DFK Tax Newsletter

The Enhancement of the GST/HST New Residential Rental Property Rebate

As part of Bill C-56 which received royal assent on December 15, 2023, the Government of Canada is providing a 100% rebate of the GST, or the federal portion of the HST, on new purpose-built rental housing (“PBRH”). 

The PBRH rebate is an enhancement of the GST/HST new residential rental property (“NRRP”) rebate, and will support the construction of new apartment buildings, student housing, and seniors’ residences designed for long-term residential rental. 

The Canada Revenue Agency (“CRA”) published GST/HST Notice 336 in June 2024 providing additional commentary along with questions and answers regarding the PBRH Rebate.

Background

The rental of a residential complex or a residential unit in a residential complex is generally exempt for GST/HST purposes. 

However, eligible residential landlords may claim the NRRP rebate up to a maximum of 36% of the GST or federal part of the HST payable on purchase or self-supply of a qualifying residential unit. 

The NRRP rebate for the GST or federal part of the HST in respect to each qualifying residential unit is gradually reduced when the fair market value of the qualifying unit exceeds $350,000, with no rebate available after a fair market value of $450,000 or more.

In Ontario, a provincial NRRP rebate is available for a portion of the provincial part of the HST that was paid. The Ontario NRRP rebate is 75% of the 8% portion of the HST paid, subject to a maximum amount of $24,000 per unit. Unlike the NRRP rebate for the GST or federal part of the HST, the Ontario NRRP rebate may be available regardless of the fair market value of the unit.

PBRH Rebate Rules

To the extent a new residential rental project meets certain requirements, the PBRH rebate rules increase the rebate percentage from 36% to 100% of the GST or federal part of the HST payable, or deemed to have been paid and collected on a self-supply, of certain purpose-built rental housing. In addition, there is no $450,000 fair market value limitation on the PBRH rebate.

The governments of Ontario, Nova Scotia and Newfoundland and Labrador have announced that they will mirror the federal PBRH rebate and provide a 100% rebate of the provincial portion of HST in those provinces. 

The government of Prince Edward Island announced that it too would generally mirror the federal PBRH rebate and provide a 100% rebate of the provincial component of HST, subject to a maximum rebate of $35,000 per unit and a reduced rebate rate for projects that reach completion after 2028.

Québec has confirmed that the province will not enact a similar PBRH Rebate from a Québec sales tax standpoint.

PBRH Rebate Requirements

To be eligible to claim the PBRH rebate, a residential rental project must meet all the following conditions:

1. The units are qualifying residential units for the current GST/HST new residential rental property rebate
2. The residential units form part of a multiple unit residential complex that has at least:
   i. 4 residential units (each containing private kitchen facilities, a private bath and a private living area), or at least 10 private rooms or suites
   ii. At least 90% of the residential units are held for long-term residential rental
3. Construction began after September 13, 2023, but before 2031, and must be substantially completed before 2036

An addition to an existing building also qualifies for the PBRH rebate to the extent that such addition includes 4 or more residential units and at least 4 of those units contain private kitchen, bath and living area, or 10 or more private rooms or suites.

The PBRH rebate may also be available where a person converts existing non-residential real property, such as an office building, into a multiple unit residential complex. The construction or alteration necessary to effect the conversion must begin after September 13, 2023, but before 2031, and be substantially completed before 2036. In addition, on September 13, 2023, the property must have met all of the following conditions: it was in existence, it was not in the process of being constructed, and it was not being used as a residential complex.

Ineligible Properties

The PBRH rebate does not apply to condominium units, single-unit housing, duplexes, triplexes, owned houses situated on leased land and sites in residential trailer parks.

The PBRH rebate is also not available for a substantial renovation of an existing multiple unit residential complex. However, the GST/HST NRRP rebate or the GST/HST new housing rebate may be available for a portion of the GST/HST payable on the purchase or the GST/HST deemed paid and collected on such housing.

How to Apply for the PBRH Rebate

Applications for the PBRH rebate are available online, using the existing GST/HST new residential rental property rebate application (GST524) option. 

Per CRA, applications filed through My Business Account opened on May 13, 2024, and applications filed through My Account opened on June 17, 2024.

Conclusion

The enhancements of the GST/HST rebates available for residential rental properties are very welcome. Here is a comparison of how the changes affect the GST/HST on a qualifying residential unit with a fair market value of $1,000,000.

Please contact your local DFK advisor if you would like to discuss how the PBRH rebate rules may impact you and for advice on eligibility before filing a rebate application.