Taxpayers who purchase a new condo or home to earn rental income may qualify for a partial rebate of the GST/HST paid on the purchase through the GST/HST New Residential Rental Property Rebate (NRRP).
Similar to the New Housing Rebate, the NRRP offers landlords a partial recovery of federal and provincial sales tax on new residential rental properties. Typically, new home buyers in Ontario are charged 13% HST on their purchase, consisting of a 5% federal tax and 8% provincial tax. The NRRP refunds 36% of the federal portion of the HST (up to a maximum of $6,300) and 75% of the Ontario portion of the HST (up to $24,000). Other provinces can also expect similar treatment for the federal portion of the tax paid on new home purchases. Provincial rebate rules vary from province to province but usually provide similar rebate percentages as well.
You qualify for the NRRP if you meet any of the following criteria:
- You paid GST/HST when you bought a new or significantly renovated residential building, an interest in the complex, and the complex or complex units leased as a residential property;
- You’re a builder and funded the GST/HST on the self-supply of a residential building, or you paid for an addition to a residential building with multiple units leased as a residential property;
- As a builder, you funded the GST/HST on the self-supply of a residential building or paid for an addition to a residential building with multiple units, and were involved in a sale that is tax exempt and the tax-empty multi-year lease of land is covered by a written contract;
- You’re a corporation that looks after co-operative dwellings and funded the GST/HST on the purchase of a newly built or significantly renovated residential building, or you look after the builder’s interest in the building and rent units for residential use for at least a year;
- You’re a co-operative dwelling and funded the GST/HST on the self-supply of a unit zoned as residential or for the addition to a residential building with multiple units, and you rent units for residential uses for at least a year; or
- You funded the GST/HST on the self-supply of land that you also rent to someone else for at least a year to use as a residence.
A key requirement of the NRRP is that landlords must ensure their property is leased for a minimum of at least one year before disposition. The rebate may have to be repaid if the property is sold within one year after it is first occupied as a place of residence and the purchaser is not buying the unit as a primary place of residence for themselves or a qualifying relation.
It is also important to note that unlike the New Housing Rebate, the NRRP is never adjusted into the purchase price of the property by the builder of a new home. The NRRP requires a separate application to the Canada Revenue Agency and usually takes anywhere from six to eight weeks to process.
Contact the professionals at Tax Solutions Canada for a free consultation on how to make the NRRP work for you. Call us today at 1 888-868-1400.