Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 247697
Business Number: N/A
Dear [Client]:
Subject: GST/HST interpretation
When construction begins for purposes of the purpose-built rental housing rebate
Thank you for your correspondence of [mm/dd/yyyy], concerning when construction begins for purposes of the goods and services tax/harmonized sales tax (GST/HST) purpose-built rental housing (PBRH) rebate.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. The Government of Nova Scotia has proposed to decrease the rate of the HST from 15% to 14% effective April 1, 2025. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
From your correspondence and our telephone conversations, we understand the following:
1. A real property developer (Developer) constructs long-term residential rental housing in Ontario.
2. The Developer is a corporation resident in Canada and is registered for GST/HST purposes. The Developer is not a public service body as that term is defined in subsection 123(1).
3. In [yyyy], the Developer purchased real property located in […], Ontario (Property) for the purpose of constructing long-term residential rental housing. A previously occupied bungalow was situated on the Property at the time of purchase.
4. In [mm/yyyy], the Developer applied for building permits to construct a duplex and a separate two-unit laneway house on the Property (Initial Development).
5. In [mm/yyyy], the […] (City) issued two separate building permits, one for the duplex and the other for the two-unit laneway house, as required by the City’s bylaws.
6. In [mm/yyyy], the Developer began the demolition, excavation, and foundation work for the Initial Development.
7. In [mm/yyyy], the City issued a […][notice] denying the Developer’s application for a minor variance for the two-unit laneway house, citing a resurgence of the COVID pandemic and concerns surrounding the issuance of the initial permits.
8. The [notice] terminated the Initial Development. The Developer abandoned the design and construction of the Initial Development. The foundation work was unfinished and no work on the interior livable space of the duplex had been started. Posts and framing were inserted to prevent the shell structure from collapsing and to preserve the work that had been completed.
9. The Developer engaged architects to design a new plan for the Property.
10. In [mm/yyyy], a new site plan and drawings for a fourplex and a single-unit laneway house (New Development) were submitted to the City for approval.
11. In [mm/yyyy], the City issued a new building permit for the single-unit laneway house.
12. In [mm/yyyy], the City issued a new building permit for the fourplex.
13. Physical work with respect to the New Development began on [mm/dd/yyyy]. A portion of the duplex’s foundation and an external wall were incorporated into the construction of the fourplex. Underpinning and additional footings were added to the original foundation and the foundation was extended to accommodate the larger fourplex structure.
14. All five residential units in the New Development will have private kitchen facilities, private baths, and private living rooms and will be leased to individuals for long-term residential accommodation.
INTERPRETATION REQUESTED
You would like to know whether the construction of the New Development began after September 13, 2023, for purposes of the PBRH rebate.
INTERPRETATION GIVEN
Generally, the PBRH rebate is available to a builder of purpose-built rental housing for 100% of the GST or the federal part of the HST that is deemed to have been paid and collected by the builder on the self-supply of the property provided certain conditions are met.
One of the conditions is that, in accordance with subsection 256.2(3.1) and subsection 4(2) of the Real Property (GST/HST) Regulations (Regulations), the property the builder is deemed to have received must be a multiple unit residential complex where:
* the multiple unit residential complex includes at least four residential units and at least four of those units each contains private kitchen facilities, a private bath and a private living area, or at least ten residential units; and
* at least 90% of the residential units that form part of the multiple unit residential complex are qualifying residential units held for the purpose of making certain exempt supplies of the unit or making exempt supplies that include giving possession or use of a unit to a person for occupancy of the unit as an individual’s place of residence.
Another condition is that, generally, the construction of the purpose-built rental housing must begin after September 13, 2023, but before 2031 and must be substantially completed before 2036. For purposes of the PBRH rebate, the Canada Revenue Agency (CRA) generally considers construction to begin at the time when excavation work relating to a residential complex begins.
The following relevant definitions are found in subsection 123(1).
A multiple unit residential complex means a residential complex that contains more than one residential unit, but does not include a condominium complex.
A residential complex, in part, includes that part of a building in which one or more residential units are located, together with:
* that part of any common areas and other appurtenances to the building and the land immediately contiguous to the building that is reasonably necessary for the use and enjoyment of the building as a place of residence for individuals, and
* that proportion of the land subjacent to the building that that part of the building is of the whole building.
A residential unit includes a detached house, semi-detached house, rowhouse unit, or apartment that is occupied or is intended to be occupied by an individual as a place of residence or lodging.
A single unit residential complex means a residential complex that does not contain more than one residential unit, but does not include a residential condominium unit.
[…].
A residential complex generally includes a building (or a part of a building), appurtenances to the building and land related to the building. Where there are two buildings on a single legal land description, each containing residential units, there would generally be two residential complexes. Each residential complex would be considered separately to determine if it is eligible for the PBRH rebate.
Where construction had already begun for a particular building (Building A) and the work is used instead to construct a different building (Building B), the CRA would generally consider construction of Building B to have begun when the excavation work for Building A began. In such a case, where the excavation work related to Building A began before September 14, 2023, a PBRH rebate would not be available for any residential unit within Building B because construction of Building B would not have begun after September 13, 2023.
Where a residential complex does not contain at least four residential units, the condition under subsection 4(2) of the Regulations, that a multiple unit residential complex must include at least four residential units, would not be met. Therefore, a builder would not be entitled to claim a PBRH rebate with respect to the GST or federal part of the HST that it is deemed to have paid and collected on the self-supply of a single unit residential complex, regardless of when construction began.
Further information on the PBRH rebate including the eligibility requirements is available in GST/HST Notice 336, Purpose-built Rental Housing Rebate.
ADDITIONAL INFORMATION
Provincial PBRH rebate
The Government of Ontario has introduced a provincial PBRH rebate for 100% of the provincial component of the HST for new purpose-built rental housing situated in Ontario. Where conditions for the federal PBRH rebate are met for a particular residential complex, the Developer may be eligible for this provincial rebate. The conditions for the federal PBRH rebate are explained above. Subsection 5(1) of the Regulations provides for this provincial rebate.
New residential rental property rebates
Where the Developer is not entitled to claim the federal PBRH rebate, it may be entitled to claim a GST/HST new residential rental property (NRRP) rebate. The GST/HST NRRP rebate is generally 36% of the GST or federal part of the HST that is deemed to have been paid and collected on the self-supply of a residential complex, subject to a maximum amount of $6,300 for each qualifying residential unit. For qualifying residential units with a fair market value between $350,000 and $450,000, the rebate for some of the GST or federal part of the HST is gradually reduced. No rebate is available with respect to a particular unit if the unit has a fair market value of $450,000 or more.
The Developer may also be entitled to claim an Ontario NRRP rebate for a portion of the provincial part of the HST that was deemed to have been paid and collected for newly constructed or substantially renovated rental property that is situated in Ontario. Subject to a maximum amount of $24,000 per unit, the Ontario NRRP rebate may be available regardless of the fair market value of the unit.
Please refer to the Guide RC4231, GST/HST New Residential Rental Property Rebate for further information on these rebates.
DISCLAIMER
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
CONTACT
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 306-491-4173.
Should you have additional questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Sincerely,
Karen Klassen
Senior Rulings Officer
Real Property Unit 1
Financial Institutions and Real Property Division
GST/HST Rulings Directorate
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