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Earlier discussion

HST: What you should know Add to ...

Rod Butcher: Whether the tax affects your purchase decision depends on the price point. There is no GST or HST on the purchase or rent of used residential housing. After June 2010, generally, new home purchases will attract a maximum $24,000 rebate of the Ontario component of the HST, and a maximum $20,000 rebate of the provincial portion of the BC HST. Each is reached at a $400,000 price level. The rebate is designed to eliminate the effect of the HST at the retail level, compared to the equivalent retail sales tax that would have been embedded in the cost of the home before the change. In BC, on a $300,000 purchase of a new residence, the provincial rebate would be $15,000 of the $21,000 that would otherwise be charged. At that price level, you should be indifferent to a price that includes BC SST on building costs, or one subject to BC HST - in theory!

Pete Kauchak: What will be the impact of the HST on condo fees? Will there be an actual 8% increase in fees or are condominium corporations exempt from paying this tax?

CndCondo: I was recently advised by my condo corporation that the HST will impact my condo fees, is that a cost that the corporation can download onto owners?

Rod Butcher: Condo fees are not currently subject to ORST, BC SST and GST, and will not be subject to Ontario or BC HST. However, condo corporations will be paying HST on their costs that cannot be recovered, and these costs will therefore be passed on to condo owners in their fees.

Joy: Under the new HST scheme, are real estate commissions and legal fees also subject to the 13% tax in Ontario? If that is the case, the buyers and sellers are really going to suffer.

Rod Butcher: Real estate commissions and legal fees will both be subject to HST. The registered agent or lawyer will be able to recover tax paid to suppliers, but for a services business, this may not offset the cost of the HST on fees charged to parties buying or selling a property materially.

House Buyer: Would this have an effect on people who are currently paying instalments for their houses/condos. Would they now be paying higher instalments as they'd have to add HST to the final instalment amount?

Rod Butcher: Yes, when the tax is in full effect, you would expect the additional cost to be factored into instalments.

Vince: I have a rental property in B.C. on which I charge my clients GST but no provincial tax. I previously had a B&B and because it had 3 suites I had to charge both the GST and the provincial tax. The local municipality added a 2% tax when I charged the provincial tax. They got the records of provincial taxes and sent me an invoice for 2%. My question is: How will local governments differentiate who is to pay the additional 2%?

Rod Butcher: To Vince, I'm sorry, I can't help you with the municipality's ability to detect other B&B renters if there are no more provincial sales tax returns to file.


Candice: What are your thoughts about the fight that Ontario mutual fund companies are putting up in order to make them exempt from the HST? Do you think they will have a chance?

Rod Butcher: On the change to an HST, there will be some winners and some losers. Any personal services-based business will likely not see tax savings on purchases that are as large as manufacturers or distributors. That means investment advisors that charge funds for investment advice (which you would see in the MER charged by the fund holder) will be colecting the HST based on the residence of the investor, but not reducing their fees significantly by any savings. This will mean a net price increase. Whether this is successfully addressed by mutual fund managers with the government remains to be seen.

Dimitry: For mutual funds, if I invest in funds outside of the province, will that allow me to save on the added tax?

Rod Butcher: Investing in funds based outside the province will not generally avoid the tax. The theory dictates that unit holders pay tax based on province of residence.

Michael in Vancouver: What is your opinion regarding the mutual fund industry's drive for HST exemption? And could you also clarify whether trading commissions (e.g. for transactions done via on-line trading or full service brokerage) - which are currently not subject to GST - will be subject to the HST in BC or Ontario?

Rod Butcher: If a service is exempt for GST, it is exempt for HST also. The tax base remains the same, except for the published point-of sale rebates.

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