Introduction:
In a move aimed at addressing housing affordability concerns in Canada, the federal government has unveiled a significant relief measure pertaining to the goods and services tax (GST) on the construction of purpose-built rental housing. This announcement introduces an enhanced rebate that promises to benefit landlords of new residential rental buildings. Below, we delve into the specifics of this rebate, its eligibility criteria, and its expected impact.
Enhanced Rebate Details:
Effective immediately, the enhanced rebate is designed to apply to a specific category of residential structures, including certain apartment buildings, student housing, and senior residences built for long-term rental accommodation. To qualify for this rebate, construction must commence on or after September 14, 2023, and conclude by December 31, 2035. This generous rebate is a direct response to the pressing need for affordable housing solutions and represents a significant policy shift.
Legislation Changes:
While legislation related to these changes is pending, it is anticipated that the Excise Tax Act will be amended to accommodate this new rebate structure. If passed, this proposal will substantially raise the rental rebate from its current rate of 36% to a full 100% of the GST and the federal portion of HST. Importantly, this relief initiative will eliminate the existing GST phase-out thresholds that previously limited access to this rebate.
Eligibility Criteria:
To benefit from the enhanced rebate, certain prerequisites must be met. Rental buildings, in general, must contain a minimum of four self-contained apartments for residential units to qualify. Meanwhile, student and senior housing projects must consist of at least 10 units. Crucially, the building must maintain a composition of at least 90% long-term residential units to meet eligibility requirements. It is worth noting that the enhanced rebate is not applicable to substantial renovations of existing residential properties, as its primary aim is to boost overall housing supply.
Background:
Before these transformative changes, only specific entities, such as non-profit organizations, co-operative housing corporations, public institutions, or charities, were eligible to receive a full GST rebate on apartment buildings, provided certain stipulations were met. The introduction of this enhanced rebate extends access to a broader spectrum of rental housing providers, marking a significant policy shift.
Provincial Sales Tax Alignment:
In addition to the GST rebate, the federal government has called upon all provinces to align their provincial sales taxes (PST) with the federal relief measures. Encouragingly, some provinces, including Ontario and Newfoundland and Labrador, have already signaled their intention to remove the provincial portion of the HST on purpose-built rental housing. Furthermore, the British Columbia government has committed to eliminating the PST on specific construction costs related to purpose-built rentals.
Conclusion:
The federal government\’s announcement of the enhanced rebate for new residential rental buildings underscores its commitment to addressing housing affordability concerns in Canada. These changes promise to provide much-needed relief to landlords and contribute to the expansion of the rental housing market. For personalized guidance on how these changes may impact you, consult our experienced sales tax professionals. Given the novelty of this tax relief and evolving details, stay tuned for updates as they become available. Contact us for further information and assistance.
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