All Assignments Subject to HST in 2022
The 2022 provincial budget makes all condominium and freehold (home/townhome) assignment agreements made after May 7, 2022 subject to HST.
Assignment transactions are common in pre-construction purchases. Before the 2022 budget, whether or not HST applied to an assignment transaction, depended on the intention of the original buyer at the time when the purchase was made. For instance, properties purchased for personal use were HST exempt. However, if the intention was deemed as a flip for profit, HST was applied.
As of May 7, 2022, HST or 13% must be applied to the first buyer’s (the assignor) profit of a pre-construction sale – not the property’s total sales price. The intention of the original purchaser whether for personal use or to re-sell for profit does not matter anymore.
The tax applies to all new assignment contracts dated before May 7, 2022 regardless of the original purchase date. For example, if you purchased a pre-construction condo in 2015 and you want to sell it as an assignment now, HST will be applicable ON TOP of the assignment purchase price.
However, HST is applicable only on PROFITS, while the original deposit paid to secure the purchase, may be HST exempt. In order to have your original deposit clear of HST, your Assignment Agreement should state in writing that part of the “Assignment Price” is attributable to the reimbursement of a deposit under the original purchase agreement.
If you are looking to sell an assignment, make sure you hire a professional to navigate your assignment agreement according to the new guidelines.