September 20, 2011

No. 2011-27



Going Back to PST — Thought-Starters for B.C. Residential Property Developers

Residential property developers in British Columbia should consider the impact that the change back to GST/PST will have on their businesses, particularly on pre-sales of developments that may not be completed until after 2012.

The exact nature of the expected transitional rules, the timing of their introduction and their effective dates are not known at this time. However, based on experience with prior transitions, developers can now anticipate the rules that may apply and prepare for their implementation.


British Columbians recently voted in a tax referendum to return to the goods and services tax (GST) and the provincial sales tax (PST), thus rejecting the harmonized sales tax (HST).


Though no firm timetable for the transition has been announced yet, two key dates will likely be relevant: the date the transitional rules are announced (the Transition Date) and the date the GST/PST is implemented (the Implementation Date). 


The British Columbia government has announced that the transition is expected to take a minimum of 18 months, which would suggest an Implementation Date in the first half of 2013. The Transition Date may be six to nine months prior to the Implementation Date, though there is no fixed time period for such announcements.

New housing sales

Based on prior transitions (GST rate reductions and HST implementation), the following rules will likely apply to the development and sale of new residential property in B.C.

Where ownership or possession of a new residential property is transferred to a buyer prior to the Implementation Date, HST should apply. Where applicable, the HST new housing rebates should be available.

Where ownership and possession of a new residential property is transferred to a purchaser on or after the Implementation Date, GST should apply unless the purchase agreement was entered into prior to the Transition Date, in which case HST should apply but the purchaser should be entitled to a partial rebate of the provincial portion of the HST. Where applicable, the GST new housing rebate should be available under either scenario.

Where the construction of a residential property is partially complete at the Implementation Date and the purchase and sale agreement was entered into on or after the Transition Date (such that GST should apply to the sale), the developer will likely be required to pay a transitional tax to ensure that the property bears what the government believes to be the appropriate provincial tax content (the British Columbia government has previously estimated that the PST content of new housing is 2% of the sale price).

Sale considerations 

Developers pre-selling new residential housing projects that are not expected to close until after 2012 should ensure that the purchase and sale agreement allows for a price adjustment to the extent the developer becomes liable for any transitional tax.   


When projects are sold on a tax-inclusive basis, developers may need to develop dual pricing models to account for the different taxes/rebates applicable depending on when the sales close.

Rental developments

Developers of new residential rental property generally become liable for tax under the “self supply rules” at the later of the date the first unit is occupied by a tenant and construction of the property is substantially complete. 

Where that date is prior to the Implementation Date, HST should apply on the fair market value adjusted for the federal and provincial new housing rebate. 

Where that date is on or after the Implementation Date, GST should apply on the fair market value and only taking into account the federal new housing rebate. However, it is likely that the developer will also be liable for some form of transitional tax to ensure a 2% provincial tax component.

Development costs

Construction materials will likely become subject to PST where ownership and possession of the materials are transferred to the developer or contractor on or after the Implementation Date. Other costs may also increase as a result of the reintroduction of the PST.

Consider PST when setting budgets

Developers should determine the impact that the reintroduction of PST will have on the costs to develop property after the Implementation Date. 

We can help

Your KPMG adviser can keep you up-to-date on developments and help you assess possible opportunities that may be available to your business during this transitional period. For details, contact your KPMG adviser.




Information is current to September 19, 2011. The information contained in this TaxNewsFlash-Canada is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG’s National Tax Centre at 416.777.8500.

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