Purpose-built Rental Housing Rebate

GST/HST Notices – Notice 336
June 2024

Except as otherwise noted, all statutory references in this publication are to the provisions of the Excise Tax Act (ETA). The information in this publication does not replace the law found in the ETA and its regulations.

If this information does not completely address your particular situation, you may wish to refer to the ETA or relevant regulation, or call GST/HST Rulings at 1‑800‑959‑8287 for additional information. If you require certainty with respect to any particular GST/HST matter, you may request a ruling. GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, explains how to obtain a ruling or an interpretation and lists the GST/HST rulings centres.

If you are located in Quebec and wish to request a ruling related to the GST/HST, please call Revenu Québec at 1‑800‑567‑4692. You may also visit the Revenu Québec website at revenuquebec.ca to obtain general information.

For listed financial institutions that are selected listed financial institutions (SLFIs) for GST/HST or Quebec sales tax (QST) purposes or both, whether or not they are located in Quebec, the CRA administers the GST/HST and the QST. If you wish to make a technical GST/HST or QST enquiry related to SLFIs, please call 1‑855‑666‑5166.

GST/HST rates

Reference in this publication is made to supplies that are subject to the GST or the HST. 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%. If you are uncertain as to whether a supply is made in a participating province, refer to GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of Supply Rules for Determining Whether a Supply is Made in a Province.

Table of Contents

• Overview
• Background
• New measure – Purpose-built rental housing rebate
• Definitions
• Questions and Answers

Overview

Generally, a person may be entitled to claim a GST/HST new residential rental property (NRRP) rebate in respect of a qualifying residential unit that forms part of a residential complex where the person purchases, constructs, or substantially renovates the residential complex or converts non-residential real property into a residential complex for lease, licence, or similar arrangement.

The GST/HST NRRP rebate is generally 36% of the GST or federal part of the HST paid, or deemed to have been paid and collected, on the acquisition, or deemed acquisition, of the residential complex, subject to a maximum amount for each qualifying residential unit that forms part of the residential complex. The maximum GST/HST NRRP rebate amount in respect of each qualifying residential unit is $6,300. For qualifying residential units with a fair market value (FMV) between $350,000 and $450,000, the GST/HST NRRP rebate for some of the GST or federal part of the HST is gradually reduced. No rebate is available for the GST or federal part of the HST if a unit has a FMV of $450,000 or more.

A person may also be entitled to claim an Ontario new residential rental property (NRRP) rebate for a portion of the provincial part of the HST that was paid, or 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 FMV of the unit.

For more information on these rebates, refer to Guide RC4231, GST/HST New Residential Rental Property Rebate.

A new temporary measure will increase the GST/HST NRRP rebate from 36% to 100% of the GST or federal part of the HST paid, or deemed to have been paid and collected, on the acquisition, or deemed acquisition, of certain purpose-built rental housing, with no reduction where the FMV of a qualifying residential unit exceeds $350,000. This new rebate is referred to in this publication as the Purpose-built rental housing rebate or PBRH rebate. A person may not claim both the GST/HST NRRP rebate and the PBRH rebate for the same residential complex.

Rental housing that does not qualify for the PBRH rebate may qualify for the GST/HST NRRP rebate where the conditions outlined in Guide RC4231 are met.

Background

A person that buys a newly constructed residential rental property (for example, an apartment building) from a builder is liable for the GST/HST calculated on the sale price of the property. If the purchaser then supplies the units in the new residential rental property to individuals as places of residence under long-term leases, the supplies of the units are generally exempt and input tax credits (ITCs) are not available to the purchaser (now landlord) in respect of the GST/HST paid upon acquiring the property. However, the purchaser/landlord may be entitled to claim a GST/HST NRRP rebate for a portion of the GST/HST payable on the purchase of the property.

Similarly, a builder that constructs a new residential rental property and then supplies the units to individuals as places of residence under long-term leases is deemed to have paid the GST/HST on the FMV of the entire property at the later of the time that the property is substantially completed and the time when the first unit is rented (referred to in this publication as a self-supply).

If the builder leases the units in the new residential rental property to individuals as places of residence under long-term leases, the builder/landlord is in the same position as the purchaser/landlord. The leases of the units are generally exempt and ITCs are not available in respect of the GST/HST deemed paid at the time of the self-supply. However, the builder/landlord may be entitled to claim a GST/HST NRRP rebate for a portion of the GST/HST payable on the self-supply of the property.

New measure – Purpose-built rental housing rebate

As a result of recent and proposed amendments to subsection 256.2(3), the addition of subsections 256.2(2.1), 256.2(3.1), 256.2(3.2), and 256.2(9.1), and the Draft Real Property (GST/HST) Regulations, a builder or purchaser of new purpose-built rental housing built specifically for long-term accommodation may be entitled to a PBRH rebate of 100% of the GST (or the federal part of the HST) that is payable on the purchase of the property or that is deemed to have been paid and collected on a self-supply of the property.

The PBRH rebate may apply to a qualifying residential unit that forms part of a multiple unit residential complex or to a qualifying residential unit that is part of an addition to an existing multiple unit residential complex where construction of the complex or addition, as the case may be, begins after September 13, 2023, but before 2031, and is substantially completed before 2036.

The PBRH rebate may also be available in relation to qualifying residential units where a person converts existing non-residential real property, such as an office building, into a multiple unit residential complex. The construction or alteration necessary to effect the conversion must begin after September 13, 2023, but before 2031, and be substantially completed before 2036. In addition, on September 13, 2023, the property must have met all of the following conditions:

• it was in existence
• it was not in the process of being constructed
• it was not being used as a residential complex

For qualifying residential units within a multiple unit residential complex acquired or self-supplied, both of the following conditions must be met:

• the multiple unit residential complex includes 4 or more residential units and at least 4 of those units each contains private kitchen facilities, a private bath, and a private living area; or at least 10 residential units
• 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

For qualifying residential units that are part of the construction of an addition to a multiple unit residential complex, all of the following conditions must be met:

• the addition includes 4 or more residential units and at least 4 of those units each contains private kitchen facilities, a private bath, and a private living area; or at least 10 residential units
• at least 90% of the residential units that form part of the addition 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
• at least 90% of the residential units that form part of the multiple unit residential complex and the addition combined are 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

The PBRH rebate is not available for the construction, substantial renovation, or purchase of any of the following:

• a condominium unit
• single-unit housing
• a duplex
• a triplex
• an owned house situated on leased land or a site in a residential trailer park

The PBRH rebate is also not available for a substantial renovation of an existing multiple unit residential complex.

However, the GST/HST NRRP rebate or the GST/HST new housing rebate may be available for a portion of the GST/HST payable on the purchase or the GST/HST deemed paid and collected on such housing.

Definitions

The PBRH rebate generally applies in respect of certain residential units that are qualifying residential units that form part of a multiple unit residential complex.

Multiple unit residential complex is defined in subsection 123(1) and “means a residential complex that contains more than one residential unit, but does not include a condominium complex”.

Subsection 256.2(1) provides that a qualifying residential unit “of a person, at a particular time, means

1. a residential unit of which, at or immediately before the particular time, the person is the owner, a co-owner, a lessee or a sub-lessee or has possession as purchaser under an agreement of purchase and sale, or a residential unit that is situated in a residential complex of which the person is, at or immediately before the particular time, a lessee or a sub-lessee, where
   1. at the particular time, the unit is a self-contained residence,
   2. the person holds the unit
      1. (A) for the purpose of making exempt supplies of the unit that are included in section 5.1, 6.1, 6.11 or 7 of Part I of Schedule V,
      2. (A.1) for the purpose of making exempt supplies of property or a service that includes giving possession or use of the unit to a person under a lease to be entered into for the purpose of its occupancy by an individual as a place of residence, or
      3. (B) if the complex in which the unit is situated includes one or more other residential units that would be qualifying residential units of the person without regard to this clause, for use as the primary place of residence of the person,
   3. it is the case, or can reasonably be expected by the person at the particular time to be the case, that the first use of the unit is or will be
      1. (A) as the primary place of residence of the person or a relation of the person, or of a lessor of the complex or a relation of that lessor, for a period of at least one year or for a shorter period where the next use of the unit after that shorter period is as described in clause (B), or
      2. (B) as a place of residence of individuals, each of whom is given continuous occupancy of the unit, under one or more leases, for a period, throughout which the unit is used as the primary place of residence of that individual, of at least one year or for a shorter period ending when
         1. the unit is sold to a recipient who acquires the unit for use as the primary place of residence of the recipient or of a relation of the recipient, or
         2. the unit is taken for use as the primary place of residence of the person or a relation of the person or of a lessor of the complex or a relation of that lessor, and
   4. except where subclause (iii)(B)(II) applies, if, at the particular time, the person intends that, after the unit is used as described in subparagraph (iii), the person will occupy it for the person’s own use or the person will supply it by way of lease as a place of residence or lodging for an individual who is a relation, shareholder, member or partner of, or not dealing at arm’s length with, the person, the person can reasonably expect that the unit will be the primary place of residence of the person or of that individual; or
2. a prescribed residential unit of the person^{Footnote 1} ”.

Residential complex is defined in subsection 123(1) and “means

1. that part of a building in which one or more residential units are located, together with
   1. 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
   2. that proportion of the land subjacent to the building that that part of the building is of the whole building,
2. that part of a building that is
   1. the whole or part of a semi-detached house, rowhouse unit, residential condominium unit or other similar premises that is, or is intended to be, a separate parcel or other division of real property owned, or intended to be owned, apart from any other unit in the building, and
   2. a residential unit,
3. together with that proportion of any common areas and other appurtenances to the building and the land subjacent or immediately contiguous to the building that is attributable to the unit and that is reasonably necessary for its use and enjoyment as a place of residence for individuals,
4. the whole of a building described in paragraph (a), or the whole of a premises described in subparagraph (b)(i), that is owned by or has been supplied by way of sale to an individual and that is used primarily as a place of residence of the individual, an individual related to the individual or a former spouse or common-law partner of the individual, together with
   1. in the case of a building described in paragraph (a), any appurtenances to the building, the land subjacent to the building and that part of the land immediately contiguous to the building, that are reasonably necessary for the use and enjoyment of the building, and
   2. in the case of a premises described in subparagraph (b)(i), that part of any common areas and other appurtenances to the building and the land subjacent or immediately contiguous to the building that is attributable to the unit and that is reasonably necessary for the use and enjoyment of the unit,
5. a mobile home, together with any appurtenances to the home and, where the home is affixed to land (other than a site in a residential trailer park) for the purpose of its use and enjoyment as a place of residence for individuals, the land subjacent or immediately contiguous to the home that is attributable to the home and is reasonably necessary for that purpose, and
6. a floating home,

but does not include a building, or that part of a building, that is a hotel, a motel, an inn, a boarding house, a lodging house or other similar premises, or the land and appurtenances attributable to the building or part, where the building is not described in paragraph (c) and all or substantially all of the leases, licences or similar arrangements, under which residential units in the building or part are supplied, provide, or are expected to provide, for periods of continuous possession or use of less than sixty days”.

For more information on the definition of residential complex, refer to GST/HST Memorandum 19-2, Residential Real Property.

Residential unit is defined in subsection 123(1) and “means

1. a detached house, semi-detached house, rowhouse unit, condominium unit, mobile home, floating home or apartment,
2. a suite or room in a hotel, a motel, an inn, a boarding house or a lodging house or in a residence for students, seniors, individuals with a disability or other individuals, or
3. any other similar premises,
4. or that part thereof that
5. is occupied by an individual as a place of residence or lodging,
6. is supplied by way of lease, licence or similar arrangement for the occupancy thereof as a place of residence or lodging for individuals,
7. is vacant, but was last occupied or supplied as a place of residence or lodging for individuals, or
8. has never been used or occupied for any purpose, but is intended to be used as a place of residence or lodging for individuals”.

For more information on the definition of residential unit, refer to GST/HST Memorandum 19-2.

Questions and Answers

1. When is the construction of a residential complex considered to begin?

Generally, the construction of a residential complex is considered to begin at the time that excavation work relating to the residential complex begins.

2. An existing multiple unit residential complex is substantially renovated and will be used for long-term rentals after completion. Will the PBRH rebate apply?

The PBRH rebate does not apply to substantial renovations of existing residential complexes. In this case, the GST/HST NRRP rebate may be available for a portion of the GST or federal part of the HST paid on the self-supply of the complex, provided all eligibility criteria are met for that rebate.

3. An apartment building currently has 20 long-term rental units. An addition to the apartment building will add 10 new long-term rental units to the building bringing the total number of long-term rental units to 30. The construction of the addition will begin after September 13, 2023, but before 2031, and will be substantially completed before 2036. Will the PBRH rebate apply to the addition?

Generally, under subsection 191(4), where the builder of an addition to a multiple unit residential complex first leases a unit in the addition as an individual’s place of residence, the builder is deemed to have paid the GST/HST on the FMV of the addition at the later of the time that the construction of the addition is substantially completed and the time possession or use of the unit is given under the lease. The PBRH rebate will be available for the GST or federal part of the HST paid on the self-supply of the addition provided all of the following conditions are met:

• the addition includes 4 or more residential units and at least 4 of those units each contains private kitchen facilities, a private bath, and a private living area; or at least 10 residential units
• at least 90% of the residential units that form part of the addition 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
• at least 90% of the residential units that form part of the multiple unit residential complex and the addition combined are 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

4. A housing project consists of two separate multiple unit buildings where the construction of one building began on August 31, 2023, and the construction of the other building began on September 30, 2023. Would the PBRH rebate apply to the entire project or would it apply only to the building where construction began on September 30, 2023?

Generally, a person may be entitled to the PBRH rebate for the GST or federal part of the HST paid in respect of a multiple unit residential complex where the construction of the complex begins after September 13, 2023, but before 2031, and is substantially completed before 2036.

The first building, in respect of which construction began on August 31, 2023, is not eligible for the PBRH rebate. However, the person may be entitled to the GST/HST NRRP rebate for a portion of the GST or federal part of the HST paid on the first building, provided all conditions are met for that rebate.

A person may be entitled to the PBRH rebate for the GST or federal part of the HST payable or deemed paid and collected in respect of the second building in respect of which construction began on September 30, 2023, provided all conditions for the rebate are met.

5. An office building is being converted into a multiple unit residential complex where the units will be rented to individuals as their place of residence. The conversion began after September 13, 2023. Will the PBRH rebate be available for the GST or the federal part of the HST deemed to have been paid and collected as a result of the conversion?

The PBRH rebate may be available for the GST or the federal part of the HST deemed to have been paid and collected on the self-supply of the multiple unit residential complex that was converted from an office building. The construction or alteration necessary to effect the conversion must begin after September 13, 2023, but before 2031, and be substantially completed before 2036. In addition, on September 13, 2023, the property met all of the following conditions:

• it was in existence
• it was not in the process of being constructed
• it was not being used as a residential complex

Finally, both of the following conditions must also be met:

• the multiple unit residential complex includes 4 or more residential units and at least 4 of those units each contains private kitchen facilities, a private bath, and a private living area; or at least 10 residential units
• 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

6. Will the PBRH rebate apply to newly constructed long-term care facilities?

The PBRH rebate may be available for the GST or the federal part of the HST payable on the purchase or deemed to have been paid and collected on a self-supply of a newly constructed long-term care facility that is a multiple unit residential complex where construction begins after September 13, 2023, but before 2031, and will be substantially completed before 2036. The multiple unit residential complex must meet both of the following conditions:

• the multiple unit residential complex includes 4 or more residential units and at least 4 of those units each contains private kitchen facilities, a private bath, and a private living area; or at least 10 residential units
• 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

7. Will the PBRH rebate apply to the GST/HST paid or payable for ongoing costs, such as electricity, heat, and maintenance, to operate a multiple unit residential complex where the units in the complex are rented to individuals?

The GST/HST paid or payable for such ongoing costs to rent units in a multiple unit residential complex does not qualify for the PBRH rebate. Generally, the PBRH rebate may be available for the GST or federal part of the HST payable on the purchase or deemed purchase of a multiple unit residential complex for each qualifying residential unit in the complex where all of the conditions for the rebate are met.

8. A charity is constructing a multiple unit residential complex. Construction of the complex began after September 13, 2023. Is the charity entitled to the PBRH rebate?

Generally, a public service body, such as a charity, may qualify for the PBRH rebate for the GST or federal part of the HST paid on the self-supply of a multiple unit residential complex where the construction of the complex began after September 13, 2023, but before 2031, and is substantially completed before 2036. The multiple unit residential complex must meet both of the following conditions:

• the multiple unit residential complex includes 4 or more residential units and at least 4 of those units each contains private kitchen facilities, a private bath, and a private living area; or at least 10 residential units
• 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

Where the charity is entitled to the PBRH rebate, it would not be entitled to the GST/HST public service bodies’ rebate for the GST or the federal part of the HST payable on the self-supply that the charity may otherwise have been entitled to claim.

9. A corporation entered into a purchase and sale agreement on September 1, 2023, for the purchase of a newly constructed 10-unit apartment building that is a multiple unit residential complex. The building will be located in Ontario and the HST is payable on the purchase. Construction of the apartment building began on December 15, 2023, with an anticipated completion date in December 2025. Once completed and possession is obtained, all units in the building will be rented by the corporation to individuals as their place of residence under annual lease agreements. Will the corporation be entitled to the PBRH rebate and, if so, how much will that rebate be?

Generally, a person may be entitled to the PBRH rebate for the GST or federal part of the HST paid on a multiple unit residential complex where the construction of the complex began after September 13, 2023, but before 2031, and is substantially completed before 2036. If the construction of the multiple unit residential complex began after September 13, 2023, but before 2031, and is substantially completed before 2036, the corporation will be entitled to the PBRH rebate provided all conditions for the rebate are met. If all or substantially all of the residential units in the multiple unit residential complex are qualifying residential units that meet the conditions for the rebate, the rebate amount would be 100% of the federal part of the HST paid on the purchase of the complex.

Further information