Alas, new homes are taxable! Indeed, buyers will be burdened by additional charges of 5% for the Goods and Services Tax [GST] and 9.975% for the Quebec Sales Tax [QST].
There is hope, though. It is possible to obtain a partial refund of those amounts. Under certain conditions, a deduction of up to 36% for the GST and up to 50% for the QST will be granted by the government.
When? How? Why? This is not as complicated as it looks! Despite my legendary mental block towards anything related to maths, I understood everything. This says it all.
First, are you eligible for a refund?
You are eligible if you buy:
A house of one or two units, which will be your permanent residence or that of a relation. It may be:
- a duplex;
- a townhouse;
- a detached house;
- semi-detached house;
- a mobile home;
- a condominium
- a house that rents rooms for short periods of time
It also requires that the purchase price of the residence is below:
- $ 450,000 for the GST.
- $ 300,000 for the QST.
Once these conditions are met, you must determine what kind of contract you sign.
If you buy both the land and a house together from a homebuilder
The homebuilder may deduct the amount of the tax refund directly on the sale price. Less wait time and less paper work : Yippee !
If this price reduction is not granted immediatly, you can request the tax refund by contacting Revenu Québec within two years from the date of transfer of the ownership of the property.
For the required forms, click here.
If you build on your lot
It is important to remember that the construction of a residence on a land already owned by the customer is not entitled to the tax reduction applied on the sale price by the homebuilder. The buyer can still get a partial refund (phew!), but must make his request directly to the Department of Revenue.
The request must be submitted within the following deadlines:
- two years from the date of transfer of the property to another person;
- two years from the date of the near-completion of the construction (90%) ;
- four years from the day on which you (or a relation) have lived for the first time in the house after work has begun.
Under exceptional circumstances, applications may be accepted after the deadline. It must then be accompanied by a letter explaining the reasons of the delay. According to a government official, "the situation invoked by the taxpayer must be independent of his will, and will be evaluated case by case. It can be, for example, a natural disaster, a death in the immediate family, etc."
Be aware of marketing techniques
Certain buyers are sometimes confused by the way promoters post their prices. Some include in advance the amount of the refund of taxes in their prices, mainly to be listed among the first ones in search engines, with a lower total. Others will show a price from which it will be necessary to add taxes then subtract the refund. Either way, the net price is the same. This marketing technique is completely legal and several compagnies use it. Obviously, it can cause a little frustration if you had not understood what the price really meant. In case of doubt, do not hesitate to raise the question.
Since we covered everything you need to know, you can now proclaim yourselves budding tax experts. For more information, visit the Revenu Québec website .