Who Pays the GST?

[UTCVenturesLtd]

Three investors, one a contractor, build a house.
Two investors pay contractor`s company for materials, contractor does the work outside of the company using his labor as his share of the jv... contractor wants to use the house as a principle residence so he can not pay capital gains.

Realtor wants to know if the GST has been paid on the new house or will she have to collect it from the future buyer.
If new house is called preowned, then no GST needs to be collected from a new buyer.

 

[Dan_Eisenhauer]

Someone is going to have to pay the GST at some point in time. It, like death, is unavoidable.

You need to talk amongst yourselves how the GST is going to be handled. The Buyer can pay it, but watch for it in the Purchase Contract. If it is not covered, you can be certain the sellers will be paying the shot.

What does your JV Agreement say? It sounds to me as if it has not ben discussed.

 

[UTCVenturesLtd]

QUOTE (Dan_Eisenhauer @ Jan 10 2010, 06:06 PM) Someone is going to have to pay the GST at some point in time. It, like death, is unavoidable.

You need to talk amongst yourselves how the GST is going to be handled. The Buyer can pay it, but watch for it in the Purchase Contract. If it is not covered, you can be certain the sellers will be paying the shot.

What does your JV Agreement say? It sounds to me as if it has not ben discussed.


GST was paid on the "materials" by the investors. If house is sold as a preowned, then no GST to worry about.

Nothing in the JV about that. Assuming the 3rd investor and builder wants it to claim as his prinicple residence while he worked in that area, so going with selling it as a preowned seems to be the way that this will go.

 

[fumbrunner]

If the Contractor is using it as his principal residence, I would say that he would be responsible for the GST if the deal is structured as him "purchasing" it from the investors. If the investors are silent (ie..contractor has made all the purchases, etc), then the contractor could potentially call it his own and not pay GST. This route sounds a bit shady however, and I`m sure CRA would nail them when the house is sold and the investors get their cut.

 

[Albertritchot]

I would recommend that the questions you put to the REIN member board by asked at GST rulings (Canada RevenueAgency office)

1-800-959-8287

They usually take your telephone call immediately and should provide good information on the above transactions.

For GST questions in general, this is an inexpensive way to get information.