November 14, 2012
Home builders in British Columbia have to comply with new disclosure requirements related to B.C.’s transition from the HST back to the GST and a new PST. The new disclosure requirements, which B.C. released on November 13, 2012, set out specific information that builders of newly constructed or substantially renovated housing must provide to purchasers of such housing on the taxes and rebates applicable to their purchase.
B.C. previously released disclosure requirements on February 17, 2012 but the new regulations released on November 13, 2012 specify the detailed information that must be disclosed and, in some instances, introduce additional obligations and requirements for builders and their agents (“builders”). The CRA also released a revised information notice (Notice 276) on November 13, 2012 on these transitional rules for new housing in B.C.
Builders should carefully review the new regulations to determine their obligations based on their specific facts and circumstances because they may face significant penalties for failing to comply. Builders could be liable for a penalty from up to 1% of the purchase price (to a maximum of $10,000 per sale) to a penalty of up to 4% of the purchase price (to a maximum of $40,000 per sale) for failing to comply with the disclosure requirements.
B.C. will transition from the Harmonized Sales Tax (HST) back to the Goods and Services Tax (GST) and a new provincial sales tax (PST), effective April 1, 2013.
How should builders provide the information?
The new regulations prescribe the form and nature of the information requirements, which vary depending on when the purchase and sale agreement was entered into:
- For agreements entered into from December 1, 2012 to March 31, 2015, builders must include the prescribed information in the agreement.
- For agreements entered into from February 17, 2012 to November 30, 2012, builders must provide the prescribed information in the form of an addendum to the agreement unless ownership or possession of the housing is transferred to the purchaser prior to 2013. The addendums must be provided to purchasers by January 1, 2013.
- Where a sale closes (such that tax becomes payable) from April 1, 2013 to March 31, 2015 and the housing was at least 10% complete as at April 1, 2013 (such that the transitional rebate is claimable by the builder), prescribed information must be set out in the statement of adjustments or other document provided to the purchaser on or before the closing date.
In B.C.’s February 17, 2012 notice (Notice #12) announcing the transitional rules for new housing, B.C. indicated that builders were required to disclose certain information in purchase and sale agreements entered into after February 16, 2012.
Even though builders may have complied with the disclosure requirements set out in the February 17, 2012 notice, it appears that builders will also be required to issue addendums in respect of any agreements entered into up to November 30, 2012 (and after February 16, 2012).
What information must builders disclose?
The specific information that builders are required to disclose varies depending upon the circumstances but may include:
- The value of the consideration for the housing as established for GST/HST purposes
- A statement as to whether the purchase price includes any HST, GST or B.C. transition tax and, if so, the rate and amount of such tax
- A statement as to any amount of new housing rebate and/or B.C. provincial new housing rebate that has been taken into account in determining the net price payable by the purchaser
- A statement as to the percentage of completion at April 1, 2013 (where relevant)
- A statement as to whether the supplier is a foreign supplier (i.e., non-resident not required to collect GST/HST on the sale)
- A specific “notice to purchaser” that varies depending whether the supplier is a foreign supplier, including a specific reference to a CRA website for more information
- A specific “notice to purchaser” on B.C. transitional tax, where applicable.
Builders’ “notices to purchaser” must include a reference to the CRA’s Notice 276; however, Notice 276 and the B.C. regulations provide slightly different wording for this reference. To ensure they’re technically complying with the law, builders should use the prescribed wording in the B.C. regulations rather than the wording set out in CRA Notice 276.
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