Navigating the Residential Rental Property Rebate: A Guide for Landlords
To provide affordable housing to Canadians, the federal government offers several programs aimed at incentivizing property development and rental. One such initiative, administered through the tax system, is the Residential Rental Property (RRP) Rebate.
This program allows landlords to claim rebates on the GST/HST paid when purchasing newly constructed or substantially renovated residential rental properties. In this article, we will explore the eligibility requirements for the rebate, how the program works, and what landlords need to know to benefit from it.
Eligibility and Rules for Claiming the Residential Rental Property Rebate
A landlord may qualify for the Residential Rental Property Rebate if, for residential rental purposes, the landlord does any of the following:
- Purchases and pays GST/HST on a new or substantially renovated house.
- The landlord or landlord's agent builds housing or makes an addition to multi-unit housing, reports this as a self-supply on GST/HST returns, and remits the GST/HST owed.
- The landlord or landlord's agent substantially renovates a house, reports it as a self-supply on GST/HST returns, and remits the GST/HST owed.
- The landlord changes the use of a property from a non-residential property to a residential one, reports it as a self-supply on GST/HST returns, and remits the GST/HST owed.
- The landlord makes an exempt lease or sublease of land, reports it as a self-supply on GST/HST returns, and remits the GST/HST owed. For example:
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- The landlord, as the builder, sells a residential unit to a buyer who qualifies for the GST/HST housing rebate, and also leases the related land to the purchaser under a single written agreement.
- The landlord leases land for long-term residential use or rents a lot or site in a residential trailer park.
To qualify for the Residential Rental Property Rebate, the fair market value of the residential unit must be less than $450,000 when GST/HST becomes payable on the purchase or self-supply of the unit. The rebate is partial if the value is between $350,000 and $450,000, and full if the value is less than $350,000.
The property must also be intended for long-term residential use, i.e. at least one year.
Long-term residential leases are exempt from GST/HST. As a result, a landlord is not able to claim input tax credits to recover the GST/HST paid towards the supply of the rental property. However, the landlord may instead qualify for the Residential Rental Property Rebate.
A cooperative housing corporation that meets the eligibility criteria applicable to individuals, and leases units for long-term residential use, will generally qualify for the Residential Rental Property Rebate.
Properties covered under the Residential Rental Property Rebates program include duplexes, multi-unit residential complexes, residential condominium units, residential complexes, sites in residential trailer parks, and similar housing types.
Exclusions:
The Residential Rental Property Rebate does not apply in the following situations:
- The residential rental property is purchased, but GST/HST was not payable (e.g., the purchase of a rental apartment already occupied by tenants).
- The landlord builds housing or adds to a multi-unit housing, but is not considered to have made a self-supply.
- The landlord purchases, builds, or substantially renovates the housing for personal use or for a related person as a primary place of residence.
The Concept of Self-Supply under the Residential Rental Property Rebates Program
In general, a landlord is expected to have paid GST/HST on the purchase of a new or substantially renovated residential rental property. However, when the landlord is also the builder or has made an addition to the property, the landlord is considered to have made a self-supply. In such cases, the landlord is deemed to have paid and collected GST/HST based on the fair market value of the property or the addition at the time the first unit is leased or occupied as a residence.
Understanding the 100% GST/HST Rebate for Purpose-Built Residential Rental Properties
You may be eligible for a 100% rebate of the GST/HST paid on the purchase, substantial renovation, or self-supply of a purpose-built residential rental property. The construction of the housing must have begun between September 13, 2023, and 2031, and must be substantially completed before 2036.
To qualify for this rebate, the residential unit must first meet the criteria for the Residential Rental Property Rebate. Additionally, the unit must be part of a building with at least:
- Four residential units, each containing its own kitchen, living room, and bathroom; or at least ten residential units in total; and
- Ninety percent of the residential units must be held for the purpose of making exempt leases or certain exempt supplies related to such leases (i.e., long-term rentals).
This rebate does not apply to individually owned condominium units, single-unit houses, duplexes, triplexes, housing situated on leased land, or sites in residential trailer parks.
Public service bodies that are eligible for the Public Service Bodies' Rebate may qualify for this rebate, even though eligibility for the Public Service Bodies' Rebate ordinarily disqualifies an entity from claiming the Residential Rental Property Rebate.
When You Might Have to Repay Your Residential Rental Property Rebate
You may be required to repay the residential property rebate previously claimed if all of the following conditions apply:
- The rebate pertains to a qualifying residential unit, other than a unit within a multi-unit residential property;
- The unit was sold within one year after it was first occupied as a place of residence, either following construction or after the last substantial renovation;
- The unit was not purchased for use as a primary place of residence by the purchaser or by a person related to the purchaser.
PRO TAX TIPS: Professional Guidance for Navigating Federal and Provincial Incentives
It should be noted that provinces also offer rebates that mirror the federal program. While you may not qualify for the federal version of the rebate, you may well qualify for the provincial version.
To navigate this complex landscape of rental rebates, it is advisable to seek professional Canadian tax advice before purchasing or engaging in self-supply of residential rental housing. Our experienced Canadian tax lawyers can guide you through these difficult decisions.
Frequently Asked Questions (FAQs):
What are the fair market value limitations for the Residential Rental Property Rebate?
To qualify for the Residential Rental Property Rebate, the fair market value of the residential unit must be less than $450,000. The rebate is partial if the value of the unit is between $350,000 and $450,000, and full if the value is less than $350,000.
What is "self-supply" in the context of the Resident Rental Property Rebates Program?
A landlord is considered to have made a self-supply when he is the builder of a residential rental property or has made an addition to one. In this case, the landlord is deemed to have both paid and collected GST/HST based on the property's fair market value at the time the first unit is leased or occupied.
Are there provincial rebates similar to the federal Residential Rental Property Rebate?
Yes, provinces also offer similar rebate programs. Landlords who do not qualify for the federal rebate may still qualify for provincial versions. It is advisable to seek professional advice to navigate these programs.