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: 247572
Business Number: [#]
Dear [Client]:
Subject: GST/HST ruling - Eligibility for the purpose-built rental housing rebate
Thank you for your correspondence of April 22, 2024, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the purchase of a new apartment building and eligibility for the purposebuilt rental housing (PBRH) rebate. We apologize for the delay in this response.
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 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.
STATEMENT OF FACTS
From your incoming letter, the Agreement of Purchase and Sale (APS) submitted, as well as our telephone conversations, we understand the following:
1. […] (Corporation) is resident in Canada and is registered for GST/HST purposes under business registration number [#].
2. The Corporation supplies residential properties to individuals as places of residence under long-term residential lease agreements.
3. On [mm/dd/yyyy], the Corporation entered into an APS with […] (Vendor). The relevant terms of the APS are as follows:
(i) Section […] of the APS provides that the Corporation offers to purchase from the Vendor the Property which will be known as […][civic address], […][City], […][Province A], for which a property identification number is to be assigned following subdivision of PID […], and which is identified as […][Lot X] on the plan of subdivision attached to the APS as Schedule “A” (Property), for a sum of $[…], inclusive of the HST (Purchase Price).
(ii) Schedule “A” to the APS indicates the Property is an irregular shaped plot on which a 12-unit apartment building (Apartment Building) was under construction.
(iii) Section […] of the APS provides that the Purchase Price, will be paid as follows:
(a) The Corporation, immediately upon acceptance of the APS by the Vendor, will pay to the Vendor’s solicitor in trust $[…] as a non-refundable deposit to be credited on account of the purchase money on closing.
(b) The balance of the Purchase Price, subject to the usual adjustments, will be paid by cash or certified cheque to the Vendor’s solicitor.
(iv) Section […] of the APS provides that the APS will be completed […] days following the Vendor notifying the Corporation, in writing, that construction of the Apartment Building is complete, or such other date as agreed in writing by the parties (Closing Date). Upon completion of the construction of the Apartment Building, the Corporation will receive vacant possession of the Property.
4. Each of the 12 units in the Apartment Building will contain private kitchen facilities, a private bath, and a private living area.
5. The Corporation will supply all units under long-term residential lease agreements for individuals to use as their place of residence.
6. The Closing Date is expected to be [mm/yyyy].
7. Excavation for the construction of the Apartment Building began prior to September 2023.
RULINGS REQUESTED
You would like to know:
1. Is the Corporation entitled to a PBRH rebate of 100% of the federal part of the HST payable on its purchase of the Property?
2. Is the Corporation required to pay the HST to the Vendor on its purchase of the Property?
RULINGS GIVEN
Based on the facts set out above, we rule that:
1. The Corporation is not entitled to a PBRH rebate of 100% of the federal part of the HST payable on its purchase of the Property.
2. The Corporation is not required to pay the HST to the Vendor on its purchase of the Property.
EXPLANATION
Ruling 1 – Eligibility for the PBRH rebate
A purchaser of new purpose-built rental housing acquired specifically for supplying long-term accommodation may be eligible for the PBRH rebate for 100% of the GST or the federal part of the HST that is payable on the purchase of the property, provided certain conditions are met.
One of the conditions 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. Construction of a residential complex is generally considered to begin at the time that excavation work relating to the residential complex begins.
In addition, under paragraph 256.2(3.1)(a) and subsection 4(2) of the Real Property (GST/HST) Regulations (Regulations), the purchaser must have received a taxable supply of a multiple unit residential complex (such as an apartment building) by way of sale 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.
As the construction of the Apartment Building began before September 14, 2023, the PBRH rebate is not available for any residential unit within the Apartment Building because the specific condition that the construction of the residential complex must begin after September 13, 2023, has not been met.
For more information on the PBRH rebate, please refer to the GST/HST Notice 336, Purpose-built Rental Housing Rebate.
Ruling 2 – Liability for tax
In accordance with paragraph 221(2)(b) and subsection 228(4), where a purchaser (other than an individual) of a taxable supply of a residential complex (such as an apartment building) is registered for GST/HST purposes at the time of the sale, the purchaser is required to account for the tax and remit it directly to the Canada Revenue Agency (CRA) rather than paying the tax to the vendor.
As the Corporation is registered for GST/HST purposes, it is required to account for the HST and remit the HST payable for the purchase of the Property directly to the CRA.
If the Corporation pays the HST on the sale of the Property to the Vendor, it will have paid an amount as tax in error. Please refer to the subheading “Tax paid in error” under Additional information below.
For further information, including how to account for the tax, please refer to the Guide RC4052, GST/HST Information for the Home Construction Industry, under the heading, “Determining if the vendor or purchaser collects and remits the GST/HST.”
We understand that the Corporation will be purchasing other new apartment buildings. Construction of some apartment buildings was begun before September 14, 2023, while construction of other apartment buildings will begin after September 13, 2023. Therefore, in addition to providing information on tax paid in error, we are also providing general information regarding residential rental rebates for your consideration.
Tax paid in error
GST/HST that is charged or collected in circumstances where it should not be charged or collected is considered to be charged or collected in error. For example, even where the terms of a contract provide that the GST/HST is included in the amount of a purchase, the amount is collected in error if the vendor is not required to collect the GST/HST that is payable.
A vendor who has charged or collected from another person an amount of tax in error (for example, from a GST/HST registered corporation on a purchase of a residential complex) may adjust, refund or credit the amount of tax to the other person.
The vendor has up to two years after the day on which the excess amount was charged but not collected to adjust the amount of tax charged, or if the excess amount was collected, two years after the day on which it was collected to refund or credit the excess tax.
Alternatively, a person who has paid an amount of tax in error to a vendor may apply to the CRA for a rebate within two years after the day the amount was paid.
For further information, please refer to GST/HST Memorandum 12.2, Refund, Adjustment, or Credit of the GST/HST under Section 232 of the Excise Tax Act.
GST/HST new residential rental property rebate
Where the PBRH rebate is not available, the GST/HST new residential rental property (NRRP) rebate may be available for some of the GST or federal part of the HST paid or payable on a taxable purchase of a residential complex.
The GST/HST NRRP rebate is generally 36% of the GST or federal part of the HST that is paid or payable on the purchase 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 the federal part of the HST is gradually reduced. No rebate is available for a particular unit if the unit has a fair market value of $450,000 or more.
For more information on the GST/HST NRRP rebate, please refer to the Guide RC4231, GST/HST New Residential Rental Property Rebate.
[Province A] PBRH rebate
The Government of [Province A] has introduced a provincial PBRH rebate for 100% of the provincial part of the HST payable on new purpose-built rental housing situated in [Province A], where conditions for the federal PBRH rebate are met. The conditions for the federal PBRH rebate are explained above. Additional details for this provincial rebate are contained in the Real Property (GST/HST) Regulations.
Applying for the PBRH rebate
GST/HST registrants can apply for a PBRH rebate online using My Business Account by selecting the Form GST524, GST/HST New Residential Rental Property Rebate Application.
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 CRA is bound by the rulings given in this letter provided that: none of the issues discussed in the rulings are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed. The interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the 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.
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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