In the case of a sale of assignment, the transferor must declare the profit of a sale of assignment in the taxation year in which the right is assigned. Profit is treated either as fully taxable business income, which is fully taxable, or as income from a capital gain, of which only 50% is taxable. For the assignee, you probably know that by assigning the purchase agreement, you are assuming responsibility for the house. What you probably don`t know is that you may not be able to take advantage of the GST/HST rebate for new apartments (which is usually granted by the developer as a credit on the purchase price). If the transferor sells the GST/HST-exempt home, the transferor will likely receive the benefit of the rebate from his purchase contract (as long as he intended to use it as a residence). To avoid confusion, let`s start by defining a few concepts. When you buy a new home or condominium under construction, you sign a purchase agreement. If you – with the manufacturer`s permission – sell this purchase agreement to someone else before you take possession of it, this is called an assignment of purchase. You become assignor and the buyer assignee. The transferee is required to pay the land transfer tax on the price of the initial contract plus the elevator and not on the purchase price of the property. The unexpected result may be that the initial purchase price has fallen below the real estate transfer tax threshold for “first purchasers” or “new constructions”, but with the addition of the elevator, the transferee may no longer be eligible for these exemptions due to the higher market value.

If you purchase a contractual assignment as an assignee (new buyer), GST will continue to apply to the purchase of the home and you will be responsible for payment. The assignment of a contract to buy and sell a new home may depend on the consent of the builder with whom the first purchaser originally entered into the contract for the construction and sale of the new home. The agreement may list conditions related to the original buyer`s right to assign the contract to a buyer, and in many cases the builder will charge the original buyer a fee for assigning the agreement to another person. However, if the assignment is taxable, the assignee should be entitled to the discount, although the amount of the discount is affected by the price paid for the order. Therefore, it is up to the transferee to determine whether the new residential rebate option still exists and what discount is available. This means that if you participate in a sale before entering into contracts, the likelihood that you will be subject to a CRA audit is high, so taxpayers must understand the income tax and GST/HST rules regarding sale on transfer. If you are a professional contractor or renovator, a speculator or mid-market investor, or a single renovator, the CRA will closely monitor your real estate sales. At the same time, keep in mind that the chances of being audited are high if you participate in a purchase order. The rating agency continues to review real estate and construction transactions with strengthened audit teams. The 2019 federal budget proposed the creation of a real estate task force. This working group essentially combines auditors and business intelligence officers with specific knowledge, training and expertise to investigate real estate transactions where the parties have failed to pay the required taxes.

Make sure this is stated in your contract and that your lawyer or notary is aware of it. Essentially, the assignment of a purchase agreement occurs when an initial purchaser of a new home, condominium or single-use apartment allows someone else (i.e., an assignee) to take over the purchase agreement. With the permission of the client, the assignee assumes responsibility for the purchase of this property. Awarding a contract allows the original purchaser (i.e. To the transferor), sell his stake in this property before taking possession of it and possibly making a profit. If the transferor proves that at the time of the purchase of the property, he intended to use it as a principal residence, he does not have to collect and transfer the GST/HST for the consideration received. The transfer is exempt from GST/HST. However, if the CRA determines that the transferor`s intention was to reorganize the property, the transferor may be required to collect and pay taxes on the transaction, either on the transfer fee or on the total price paid by the transferee for the house, depending on the terms of the transfer agreement.

Article 5.18 of the assignment agreement governs the GST payable . . .