PST Increase | Services to Real Property
Transitional Issues Regarding Homes Under Construction
Wednesday’s budget expanded the application of PST to “Services to Real Property.” This was what we referred to in our newsletter today as the “Inclusion of PST on Construction Labour.” The following bulletin from the Ministry of Finance explains what this means and covers some of the transitional issues:
As a follow up to this we have received some additional information that will help explain the application of the new tax measures to a home or other structure that is under construction as of April 1st.
Transition Rules on Homes Built for resale
I am a developer/builder of homes for resale purposes, some that are already built and some under construction as at April 1, 2017, how does tax apply?
The principal basis for these transition rules is to recognize that homes already under construction for resale purposes, will follow the old PST rules and that the construction of new homes built for resale purposes, started after April 1, 2017 will follow the new rules. These same principles will also apply to RTM’s.
Since this type of property is being built for resale purposes, the date of a written agreement with a contractor will only apply to the cost of materials they supply under the old rules.
For builders/developers with a home under construction as of April 1st, the old PST rules will apply to these particular homes (when the homes are intended for resale),
Rules for the contractor
- PST is to be paid by the contractor on the cost of materials they supply.
- 5% on materials purchased prior to March 23, 2017
- 6% on materials purchased on or after March 23, 2017
- The contractor does not charge PST on the labour component or mark-up
- The contractors invoice for these contracts will state “PST included”
Rules for the builder
- The builder will advise the contractor to follow the old rules on these homes
- The builder will not collect PST on the sale of these homes
The new PST rules will apply to any new homes (for resale only) on which the construction began on or After April 1, 2017.
- The contractor does not pay PST on the cost of materials
- The contractor does not charge PST on their service contract (builder quotes VL)
- The builder will collect PST of 6% on the sale of these new homes (excluding land)
These rules are intended to address the transition period for builders and developers who construct homes for resale purposes.
If there are any questions regarding this don’t hesitate to contact me.
Chief Executive Officer
Association of Saskatchewan REALTORS®