Real Estate Commissions would fall under the Services category in the following link, http://www.cra-arc.gc.ca/E/pub/gi/notice247/notice247-e.pdf, and indicates that:

“The HST would generally apply to any consideration that becomes due, or is paid without having become due, on or after May 1, 2010, for a supply of a service, to the extent that the consideration relates to the portion of the service performed on or after July 1, 2010. However, if 90% or more of the service is performed before July 2010, no HST would be payable on the consideration for the service.”

A lot of information is being disseminated to Real Estate Brokerages from different sources, therefore we contacted the HST Rulings Division to ask specifically how the upcoming changes will affect Real Estate Commissions. At this time, we are told that CRA cannot provide a ruling, since new information continues to be released, but they did provide an interpretation.

We were told that HST should be applied to any closings that happen on or after July 1st, 2010, unless the agent can prove that 90% or more of the service was provided before that date. The onus is on the agent to justify that calculation.

We have also been told that doing an automatic pro-rated calculation based on the dates entered on your trades is not acceptable and as your accounting software provider we should not implement this functionality. Again, it is not the Real Estate office who can determine what portion of the service was provided prior to July 1st, it is the agent.

With that being said, Lone Wolf has determined that the best course of action is to update the Rate table for the main tax (E.1.2), to reflect the change. Then any deals with a close date, as well as any other postings with a date on or after that date will be calculated with the new rate.

In order to accommodate deals where the agents provide sufficient information to you to indicate the tax rate should be different or pro-rated, you will be able to enter any overrides in the Tax Rate field on the Key Info screen (2.1). This way you can enter the determined tax rate for the Commission coming into the office for the individual trade. We recommend that you keep any documentation in regards to that calculation in the trade files and/or scan the document and attach it to the trade using the Docs button (top right hand corner in 2.1).

We will keep you updated with any further changes as that information becomes available to us.