When purchasing real estate in Vancouver, many buyers are aware that new presale units are subject to GST. However, what happens when you consider a resale unit that has never been occupied? Let me provide some clarity on this often-overlooked topic.Q: If I buy a resale condo that’s a couple of years old and has never been occupied, do I have to pay GST?A: The short answer is yes, you may still be required to pay GST on a never-occupied unit. Surprisingly, even though it’s a resale property, the federal government classifies these units as "new" for GST purposes.
Understanding the GST Implications
When a unit has never been occupied, it is viewed as a transfer of unoccupied inventory from one developer to another. This means that the buyer is liable for GST, even if the building was completed some time ago.Case Example:
Consider an investor who bought a unit for $500,000 and paid $25,000 in GST. After a year and a half, they sold it for $600,000. The new buyer, unaware of the GST implications, found themselves responsible for an additional $30,000 in taxes upon the resale because the unit had never been occupied. Meanwhile, the original seller claimed back their GST, resulting in a $100,000 profit for the investor.Additional Scenarios Where GST May Apply
- Business Use: If the previous owner used the property for business purposes for more than 50% of their ownership, GST may apply.
- Input Tax Credits or Renovations: If the property has claimed input tax credits or has undergone substantial renovations, GST would also be applicable.