Canada

Grandparented housing sales see simplified reporting requirements

TAX ALERT  | 

The Department of Finance (Finance) announced changes beneficial to home builders who have ‘grandparented’ new or substantially renovated housing under the transitional Harmonized Sales Tax (HST) rules. The reporting requirements for these types of housing will now be simplified.

Certain taxable housing sales were grandparented as a transitional action to prevent the provincial component of the HST or the HST rate increase to affect these sales.

Reporting changes to the Electronic Filing and Provision of Information (GST/HST) Regulations took effect on June 3, 2016. Under these new rules, builders with grandparented housing sales must report only those transactions that qualify under the new definition of ‘specified housing supply’ ($450,000 or more), for reporting periods after March 22, 2016. In each period where the GST is triggered, builders need to report the number of units corresponding to the definition of specified housing supplies as well as the total amount for the specified housing supplies.

Before these new rules were implemented, when the HST took effect, builders who made grandparented housing sales became subject to specialized reporting requirements and the purchaser did not qualify for a GST New Housing Rebate or New Residential Rental Property Rebate.

Previously, builders may not have been privy to information regarding the purchaser’s entitlement to one of these rebates. Since builders typically credit the rebate to the buyers at the sale closing, they would know that a buyer could claim the GST New Housing Rebate. But the same builder would not necessarily have access to the rental agreement, thus he or she might not know that the buyer could claim the GST Residential Rental Property Rebate.

An opportunity to correct past reports

Under the new simplified rules, builders can now elect to report all specified housing supplies in British Columbia, Nova Scotia, Ontario or Prince Edward Island, where the GST or the federal HST came into effect, after June 2010 and before May 2016. Builders must use Form RC4617 and report on a calendar-year basis.

Minimize risk of penalties

These new rules will not minimize penalty rates; they do, however, minimize the risk of misreporting. Builders’ penalties can be substantial – up to 10 per cent of the total consideration. Builders now have an opportunity to correct misreported grandparented housing sales without the risk of the CRA levying large penalties – but this time window will not stay open forever.

Next steps for builders

In previous years, builders may not have fully grasped their responsibility to report grandparented housing sales; many may also not have understood the magnitude of the misreporting penalties. Builders should consider the risk of a CRA assessment under the former rules versus the new simplified rules, as well as the significance of penalties outlined above.

Under these new measures, builders will not be required to meet the conditions of the Voluntary Disclosure Program for penalty relief.


Subscribe to our newsletters

Subscribe


HOW CAN WE HELP YOU?

Contact us by phone +1.855.420.8473 or submit your questions, comments or proposal requests


Recent Tax Alerts

US tax reform: Business and investing

In a white paper for the Canadian Tax Foundation, RSM highlights how U.S. tax reform affects U.S. and international businesses.

  • October 22, 2018

Updates to Quebec tax credits & incentives to offset US tariff impact

Recent tax changes by the government of Quebec include enhancements to the investment tax for manufacturing and processing equipment.

  • October 22, 2018

Plan now for 2019 refundable dividend tax on hand transition

Per the Federal Budget 2018, new rules will apply to the Refundable Dividend Tax On Hand (RDTOH) regime starting January 1, 2019.

  • October 02, 2018

Don’t miss your trust's 21st anniversary

The 21-year rule on trusts may result in unintended tax consequences, if trustees and beneficiaries fail to plan for it in a timely manner.

  • September 10, 2018

Case by case: Tax deductions in merger and acquisition transactions

Recent court rulings provide tax treatment frameworks for transaction costs, but their application requires careful consideration.

  • August 08, 2018