New Condo Bought as an Investment: GST/HST Rebate Rules in Canada

You signed a pre-construction condo agreement, and at closing you paid GST or HST. You may be wondering whether you can get any of it back. The answer depends on who you are, what you plan to do with the unit and how the tax was charged.

This article compares the two federal routes, the owner rebate and the rental rebate, and explains when neither applies. It covers federal rules only. Because details like assignments and ownership structure change the result, a lawyer or accountant should confirm your case.

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

Why the owner rebate usually does not fit an investor

The new housing rebate under section 254(2) of the Excise Tax Act is for an individual who acquires the home as their own or a relation's primary place of residence. The intent to use it that way must be evident at the outset, and an investment property does not qualify.

CRA states it directly: an investor who will not live in the unit cannot claim the owner rebate. A parent buying for an adult child to live in may qualify, since a relation can be the occupant. The first occupant must be the buyer or a relation, and all other conditions must be met.

Ownership structure matters as well. Partnerships and corporations cannot claim the owner rebate, and an individual cannot claim if a partnership or corporation co-owns the house.

The rental rebate: when it can apply

The new residential rental property (NRRP) rebate in section 256.2(3) is aimed at the investor. A non-builder purchaser is entitled when tax first becomes payable, if the property includes a qualifying residential unit and the tax is not recoverable as an input tax credit.

A qualifying unit is self-contained, held for exempt residential rental, and its first use is as a primary residence for at least one year. The amount is A × ($450,000 − B) ÷ $100,000. A is the lesser of $6,300 and 36% of the tax, and B is the greater of $350,000 and the unit's fair market value. In multi-unit complexes, A is adjusted by the unit's floor-space share.

You apply on Form GST524 within two years after the end of the month tax first became payable.

Owner rebate compared with rental rebate

The rental rebate is not paid where the individual qualifies for the new housing rebate on the same housing.

When the rental rebate is not paid

There are several situations where the rental rebate is not paid:

• Purchases of existing occupied rentals where no GST/HST was payable.
• Units that are not self-contained or not held for exempt residential leases.
• Cases where the tax is recoverable under another law.
• Public service bodies eligible for the public service body rebate for the federal part.
• Purpose-built rental housing, which has its own separate rebate and cannot be claimed together with the NRRP rebate on the same property. That rebate excludes condos, single units, duplexes and triplexes.

Repayment can also apply. If a non-multi-unit qualifying unit is sold within one year of first occupancy to a buyer who will not use it as a primary residence, the rebate must be repaid with interest at the prescribed rate less 2% per year.

Assignments and what to do next

Many investors buy by assignment. Where an agreement is assigned to you, there may be two builders, and you may pay GST/HST to the original builder and to the assignor for the interest transferred. Assignment fees count toward the price threshold only if taxable. Only the builder who sells the house can pay or credit the owner rebate, so an assignee must claim directly from CRA.

• Decide and document how the unit will be used: your residence, a relation's residence or a rental.
• Check the name or names on title and whether a corporation or partnership is involved.
• Collect your agreement, any assignment, the statement of adjustments and proof of tax paid.
• Note the end of the month in which tax first became payable and calendar the two-year rental rebate deadline.
• Ask a lawyer or accountant to confirm whether the unit is a qualifying unit, because provincial rules for rental programs differ.

Frequently asked questions