For home renters in Vancouver and other places within the province, the obvious question begging for answer is this - Is there a direct impact of BC Harmonized Sales Tax on the prevailing rental rates in British Columbia? A simple and straightforward response to this question is this - the tax has no DIRECT impact on rental rates in Vancouver, Chilliwack and other major cities in the Province.
This means that your landlord will and cannot levy the 12-percent HST on rental rates.
In short, what you pay for a rental home or condo unit will not carry this tax payment; what you see is what you get.
Now, does this mean that BC renters will not have any concern with this new harmonized sales tax? In reality, BC home or condo renters will ultimately have to account for an upward shift in rental rates with the HST implementation.
The message from tax advisors and real estate experts is clear - this 12-percent tax will have an indirect impact on home and condo renters.
In fact, this new tax policy will affect rental rates of commercial properties as well.
Home and condo renters should expect the adjustments attributable to the tax by next year.
Property owners will most likely apply this additional 12 percent tax on the costs of operations, repair and maintenance, related professionals services and renovations.
This means that this add-on cost on these items will have to be reflected on the applied rental rates of home or condo units.
Two-Fold Effect There is a two-pronged effect of the BC HST on prevailing rental rates of home and condo units and operating cost of property owners.
The added tax burden will ultimately push rental rates of homes and condo units in British Columbia.
This will have a negative impact on the affordability of home properties.
To properly understand how this event will play out, you need to look at the dynamics of HST.
The BC Harmonized The British Columbia is the fifth province that has so far adopted this new tax scheme.
As the name implies, the Harmonized Sales Tax involves the harmonization of federal GST and provincial sales tax.
Other provinces that have also adopted the harmonized sales tax include Nova Scotia, New Brunswick, Labrador/Newfoundland, and Ontario.
With this tax harmonization scheme, these two types of sales tax are now combined into a single tax payment which is equivalent to 12 percent.
To allay the fears of property owners and renters, the BC government has recently announced that the implementation of the tax sales tax harmonization will not be applied on home and condo rentals in Vancouver and other cities of the province.
This means that if you are renting a Vancouver condo unit at a rate of $1,000 a month, the payable amount will be the quoted rental rate and not $1,000 plus 12 percent sales tax.
While this may be a clear indication that home and condo rentals will not directly bear this tax burden, this does not necessarily mean that home and condo renters are shielded from the effects of the harmonized sales tax.
HST Implication from the Perspective if Home and Condo Renters This 12-percent sales tax will most likely have an indirect effect on the rental rates of homes, condo units and commercial properties.
This harmonized tax scheme will affect the prevailing property rental rates in two ways.
Home utilities and services will be subject to 12 percent HST.
This means that the cost of gas, water, heat, electricity, hydro and other utilities will experience an upward adjustment.
Additionally, the same 12-percent sales tax will also be applied on common necessities of the ordinary household.
These include cable TV, Internet connection, cell phones, landlines, etc.
The harmonized sales tax will also be applied when you purchase household items, appliances, furniture, computers and other goods and services.
Thus, this adjustment in the prices of these items will indirectly affect the prevailing rental rates and cost of living of home and condo renters.