How will commissions be impacted by the Harmonized Sales Tax on real estate transactions as the HST implementation date of July 1st, 2010 approaches? Here is the breakdown:
- If the transaction is written and closes before July 1st, 2010, then only GST will be payable upon the amount of the commission.
- If the transaction is written before July 1st, 2010 and closes after July 1st, 2010, then this transaction would fall into a grey area. The Canada Revenue Agency (CRA) has been asked to provide an interpretation on this scenario and as of yet they have not supplied with one. Until the ruling comes down, it is best to assume the worst and anticipate that the full HST would be payable. The fact that the contract was written before July 1st, and ninety percent (90%) of the work related to the contract will have been completed, we are hopeful that only the GST portion will apply. Of course, CRA holds the key to this answer.
- If the transaction is written after July 1st, 2010, then the full HST would be payable on the commission.
The Muddy York Real Estate Blog will keep you posted as to developments and rulings from CRA on this topic.