conditions are met:
• the purchaser is buying a newly constructed or substantially renovated single unit residential complex or residential condominium unit from a builder, together with the related land;
• the housing is situated in Ontario;
• HST at 13% applies to the sale;
• the purchaser meets the conditions for claiming the Ontario new housing rebate; the builder pays or credits the Ontario new housing rebate and, where applicable, the GST/HST new housing rebate in respect of the federal part of the HST to the purchaser; and
• the builder and the purchaser have agreed to a stated price net of the Ontario new housing rebate and, where applicable, the GST/HST new housing rebate in respect of the federal part of the HST.
To calculate the additional HST payable upon close for an investment property, refer to the formulas and examples below.
Formula #1 for Properties Priced Under $368,200
Provided the Builder’s List Price or “Stated Price Net of Rebates (SPNR)” is not more that $368,200 (meaning that the consideration (i.e. builder’s purchase price) is not more than $350,000):
Base Price / Consideration = SPNR ÷ 1.052
Example 1
The stated builder’s list price net of rebates is $325,000 and all of the above conditions are satisfied. The “consideration” or builder’s base price would be calculated as:
Builder’s base price
= builder’s list price ÷ 1.052
= $325,000 ÷ 1.052
= $308,935.36 (indicating that $16,064.64 in HST is already included in the builder’s list price)
Once the Builder’s base price is determined the tax payable and the new housing rebates may be calculated.
Total HST payable
= builder’s base price x 13%
= $308,935.36 × 13%
= $40,161.60
Less GST/HST new housing rebate in respect of the federal part of the HST
= (builder’s base price x 5%) x 36%
= ($308,935.36 × 5%) x 36%
= $5,560.84
Less Ontario new housing rebate in respect of the provincial part of the HST
= (builder’s base price x 8%) x 75%
= ($308,935.36 × 8%) × 75%
= $18,536.12
For an investor, on closing they would be required to remit the $24,096.96 in additional HST and then apply for the rebate of that HST amount, a process which typically takes about 6 to 8 weeks and requires that the property be leased to a tenant for a minimum of one year.
Formula #2 for Properties Priced Between $368,200 and $424,850
If the Builder’s list price is more than $368,200 but not more than $424,850 (meaning that the base price is more than $350,000 but not more than $400,000), then:
The base price = (List price + $28,350) ÷ 1.133
Example 2
The stated price net of rebates is $410,000 and all of the above conditions are satisfied. The builder’s base price would be calculated as:
Builder’s base price
= ($410,000 + $28,350) ÷ 1.133
= $386,893.20 (indicating that $23,106.80 in HST is already included in the builder’s list price)
Once the consideration is determined the tax payable and the new housing rebates may be calculated.
Total HST payable
= $386,893.20 × 13%
= $50,296.12
GST/HST new housing rebate in respect of the federal part of the HST
= $6,300 × [($450,000 - $386,893.20)] ÷ $100,000
= $3,975.73
Ontario new housing rebate in respect of the provincial part of the HST
= ($386,893.20 × 8%) × 75%
= $23,213.59
Formula #3 for Properties Priced Between $424,850 and $484,500
If the Builder’s list price is more than is more than $424,850 and not more than $484,500 (meaning that the base price is more than $400,000 but not more than $450,000):
The base price = (Builder’s List price + $52,350) ÷ 1.193
Example 3
The stated price net of rebates is $460,000 and all of the above conditions are satisfied. The builder’s base price would be calculated as:
Builder’s base price
= ($460,000 + $52,350) ÷ 1.193
= $429,463.54 (indicating that $30,536.46 in HST is already included in the builder’s list price)
Once the consideration is determined the tax payable and the new housing rebates may be calculated.
Total HST payable
= $429,463.54 × 13%
= $55,830.26
GST/HST new housing rebate in respect of the federal part of the HST
= $6,300 × [($450,000 - $429,463.54)] ÷ $100,000
= $1,293.80
Ontario new housing rebate in respect of the provincial part of the HST
= ($429,463.54 × 8%) × 75%
= $24,000 (maximum provincial rebate)
Formula #4 for Properties Priced Over $484,500
If the Builder’s list price is more than is more than $484,500 (meaning that the base price is more than $450,000):
Builder’s base price = (Builder’s List price + $24,000) ÷ 1.13
Note: there is no rebate of the Federal proportion of the HST for houses, priced above $484,500.
Example 4
The stated price net of rebates is $700,000 and all of the above conditions are satisfied. . The builder’s base price would be calculated as:
Builder’s base price
= ($700,000 + $24,000) ÷ 1.13
= $640,707.96 (indicating that $59,292.04 in HST is already included in the builder’s list price)
Once the consideration is determined the tax payable and the new housing rebates may be calculated.
Total HST payable
= $640,707.96 × 13%
= $83,292.03
GST/HST new housing rebate in respect of the federal part of the HST
= $6,300 × [($450,000 - $640,707.96)] ÷ $100,000
= $0
Ontario new housing rebate
= ($640,707.96 × 8%) × 75%
= $24,000 (maximum provincial rebate)
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