HST Assignment Sales – Let’s Be Clear About the Rules

Two factors determine if HST applies:

  1. Never occupied
    • So, if you assign after Occupancy, you do not have to worry further about having HST applied to your assignment sale.
    • However, waiting until after Occupancy, is not always the best deal financially as you have to pay the final occupancy deposit and the interim occupancy fees per month.
  2. Primary purpose rule
    • If you assign before occupancy, you will have to rely on CRA’s determination of your “original intention” or purpose for buying the property, eg;  was it to own and occupy/rent or was it to ‘flip” (sell within a year of first occupancy)
    • Canada Revenue Agency (CRA) wants to determine if you are operating as a builder or as an individual intent on buying a home you will live in yourself or rent it out (not just flip it). Thus primary purpose or intent is the key factor in determining if HST applies or is exempt.

Example: the primary intention was to live in the condo unit, use it as a vacation home, or rent it to another individual for use as their place of residence.

Factors in determining the primary purpose

  • The person offers to sell their interest in the house or takes other actions to attract buyers before, or while, the house is under construction.
  • The person finances the purchase of the house by a short-term mortgage or an open mortgage that can be paid off without penalty, rather than by a long-term or closed mortgage.
  • Financing of the house is beyond the person’s means and that person is relying on the increased value and salability of the house, or an interest in the house, in a rising housing market.
  • The person is an individual and their stated intention to occupy the house as a place of residence is not supported by the circumstances of the case. For example, an individual has a family of four and enters into a purchase and sale agreement for a one-bedroom condo unit where they are not contemplating any changes in family circumstances.
  • The person’s pattern of activity is such that their occupancy of the house does not have the qualities or characteristics of being permanent. For example, the person purchases more than one house at or around the same time. This factor may be given extra weight where the person has previously entered into a purchase and sale agreement for purposes of selling the house or an interest in the house. There are no outward indicators to support a contrary primary intention (i.e., an intention contrary to an intention of resale). For example, an individual is selling a condo unit, one or more of the above factors are present, there are no physical actions or evidence that the individual’s primary intention was to live in the condo unit, use it as a vacation home, or rent it to another individual for use as their place of residence, and no evidence that the sale of the condo unit was triggered by some unforeseen event.

HST applies to Profit + Recovery of Deposits

The consideration charged for the sale of an interest in a house generally includes amounts that a person paid to a builder (e.g., a deposit) and that the person wants to recover when assigning their interest in the house. The sale price for the interest may also include a profit, i.e., an amount over and above amounts the person had paid to the builder. If a person’s sale of their interest to an assignee purchaser is taxable, the total amount payable for the sale of the interest is subject to GST/HST, including any amount the person paid as a deposit to the builder, whether or not such an amount is separately identified.


A first purchaser enters into a purchase and sale agreement for a new house with a builder (Builder A) and pays a deposit of $80,000 at that time. The first purchaser does not make any further payments to Builder A. The first purchaser subsequently assigns the agreement to an assignee purchaser for $100,000. If the sale of the interest in the house from the first purchaser to the assignee purchaser is subject to GST/HST, tax applies to the full $100,000. This is the case even if the assignment agreement identifies that the $80,000 is a recovery of the deposit that the first purchaser paid to Builder A.


Category: HST

- January 12, 2018

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