Tax Insights: Enhanced Harmonized Sales Tax relief on the sale of new homes in Ontario

Issue 2026-20

In brief

What happened? 

On May 5, 2026, the Ontario government provided additional guidance¹ on the implementation of measures to provide Harmonized Sales Tax (HST) relief to purchasers of new homes in Ontario. As announced on March 25, 2026 (in advance of Ontario’s 2026 budget address), temporary enhancements to Ontario’s existing New Housing Rebate (NHR) and New Residential Rental Property Rebate (NRRPR) will rebate the entire 8% provincial portion of the HST for eligible purchases of qualifying newly built homes valued at up to $1 million. The federal government has agreed to partner with Ontario and provide funding that would allow Ontario to also rebate the 5% federal portion of the HST, creating a maximum rebate of $130,000 for eligible Ontario homebuyers.   

Why is it relevant?

These rebates temporarily eliminate the HST on the sale of qualified new homes valued at up to $1 million, for agreements of purchase and sale entered into after March 31, 2026 and before April 1, 2027. The $130,000 maximum HST rebate is available for homes valued at up to $1.5 million, and gradually reduced for homes valued between $1.5 million and $1.85 million.

Actions to consider

As the administration of the rebates is subject to the passing of provincial legislation (introduced in the Ontario legislature on May 5, 2026²) and enacting relevant provincial regulations and amendments to federal GST/HST regulations, builders and homebuyers should monitor ongoing guidance from the respective federal and provincial governments. They should proceed cautiously as they wait for final details on rebate eligibility and how to claim the enhanced rebates.

In detail

Background

On March 25, 2026, the Ontario government announced that it would temporarily enhance the province’s existing NHR for new and substantially renovated homes and the existing NRRPR for residential rental properties, by rebating the entire 8% provincial portion of the HST for eligible newly built homes valued at up to $1 million. The federal government has agreed to partner with Ontario to also rebate the 5% federal portion of the HST, creating a maximum rebate of $130,000 for eligible Ontario homes.

The maximum HST rebate will be available for eligible homes valued at up to $1.5 million, and gradually reduced for homes valued between $1.5 million and $1.85 million. Eligible homes valued above $1.85 million will continue to qualify for the existing rebate of $24,000 (which is expected to be eliminated after March 31, 2027). To be eligible for the enhanced rebates, the eligible home must be used as a primary place of residence, or as a qualified residential rental property. Eligibility is not limited to first‑time home buyers.

The enhanced NHR and NRRPR would generally apply to the same types of housing and follow the same eligibility conditions as the existing rebates, subject to some additional conditions to take into account that the rebate enhancements are temporary.

Enhanced NHR

If an individual meets the eligibility requirements for Ontario's existing NHR, which include that the homes are for use as the individual’s primary place of residence (or that of a relation), the individual may be eligible for the enhanced NHR if:

• the agreement of purchase and sale between the individual and the builder/co-op is entered into after March 31, 2026 and before April 1, 2027, and construction or substantial renovation of the home begins before January 1, 2029, and is substantially completed before January 1, 2032, for the purchase of:
  • a new or substantially renovated home from a builder, or
  • shares of a cooperative housing corporation, or
• the construction or substantial renovation of an owner-built home begins after March 31, 2026 and before April 1, 2027, and is substantially completed before January 1, 2030, for building or substantially renovating, or hiring someone else to build or substantially renovate, a home on land the individual owns or leases

Eligible homes include a detached or semi-detached single unit house, duplex, residential condominium unit, townhouse, rowhouse, unit in a cooperative housing corporation, mobile home (including modular home) and floating home.

An individual who would be eligible for the Ontario first-time home buyers’ rebate and for the enhanced NHR would be permitted to claim either or both rebates, but the total amount of all Ontario rebates that may be claimed by an individual would be limited to the maximum amount claimable under the enhanced NHR.

Upon purchasing a new home from a builder, the builder may pay or credit the total amount of the NHR. Builders will not be able to pay or credit the enhanced NHR for homes where GST/HST becomes payable before:

• the federal regulations that are necessary to implement the enhanced NHR are enacted, and
• the updated rebate application forms are released

If GST/HST becomes payable before this time, eligible purchasers will need to pay the GST/HST at closing and apply for the enhanced NHR directly with the Canada Revenue Agency (CRA) after the federal regulations and rebate application forms are released.

Enhanced NRRPR

As with Ontario’s current NRRPR, properties eligible for the enhanced rebate include a single-unit residential complex (a detached or semi-detached single unit house, duplex, townhouse or rowhouse) and residential condominium unit. Landlords who meet the requirements to be eligible for the existing NRRPR should be eligible for the enhanced NRRPR in situations where they purchase from a builder a new or substantially renovated residential complex to rent for long‑term residential use (at least one year).

The guidance notes that the rebates will not be available with respect to rental units that builders have constructed and are deemed to have sold pursuant to “self‑supply” provisions in the Excise Tax Act (ETA), unless construction commenced after March 31, 2026 (see below).

As with the existing NRRPR, eligible persons must apply for the rebate directly from the CRA. For “builders” of new homes, the availability of the enhanced NRRPR depends on whether the construction or substantial renovation of the residential complex begins before April 1, 2026 or after March 31, 2026.

Construction begins before April 1, 2026

The enhanced NRRPR may be available to a person who is not a “builder” on the purchase of a new or substantially renovated single‑unit residential complex or a residential condominium unit where the construction or substantial renovation began before April 1, 2026. A “builder” would not be eligible for the enhanced NRRPR, because renting the unit would trigger a deemed supply pursuant to subsection 191(1) of the ETA (see below).

If the purchaser of an eligible residential rental property would qualify for the current NRRPR for a taxable supply by way of sale of a residential complex (other than a deemed sale by a builder pursuant to section 191 of the ETA), the enhanced NRRPR would generally be available in respect of the residential complex if:

• the residential complex is a single‑unit residential complex or residential condominium unit
• the agreement of purchase and sale for the residential complex was entered into with the builder after March 31, 2026, and before April 1, 2027, and
• the construction or substantial renovation of the residential complex is substantially completed before January 1, 2030

Subsection 191(1) of the ETA provides that a builder is generally considered to have made a deemed sale of the residential complex for consideration that is equal to the fair market value (FMV) of the residential complex if they:

• construct or substantially renovate a single-unit residential complex or a residential condominium unit, and
• provide possession or use of the residential complex to a person under a lease, license or similar arrangement

As such, the builder is required to pay GST/HST on the FMV of the rental property. The guidance notes that a builder will not be eligible for the enhanced NRRPR if construction commenced before April 1, 2026. In these instances, builders should consider whether the rebate can be claimed if the “qualifying residential units” are sold to another person that is not a builder. For example, if newly constructed condominium units are sold to a partnership after the residential complex is registered as a condominium and the units are acquired for the primary purposes of leasing the units to individuals as their primary place of residence, the rebate may be available.

Construction begins after March 31, 2026

A person that purchases or builds a residential complex, or an addition to a residential complex, for which construction begins after March 31, 2026, may be eligible for the enhanced NRRPR. If a person qualifies for the current NRRPR for an eligible residential rental property or an addition to the property, the enhanced NRRPR may be available if the construction or substantial renovation:

• begins after March 31, 2026 and before April 1, 2027, and
• is substantially completed by January 1, 2030

Assignment sales

An assignee who assumes the rights and obligations of the assignor that is a purchaser of a new home under an agreement of purchase and sale with a builder is eligible for the enhanced NHR or NRRPR if:

• both the original agreement of purchase and sale and the assignment agreement were entered into after March 31, 2026 and before April 1, 2027, and
• all other requirements to be eligible for the enhanced rebates are met

Tax payable date

For both the enhanced NHR and the enhanced NRRPR, tax would need to become payable no later than December 31, 2032. To ensure that the enhanced rebates are available as intended, rules similar to the First‑Time Home Buyers’ GST/HST Rebate will be implemented to limit their availability to the circumstances that were anticipated.

Eliminating the existing NHR and NRRPR

Eligibility for the existing NHR and NRRPR is proposed to end after the end of the proposed enhancement period for these rebates. The 2026 Ontario budget noted that further details on transitional provisions detailing the elimination of the rebates will be provided in the 2026 Ontario Economic Outlook and Fiscal Review, which is expected in fall 2026.

Eligibility for the Ontario HST rebates for first-time home buyers and purpose-built rental housing would not be affected and would continue to follow the requirements previously released by the federal government for eligible properties.

The takeaway

It is unfortunate that the regulations and rebate forms for the enhanced rebates have not yet been released, even though the rebates are effective April 1, 2026. This delay has led to confusion in the marketplace for both builders and purchasers.

Until the federal regulations are finalized, builders should proceed cautiously when considering rebate eligibility and pricing. While purchasers entering into agreements generally expect to receive the enhanced rebates, they will need to be prepared to fund the amount of the rebate on closing. The rebates cannot yet be assigned to the builder and the homebuyer will need to file rebate claims with the CRA and await payment.

We can help builders determine if the enhanced rebates are available and discuss any issues that may arise.