Is HST payable on an assignment sale of a pre-construction home in Ontario?
Yes. Since May 7, 2022, every assignment of an agreement to buy a newly built home or condo, by anyone other than the builder, is subject to HST under the federal Excise Tax Act. The assignment is a taxable supply, whatever the original intent, and HST applies to the full price the new buyer pays for it, less only any part the assignment agreement shows in writing as reimbursing the deposit.
The assignor generally has to collect and remit the HST, even as an individual who only assigned one contract and is not registered for HST. Failure to comply can result in the CRA assessing HST, interest, and penalties after the fact.
The new home HST rebate available to the original buyer may not transfer seamlessly on an assignment, and the ultimate purchaser’s eligibility for the rebate depends on their intended use of the property. The tax treatment of assignment sales is complex — legal and tax advice is strongly recommended before entering or closing any assignment transaction.
Key takeaways
- Since May 7, 2022, every assignment of an agreement for a newly built home or condo, by anyone other than the builder, is subject to HST.
- HST applies to the full price the new buyer pays, less only any part the assignment agreement shows in writing as reimbursing the deposit.
- The assignor generally has to collect and remit the HST, even as an individual.
- The rules are complex — get professional advice before you sign or close.