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In general, most businesses will benefit from the proposed HST (Harmonized Sales Tax) initiative as it will reduce administrative costs since only one GST/HST return will be required.
Important Notes:
- The HST system will generally use the same tax base and rules as that of the GST.
- Certain goods and services currently taxed at the 5% rate will, however, be subject to the new 13% rate.
- Zero-rated goods will remain the same under the HST.
- Some goods and many services not currently subject to PST will become HST-taxable.
- The HST system is set to take place July 1, 2010.
The most attractive benefit of the HST for businesses will be the ability for businesses making GST-taxable supplies expenditures to claim input tax credits in order to recover most of the HST paid. This feature was not available to PST-taxable supplies and thus businesses incurred the cost of the PST.
How HST Will Affect Real Estate
Item |
GST-Taxable Before July 1, 2010 |
RST-Taxable Before July 1, 2010 |
Change as per HST |
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New Homes < $400K |
5% |
No RST |
No |
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New Homes > $400k |
5% |
No RST |
Yes |
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Resale Homes |
No GST |
No RST |
No HST |
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Real Estate Commissions |
5% |
No RST |
Yes @ 13% |
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New Housing Rebate
- The new housing rebate will be 75% of the Ontario component of the HST. The 75% will be capped at $24000.
- Purpose: To ensure that buyers of homes that are less than (<) $400,000, do not pay more tax than they would have otherwise paid under the previous system.
- Prospective home-owners looking to purchase a home that is in excess (>) $400,000 will be eligible for the maximum new housing rebate of $24000.
Please note that the impact of the proposed HST varies on a case by case basis. Insight into the type of business being operated is necessary to determine the proposed effects.
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