Tax Insights: GST/HST issues affecting the real estate and construction industries

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Issue 2014-25

This Tax Insights highlights Goods and Services Tax/Harmonized Sales Tax (GST/HST) issues relevant to the real estate and construction industries relating to:

  • the Retail Sales Tax (RST) Transitional New Housing Rebate
  • GST/HST reporting (including Canada Revenue Agency (CRA) Notice 284)
  • partnerships
  • documentary requirements to claim input tax credits (ITCs)

RST Transitional New Housing Rebate

The Transitional New Housing Rebate (the Rebate) is designed to refund to the purchaser or builder the provincial RST included in eligible pre-July 1, 2010 housing construction costs.

Eligibility

To be eligible for the Rebate, the construction must have been at least 10% complete as of July 1, 2010. The builder must also obtain a Letter of Good Standing from the provincial government.

For freehold homes, the purchaser is eligible for the Rebate when HST applies on the purchase price. The purchaser can assign the Rebate to the builder or apply directly to the CRA for the Rebate.

For condominium units, the builder is eligible if either HST applies on the sale or the Transitional Tax Adjustment (TTA) is paid.

Calculating the Rebate

The Rebate is the product of:

  • the ‘Estimated RST Content,’ calculated using the floor space method or selling price method, and
  • a factor based on the degree of completion at July 1, 2010

Claiming the Rebate

The timing for claiming the Rebate is shown in the following table:

  Floor space method Selling price method
After July 1, 2010 HST becomes payable
Before July 1, 2014

Purchasers and builders must ensure that Rebate applications are filed with the CRA by the June 30, 2014, deadline.

It is important that condominium builders who have determined that the selling price method results in a larger Rebate for their units nevertheless use the floor space method when applying for the Rebate with respect to eligible units that remain unsold close to the filing deadline, even if this results in a smaller Rebate.