To combat the increasing shortage of rental housing, the Canadian government has introduced new legislation. On September 14, 2023, they announced the Enhanced GST Rental Rebate, also known as the landlord's rebate, aiming to encourage the construction of rental homes in Canada.

Bill C-56 was tabled in the House of Commons on September 21, 2023 confirming that the enhanced GST Rental Rebate will apply to new residential housing projects that begin construction between September 14, 2023, and December 31, 2030, and complete construction by December 31, 2035.

Under the enhanced GST Rental Rebate, builders and purchasers of new purpose-built rental housing (such as apartment buildings, student housing, and senior residences) will receive full relief for the 5% GST(or the 5% federal component of the HST) paid. This enhanced rebate would not be to the existing phase out thresholds that reduce the rebate for rental units valued between $350,000 and $450,000, and completely eliminate it for rental units valued at $450,000 or more. This change eliminates a significant barrier to the rebate that was caused by high housing costs in major Canadian cities.

The requirements and conditions required to be met for purpose-built rental housing are to be detailed in regulations which have not yet been released. According to commentary released thus far, to qualify for the rebate, new residential units must meet the existing criteria for the GST Rental Rebate, and be in buildings that:

- have at least 4 private apartment units

- or have at least 10 private rooms or suites; and

- have at least 90% of the residential units designated for long-term rental.

Projects that convert non-residential real estate into residential complexes are also eligible for the enhanced rebate, as long as they meet the conditions specified in the legislation. Public service bodies can also access the enhanced GST Rental Rebate.

Individually-owned condominium units, single-unit housing, duplexes, triplexes, housing co-ops, and houses on leased land or sites in residential trailer parks are not eligible. However, they can still qualify for the existing GST Rental Rebate if they meet the criteria. The existing GST Rental Rebate will continue to apply to residential housing that qualifies, but does not meet the conditions for the enhanced rebate, such as buildings with fewer than 4 residential units or housing undergoing substantial renovation.

There are many unknowns surrounding the enhanced rebate. One of the most significant unknowns being what will constitute the beginning of construction. What if you had permits in place but had not yet “broken ground”? What if you had ceased construction but this program would make it viable to restart construction? What if you purchase a project that was previously ceased by the vendor and now you want to restart construction?

If you have questions or would like additional information regarding the enhanced GST rental rebate, contact Nathan Sheppard, KRP's Indirect Tax Advisor.

Nathan Sheppard, CD, BBA, CPA

780.424.3000 ext. 654
NSheppard@krpgroup.com
‍

‍Information provided is of a general nature and deals with time sensitive information that could change. Information may not apply to your particular facts and circumstances and should not be relied upon in lieu of seeking advice from your professional advisors. Neither KRP nor its partners, directors, contractors or employees will be liable for any actions taken from reliance on this information. Links to other websites or publications are provided for your convenience only and you may access them at your own risk. By supplying this information, KRP is not providing tax, accounting, legal, or professional service or advice.