Bare Trust Holding Title and the GST/HST New Housing Rebate in Canada

Sometimes a new home is bought with title held by another person or a company on your behalf, often called a bare trustee. You are the beneficial owner, but the name on the agreement and on title is someone else's. Buyers in that position often ask whether they can still claim the GST/HST new housing rebate.

There is no simple yes or no. This article sets out the rebate conditions that a bare trust arrangement can put under pressure, so you know what to check and what to ask before you sign.

This article covers Canadian federal tax law, which applies in every province.

What a bare trust is, in plain words

A bare trust is an arrangement where one person or company holds legal title to property for someone else, who is the real owner and decides what happens to it. The trustee has no independent role. People use these arrangements for privacy, financing or convenience. The rebate rules, however, ask who the buyer is and whether that person is an individual, so the structure can matter.

Rebate conditions that a bare trust can affect

• The buyer must be an individual who acquires the home as their own or a relation's primary place of residence.
• Partnerships and corporations cannot claim, and an individual cannot claim if a partnership or corporation co-owns the house.
• The first individual to occupy the home must be the buyer or a relation of the buyer.
• If more than one individual owns the house, only one can claim, and the rebate can apply if all other conditions are met by at least one of the individuals.

If a corporation acts as bare trustee and is a signatory to the agreement or appears as a co-owner, the question is whether that affects the individual's claim. Court decisions have looked at whether everyone named on the agreement needs to qualify, and the answer can turn on the exact documents. That is a reason to have a lawyer review the trust agreement and the purchase agreement together before closing.

Residence, relations and price tests

The intent to use the house as your or a relation's primary place of residence must be evident at the outset of buying. A recreational cottage, an investment property, or a house you plan to use on a more distant occasion such as retirement does not qualify.

A parent may qualify when buying for an adult child or other relation who will live there, if all other conditions are met. Relations include blood relatives, spouses, common-law partners and adoptive relations, and for this rebate only, former spouses and former common-law partners also count.

The price tests still apply. The regular rebate is the lesser of $6,300 and 36% of the tax paid where total consideration is $350,000 or less, phases out up to $450,000, and is nil at $450,000 or more. A first-time buyer rebate may be available for pricier homes, but only if the first-time buyer conditions are met by the buyer, including the spouse or partner lookback.

Investors and corporations

If the beneficial owner will not live in the home, the owner rebate is not available. An investor who will not live in the unit cannot claim it. A corporation that buys a new residential unit to rent out may still qualify for the new residential rental property rebate on Form GST524 if the purchase was taxable and it is not the builder. That is a separate rebate with its own conditions.

What to do before closing

• Get the bare trust agreement and the purchase agreement and have them reviewed together.
• Identify every person and company named as buyer, signatory or owner.
• Confirm who will be the first occupant and how they are related to the buyer.
• Ask the builder whether it will credit the rebate, and what it requires from you.
• Keep the statement of adjustments and records for six years.
• Note the deadline: two years after ownership transfers for a builder purchase.

If the rebate is paid or credited and you were not entitled to it, you must repay it. Getting advice before closing is usually easier than correcting the position afterwards.

Frequently asked questions