Usually, yes. For assignment agreements entered into on or after May 7, 2022, the assignment of a purchase agreement for a newly built house or condo is generally a taxable supply for GST/HST. Tax applies to the assignment price, excluding the part that reimburses the deposit. In Ontario, that means 13% HST on the assignor’s profit portion.
Key takeaways
- The rule applies to assignment agreements entered into on or after May 7, 2022.
- The deposit reimbursement is excluded; GST/HST applies to the amount above it.
- Before this change, many individuals who bought to live in the home didn’t charge GST/HST on assignments.
- Spell out in the agreement whether the price includes or is plus HST.
What changed in 2022?
Before May 7, 2022, whether GST/HST applied to an assignment depended on the assignor’s intention when they bought. If they bought to live in the home, the assignment was often treated as exempt; if they bought to resell, it could be taxable. That was hard to prove and hard for the CRA to enforce.
The federal government changed the rules so that assignment sales of newly constructed or substantially renovated residential housing are generally taxable, regardless of the assignor’s intention. The change applies to assignment agreements entered into on or after May 7, 2022.
Which part of the price is taxed?
The consideration attributable to the deposit is excluded. In practice, GST/HST is calculated on what the assignee pays above the deposit refund, which is usually the assignor’s profit.
| Ontario example | Amount |
|---|---|
| Deposit refund paid to the assignor | $129,600 (not taxed) |
| Profit portion of the assignment price | $71,900 |
| HST at 13% on the profit portion | $9,347 |
The HST rate depends on the province: 13% in Ontario, 15% in the Atlantic HST provinces, and 5% GST in provinces without HST (plus any provincial sales tax rules, which don’t apply to real property in the same way).
Who collects and remits the HST?
Generally the assignor, as the supplier, is responsible for accounting for the GST/HST, and the assignee pays it as part of the deal. How it’s collected and remitted depends on each party’s GST/HST registration status, so both lawyers and the assignor’s accountant should confirm the mechanics before signing.
Should the price be “plus HST” or “HST included”?
This is one of the most common points of dispute. If the agreement doesn’t say, the assignor may end up paying the tax out of their profit. Assignors usually want the price to be plus HST; assignees usually want it included. Agree on it in writing.
Does this affect the new housing HST rebate?
The new housing rebate on the builder’s price is a separate issue. Whether the assignee can claim it depends on their eligibility, such as buying the home as their primary residence, and on how the builder handles the rebate at closing. Ask the builder’s lawyer how they treat the rebate for assignees.
Frequently asked questions
Is HST charged on the deposit in an assignment?
No. The part of the assignment price that reimburses the deposit is excluded. GST/HST applies to the amount above it.
When did HST on assignment sales start?
For assignment agreements entered into on or after May 7, 2022.
Does HST apply to resale home assignments?
The 2022 rule targets assignments of agreements to buy newly constructed or substantially renovated residential housing, which is where assignments almost always arise.
How much HST do I pay on an assignment in Ontario?
Generally 13% of the assignment price above the deposit refund. On a $71,900 profit, that’s about $9,347.
Buying or selling an assignment?
Browse live assignments or post yours for free on Assignment Connect.
Sources
This guide is general information, not legal, tax or financial advice. Rules change and every agreement is different, so speak with a real estate lawyer, accountant or mortgage professional about your situation.