On April 7, 2022, the Government of Canada released Budget 2022: A Plan to Grow Our Economy and Make Life More Affordable. As part of the government’s effort to curb housing speculation, GST will apply to all assignment sales of newly constructed or substantially renovated residential housing.
“Homes should be for people to live in, not commodities to be traded and profited upon by housing speculators. Speculative trading in the Canadian housing market contributes to higher prices for Canadians. Speculative trading can include the resale of housing before it has even been constructed or lived in. This is called an “assignment sale.”
Currently, when a person makes a new home assignment sale, Goods and Services Tax/Harmonized Sales Tax (GST/HST) may or may not apply, depending on the reason for purchasing the home. For example, GST/HST does not apply if the buyer initially intended to live in the home.
This creates an opportunity for speculators to be dishonest about their original intentions, and uncertainty for everyone involved in an assignment sale as to whether GST/HST applies. The current rules also result in the uneven application of GST/HST to the full and final prices of new homes.
To address these issues, Budget 2022 proposes to make all assignment sales of newly constructed or substantially renovated residential housing taxable for GST/HST purposes, effective May 7, 2022.”
At this time, there is no indication as to how a developer which is the vendor under the pre-sale contract may be affected. Clark Wilson’s Commercial Real Estate team will update this article as more information is released.