GST/HST Rebates when Buying Canadian Property
Houses are expensive, so it is important to take advantage of any program that allows you to recover some of your costs. The New Residential Rental Property Rebate (“NRRP”) and the New Housing Rebate (“NHR”) allow you to do this. However, the criteria can be confusing, and people often apply for the wrong one, or their circumstances change and the application that they originally applied for is no longer appropriate. That is why it is important to know the differences.
The New Residential Rental Property Rebate
The NRRP allows you to recover some of your costs when you purchase real estate that will be used as residential rental property.
The New Home Housing Rebate
The NHR allows you to recover some of your costs when you construct or substantially renovate a home.
What are the Criteria for Applying?
The criteria for an NHR are:
- The home must be used as a principal residence; and
- The construction must be for a newly built home or for substantial renovations or major additions
- Substantial renovation must include gutting the entire home with at least 90% of the dry wall removed; and
- A major addition must at least double the size of the home.
The criteria for an NRRP are:
- First occupants of the new residential rental property must be the tenants;
- First occupants cannot include the landlord; and
- The fair market value of the qualifying residential unit at the time the tax was payable must be less than $450,000.
- If you are a resident of Ontario and the fair market value exceeds $450,000 you may be eligible to claim the provincial NRRP.
If you receive the NRRP and then sell the residence within 1 year, you may have to repay the entire rebate unless you sell it to a person who occupies it as their principal residence.
How to Apply?
You can apply for an NHR by:
- Within 2 years are the property closes, complete either Form GST191 for owner-built houses or Form GST190 for houses purchased from a builder; and
- Provide the appropriate supporting documentation.
You can apply for an NRRP by:
- Within 2 years after the property closes or sells, complete Form GST524; and
- Provide the appropriate supporting documentation.
Change in Circumstances
If you purchase your home with the intention of making it your primary residence, often the builder will apply for the NHR on your behalf, thus lowering your purchase price. However, if your circumstances change, and once the home is built you are no longer the first occupant, you no longer meet the criteria of the NHR. However, if you rent out your new home, you could very likely qualify for the NRRP instead.
When this occurs, it is very possible the CRA audits you to determine if you qualify for the rebate. We see quite a lot of this and can assist with your audit!
Other Issues to Note
The principle residence exemption can also result in tax implications upon the purchase or sale of property.
Property assignment can result in GST/HST as well as income tax implications. Assignment is when you purchase a pre-construction home or property, and sell the property before it is built and before you gain title to it. In other words, you are assigning your purchased rights to a home to another person.
If you have any questions about the tax consequences that relate to purchasing or selling property, contact our firm for a free consultation. We are here to help!
**Disclaimer
This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.
Mariya Zekel
