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Proposed GST/HST Treatment of Assignment Sales
GST/HST Notices - Notice 323 May 2022
On April 7, 2022, the Minister of Finance Canada tabled Budget 2022 which proposed an amendment to Part IX of the Excise Tax Act. The proposed amendment would make all assignment sales in respect of a newly constructed or substantially renovated single unit residential complex or residential condominium unit taxable.
This publication provides questions and answers regarding the proposed amendment. Any commentary in this publication should not be taken as a statement by the Canada Revenue Agency that the proposed amendment will become law in its current form.
Except as otherwise noted, all statutory references in this publication are to the provisions of the Excise Tax Act (ETA). The information in this publication does not replace the law found in the ETA and its regulations.
If this information does not completely address your particular situation, you may wish to refer to the ETA or relevant regulation, or call GST/HST Rulings at 1‑800‑959‑8287 for additional information. If you require certainty with respect to any particular GST/HST matter, you may request a ruling. GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service , explains how to obtain a ruling or an interpretation and lists the GST/HST rulings centres.
If you are located in Quebec and wish to request a ruling related to the GST/HST, please call Revenu Québec at 1‑800‑567‑4692. You may also visit the Revenu Québec website at revenuquebec.ca to obtain general information.
For listed financial institutions that are selected listed financial institutions (SLFIs) for GST/HST or Quebec sales tax (QST) purposes or both, whether or not they are located in Quebec, the CRA administers the GST/HST and the QST. If you wish to make a technical GST/HST or QST enquiry related to SLFIs, please call 1‑855‑666‑5166.
GST/HST rates
Reference in this publication is made to supplies that are subject to the GST or the HST. The HST applies in the participating provinces at the following rates: 13% in Ontario and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%. If you are uncertain as to whether a supply is made in a participating province, refer to GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of Supply Rules for Determining Whether a Supply is Made in a Province .
Table of Contents
Proposed amendment, definitions, questions and answers.
An assignment sale in respect of residential housing is a transaction in which a purchaser (an assignor) that has entered into an agreement of purchase and sale with a builder of a new house sells (assigns) their rights and obligations under the agreement of purchase and sale to another person (an assignee). The agreement that details the terms of the assignment of an agreement of purchase and sale (the assignment sale) is generally referred to as the assignment agreement.
For purposes of this notice, a house includes a detached or semi-detached house, a duplex, a condominium unit, a townhouse, a unit in a co-operative housing corporation, a mobile home (including a modular home) and a floating home.
Under the current GST/HST rules, an assignment sale made by a person that is not an individual in respect of newly constructed or substantially renovated residential housing is generally taxable, whereas an assignment sale made by an individual may be either taxable or exempt. An assignment sale made by an individual is generally taxable if the individual had originally entered into the agreement of purchase and sale with the builder for the primary purpose of selling their interest in the real property. If, on the other hand, the individual had originally entered into the agreement of purchase and sale for another primary purpose (for example, to occupy the house as a place of residence), the assignment sale is generally exempt. Any amount an assignor paid as a deposit to a builder is included in the consideration for a taxable assignment sale. For more information on the current GST/HST rules, refer to GST/HST Info Sheet GI-120, Assignment of a Purchase and Sale Agreement for a New House or Condominium Unit .
The proposed amendment to the ETA would make all assignment sales, including those made by individuals, in respect of newly constructed or substantially renovated residential housing taxable for GST/HST purposes. Furthermore, the proposed amendment would exclude any amount attributable to a deposit paid by an assignor to a builder from the consideration for a taxable assignment sale, when certain conditions are met. The proposed amendment would apply to all assignment agreements entered into after May 6, 2022.
The proposed amendment adds section 192.1 to the ETA. Proposed section 192.1 states that if a taxable supply by way of sale of a single unit residential complex (as defined in subsection 254(1)) or of a residential condominium unit is made in Canada under an agreement of purchase and sale (in this section, referred to as the purchase agreement) entered into with a builder of the single unit residential complex or of the residential condominium unit and if another supply by way of assignment of the purchase agreement is made by a person (other than the builder) under another agreement, then the following rules apply:
- the other supply is deemed to be a taxable supply, by way of sale, of real property that is an interest in the single unit residential complex or residential condominium unit
- the consideration for the other supply is deemed to be equal to the amount determined by the formula:
Proposed section 192.1 applies in respect of any supply by way of assignment of an agreement of purchase and sale if the supply is made after May 6, 2022.
Proposed section 192.1 applies to a single unit residential complex or a residential condominium unit.
Single unit residential complex means a residential complex that does not contain more than one residential unit, but does not include a residential condominium unit.
For the purposes of the proposed amendment, a single unit residential complex also includes:
- a multiple unit residential complex that does not contain more than two residential units (for example, a duplex)
- any other multiple unit residential complex if it is described by paragraph (c) of the definition of residential complex in subsection 123(1) and contains one or more residential units that are for supply as rooms in a hotel, motel, inn, boarding house, lodging house or similar premises and that would be excluded from being part of the residential complex if the complex were a residential complex not described by that paragraph (for example, a bed and breakfast establishment)
Residential condominium unit means a residential complex that is, or is intended to be, a bounded space in a building designated or described as a separate unit on a registered condominium or strata lot plan or description, or a similar plan or description registered under the laws of a province, and includes any interest in land pertaining to ownership of the unit.
1. I am an individual who entered into an assignment agreement before May 7, 2022. Is the assignment sale taxable?
If an assignment agreement is entered into before May 7, 2022, the current GST/HST rules apply. This means that the assignment sale may be either taxable or exempt. An assignment sale made by an individual is generally taxable if the individual had originally entered into the agreement of purchase and sale with the builder for the primary purpose of selling their interest in the real property. If, on the other hand, the individual had originally entered into the agreement of purchase and sale for another primary purpose (for example, to occupy the property as a place of residence), the assignment sale is generally exempt.
Under the current GST/HST rules, if an assignor’s sale of their interest in the real property to an assignee is taxable, the total amount payable for the sale of the interest is subject to the GST/HST, including any amount the assignor paid as a deposit to the builder, whether or not such an amount is separately identified.
For more information, refer to GST/HST Info Sheet GI-120 .
2. The assignor already paid a deposit under the purchase and sale agreement. Is the portion of the assignment sale that is attributable to the deposit taxable?
Typically, the consideration for an assignment sale includes an amount attributable to a deposit that had previously been paid to the builder by the assignor. The application of the GST/HST to the amount attributable to the deposit in the context of the assignment sale depends on the date the assignment agreement was entered into and not on the date the deposit was paid to the builder.
Where an assignment agreement is entered into before May 7, 2022, and the assignment sale is taxable, the total amount payable for the sale of the assignor’s interest to the assignee is subject to the GST/HST, including any amount the assignor paid as a deposit to the builder, whether or not such an amount is separately identified.
Where an assignment agreement is entered into on or after May 7, 2022, and the assignment agreement indicates in writing that a part of the consideration is attributable to the reimbursement of a deposit paid by the assignor to the builder under the purchase and sale agreement, the proposed amendment excludes the amount attributable to the deposit from the consideration for a taxable assignment sale.
3. Who is responsible for remitting the tax on the assignment sale under the proposed amendment?
The proposed amendment does not change who is responsible for remitting the tax on the assignment sale. The assignor in respect of a taxable assignment sale would generally continue to be responsible for collecting the GST/HST and remitting the tax to the Canada Revenue Agency (CRA). Where the assignor is a non-resident of Canada, the assignee would continue to be required to self-assess and pay the GST/HST directly to the CRA.
For more information, refer to Guide RC4022, General Information for GST/HST Registrants .
4. Will the proposed amendment affect the new housing rebate?
The amount of a new housing rebate under the GST/HST legislation is determined based, in part, on the total tax paid and the total consideration for a taxable supply of a house, which includes any other taxable supply of an interest in the house (for example, the tax and consideration paid by an assignee for a taxable assignment sale). As a result of the proposed amendment, where an assignment agreement is entered into after May 6, 2022, the GST/HST applies to assignment sales that were not otherwise taxable, and the amount attributable to a deposit is excluded from the consideration for all taxable assignment sales. Consequently, the proposed amendment may have an impact on both the total tax paid and the total consideration for the taxable supply of a new house, which may affect the amount of a GST/HST new housing rebate in respect of the GST or the federal part of the HST, or of a new housing rebate in respect of the provincial part of the HST, that may be available in respect of a new house.
Only one new housing rebate application can be made for each new house. Therefore, an assignee purchaser cannot submit a rebate application through a builder (Builder A) for the tax paid to Builder A on the purchase of the house and submit a second rebate application for the tax paid to the assignor on the purchase of the interest in the house. In such cases, the assignee purchaser may want to file their new housing rebate application directly with the CRA rather than through Builder A. In this way, the assignee purchaser can include in the new housing rebate application the tax paid to Builder A and the tax paid to the assignor in determining the amount of their GST/HST new housing rebate and, where applicable, a provincial new housing rebate.
For more information, refer to Guide RC4028, GST/HST New Housing Rebate .
5. Will the proposed amendment affect the new residential rental property rebate?
The amount of a new residential rental property rebate (NRRPR) under the GST/HST legislation is determined based, in part, on the total tax payable in respect of a residential complex and the fair market value of the qualifying residential unit that forms part of the complex at the time the GST/HST becomes payable on the purchase of the complex. As a result of the proposed amendment, where an assignment agreement is entered into after May 6, 2022, the GST/HST applies to assignment sales that were not otherwise taxable, and the amount attributable to a deposit is excluded from the consideration for all taxable assignment sales. Consequently, the proposed amendment may have an impact on the total tax payable in respect of the complex, which may affect the amount of a GST/HST NRRPR in respect of the GST or the federal part of the HST, or of an NRRPR in respect of the provincial part of the HST.
For more information, refer to Guide RC4231, GST/HST New Residential Rental Property Rebate .
Further information
All GST/HST technical publications are available at GST/HST technical information .
To make a GST/HST enquiry by telephone :
- for GST/HST general enquiries, call Business Enquiries at 1‑800‑959‑5525
- for GST/HST technical enquiries, call GST/HST Rulings at 1‑800‑959‑8287
If you are located in Quebec , call Revenu Québec at 1‑800‑567‑4692 or visit their website at revenuquebec.ca .
If you are a selected listed financial institution (whether or not you are located in Quebec) and require information on the GST/HST or the QST , go to GST/HST and QST - Financial institutions, including selected listed financial institutions or:
- for general GST/HST or QST enquiries , call Business Enquiries at 1‑800‑959‑5525
- for technical GST/HST or QST enquiries , call GST/HST Rulings SLFI at 1‑855‑666‑5166
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Real estate assignments: tax exposure calculator .
If you are buying and selling pre-construction real estate in the course of a business (i.e. you did not plan to purchase the property for personal use), this calculator may give you a general idea of your combined HST and income tax exposure in Ontario, Canada.
This calculator compliments our Blog Post on the 2022 Federal Budget changes related to real estate assignments. We strongly encourage you to read our Blog Post before using the calculator.
The calculator is merely an illustrative tool for the hypothetical scenario described in the Blog Post, i.e. where the assignment sale triggers business income for the purposes of the Income Tax Act (Canada) and a taxable supply subject to HST for the purposes of the Excise Tax Act (Canada). If your assignment sale results in capital gain for Income Tax purposes, this calculator won't work for you (we might create one for our readers, if there is enough interest). Talk to your tax advisor to determine whether your assignment sale would result in business income or in capital gain.
This calculator does not account for closing costs (real estate commission or legal fees, which are generally deductible) and does not account for a number of personal tax credits that may be available to you. The amounts are approximate.
Important Disclaimer
DO NOT rely on this calculator for an accurate estimation of your tax liability, or for any tax, legal or accounting advice. Always speak to your tax professional to estimate or determine tax consequences applicable to your specific situation or contact our tax lawyers .
Tax Exposure Calculator
Sale of real estate property on assignment.
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Re-sale price should be higher than price of pre-construction
Your Assignment
Funds received from assignee, your assignment consideration (excluding deposit but including hst), your hst payable to cra on assignment, your income from assignment (net of hst), your tax implications, your total annual income from all sources, your income tax on all your annual income , hst you must remit to the cra as a result of the assignment , your total tax cost (income tax liability and hst remittance), your after-tax proceeds , your effective tax rate (combined effect of paying income tax and remitting hst), recent posts.
Tax Implications of a Real Estate Assignment: a Tax Exposure Calculator
The Future of Tax Audits Looks Digital
True or False? Political Rumours Around Taxing Gain on Principal Residence: The 2021 Edition
HST on Assignments
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An assignment is a sales transaction that is carried out between the owner (assignor) and the buyer (assignee). The original owner sells the property to the buyer before the original buyer closes on the property. In short, the buyer sells the property to gain any interest or profit on the house by selling the property before they close on the property.
HST on Assignment Sale
The assignor pays the HST on the assignment sale along with the original price. The assignment agreement is prepared, clearly stating the profit on a transaction. It is advisable to hire a Real Estate lawyer to prepare the agreement with all the necessary information.
Important Changes in the HST on Assignment Sales
In the 2022 Federal Budget, two important changes were introduced in the HST on assignments. The changes that will govern the New Home Contract are as follows:
HST on Assignments is Applicable on all New Home Contracts
The government announced that all Assignment agreements for New Homes entered in on or after May 7 th, 2022 are now subject to HST. In the past, the HST on assignments was decided based on the intention of the original buyer, who often paid no HST on assignments. In short, the government has now removed all exemptions, and every New Home Assignment is subject to HST now.
The intention of the original owner is no longer taken into consideration, and all New Home Assignments are now deemed to be a taxable supply to HST.
Deposits are Exempt from HST under Conditions
The government has removed another confusion that often clouded the judgment of whether or not HST is to be paid on the deposit. To exempt the deposit from HST, the Assignment Agreement must include that part of the assignment price is the reimbursement of the deposit paid by the original buyer under the purchase agreement. In short, the writing must clearly state that the assignment price already includes the deposit, so the HST can be exempt.
As stated in the HST Info Sheet GI-120, the HST is only charged to the extent the assignment price exceeds the deposits paid by the assignor in the New Home Contract. The HST does not apply to the original deposit paid by the assignor. However, the above condition must be met. The HST is only payable on any other amount paid to Assignor over and above the deposit.
Nanda & Associate Lawyers Professional Corporation assists Canadian residents and businesses with their HST needs. Get in touch with us today for more details.
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How HST Applies to Selling Assignments As of May 7th 2022
By Condo Culture
There have been plenty of conversations amongst the real estate community and assignment sellers regarding the Federal government announcing that they will be making HST payable on profits made by either end-user buyers or investors, effective May 7th, 2022.
Here’s What Has Changed
This additional charge has always been in place with HST on profits being the responsibility of the Seller. There were specific workarounds in place which won’t apply anymore. This regulation already applied to investors, so nothing changes with this particular type of purchaser. The government essentially wants to tighten up on end-users purchasing a pre-construction unit and subsequently assigning. So moving forward, regardless if the intention was to move into your unit as an end-user, any profit from any assignment sale will now be subject to HST .
Savings - Have a Professional Team On Your Side
Even if you’re an end-user buyer and need to sell your unit for whatever reason as an assignment sale, you can deduct certain expenses from your profit to reduce the amount of HST you pay. The commission of your REALTOR®, lawyer and accountant fees, other assignment-related costs, upgrades to the property, and additional ones are potentially eligible. It’s certainly possible to save between 15% to 20% on what you need to pay for HST based on leveraging applicable deductions.
We highly recommend having an experienced REALTOR®, accountant, and lawyer representing you who all have experience with assignment transactions. Your team can help you navigate through the process from start to finish and beyond, so there are no surprises along the way and to ensure you feel comfortable knowing that you didn’t pay more in HST than you need to in order to maximize your ROI.
Condo Culture has a vast amount of expertise handling all types of assignment transactions and we are all over new regulations as they morph and change over time, so be sure to reach out for any of your assignment selling or buying needs. Assignments can offer unique value given their off-market nature with less buyer competition. They are a great option to review as you explore all possible Condo purchase possibilities.
A Simple Assignment Selling Example
When selling an assignment unit, you pay HST on the deposits made on the purchase, plus the 13% on the home’s increase in value once the deal is complete.
Let’s look at an example - if you originally bought a condo for $450K and ultimately sold it as an assignment listing for $650K, then you will need to pay an additional 13% HST on the increase of $200K minus any deductions as outlined above.
Current Exclusive Assignment Opportunities
We have a bunch of fantastic assignment buying options available right now, including these two beauties.
Unit 1012 at Station Park in Tower 1
Highlights:
🛌 2 bedrooms 🛀 2 bathrooms 🚘 1 parking spot 🔐 1 locker ⏹ 810 sq.ft. + a 45 sq.ft balcony ⬆ $18.5K in upgrades on the kitchen and bathroom. Corner unit facing King Street with stunning city views. Expected occupancy: Fall 2022 List price: $699,900
Analysis: This spectacular two-bedroom condo is in a highly sought-after corner unit looking out onto King Street. It’s well priced at $864/sq.ft. and that includes almost $20K in gorgeous upgrades along with a premium lighting package addition, plus a parking spot, as well.
Unit 512 at Station Park in Tower 2
🛌 1 bedroom 🛀 1 bathroom ⏹ 625 sq.ft. + a 60 sq.ft balcony ⬆Entertainment package upgrade included. Corner unit facing both King and Wellington Street with nice 5th-floor views. Expected occupancy: Early 2023 List price: $510,000
Analysis: This wonderful corner unit has a solid price per square foot at $816 including an entertainment package that has been added. It has a generous amount of space for a 1 bedroom unit and a good-sized balcony to lounge, dine, and entertain
We have helped hundreds of clients navigate the unique assignment selling and buying process, and would love to leverage our deep experience to help you succeed with your future transactions. In addition to our Assignment expertise, we are also experts in Condo Resale and Pre-Construction transactions - we are a full spectrum condo brokerage that’s at your service!
To learn more about our assignment selling and buying approach and unique expertise, be sure to read this informative article and connect with us if you have any questions or got any type of condo business to take care of.
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As a result of the proposed amendment, where an assignment agreement is entered into after May 6, 2022, the GST/HST applies to assignment sales that were not otherwise taxable, and the amount attributable to a deposit is excluded from the consideration for all taxable assignment sales.
In order to illustrate the points we discuss in the article, we have created a fun and interactive Assignment Tax Exposure Calculator for real estate assignments in Ontario (HST rate 13%) that result in business income for Income Tax purposes. If your assignment sale results in capital gain for Income Tax purposes, this calculator won't work ...
The calculator is merely an illustrative tool for the hypothetical scenario described in the Blog Post, i.e. where the assignment sale triggers business income for the purposes of the Income Tax Act (Canada) and a taxable supply subject to HST for the purposes of the Excise Tax Act (Canada).
The 2022 Federal Budget introduced two important changes governing the HST on the Assignment of a New Home and New Condominium Agreement of Purchase and Sale entered into with a builder (“New Home Contract”). 1) All Assignments Of New Home Contracts Are Now Subject To HST, Without Exception
There have been plenty of conversations amongst the real estate community and assignment sellers regarding the Federal government announcing that they will be making HST payable on profits made by eitherend-user buyers or investors, effective May 7th, 2022. Here’s What Has Changed.