On May 27, 2025, the Government of Canada introduced proposed legislative amendments to the Excise Tax Act (Canada) to establish a new Goods and Services Tax ("GST") rebate for first-time home buyers (the "FTHB GST Rebate"). This initiative is part of the federal government's efforts to increase housing affordability and to stimulate the construction of new homes across the country.
The proposed FTHB GST Rebate would allow eligible first-time home buyers to recover up to 100% of the GST (or the federal portion of harmonized sales tax ("HST")) paid on a new home, as more particularly described below, potentially resulting in savings of up to $50,000.
The FTHB GST Rebate applies to new homes where the purchase price is up to $1 million. For new homes priced between $1,000,001 and $1,499,999, the FTHB GST Rebate will be phased out on a linear basis. For example, a new home priced at $1,250,000 would qualify for a 50% rebate, which is up to $25,000. Unfortunately, new homes priced at $1.5 million or higher will not qualify for the FTHB GST Rebate.
To qualify for the FTHB GST Rebate, the following conditions must be met:
- The Buyer
The Buyer must be:
(a) at least 18 years old
(b) a Canadian citizen or permanent resident
(c) a first-time home buyer (neither such buyer nor their spouse or common law partner has owned and occupied a home anywhere in the world in the past four calendar years)
- Types of Homes
The FTHB GST Rebate is available for the following types of home purchased:
(a) a newly constructed home that is purchased from a builder
(b) a new home that is constructed by or for such buyer on land that they own or lease
(c) shares that are purchased in a co-operative housing corporation
- Timing Requirements
The timing requirements to qualify for the FTHB GST Rebate are below:
(a) the agreement of purchase and sale must be entered into on or after May 27, 2025, and before 2031
(b) construction of the new home must commence before 2031, and must be substantially completed before 2036
(c) legal title to such home must be transferred or conveyed to the buyer before 2036
- Occupancy Requirements
The occupancy requirements for the buyer are as follows:
(a) the new home must be intended for use as the buyer's primary place of residence
(b) the buyer must be the first occupant of such home
The GST/HST New Housing Rebate allows for a relative of the buyer to move into the new home as the first occupant of such new home and as their primary residence. However, the FTHB GST Rebate requires at least one of the buyers of a new home to move in as the first occupant and as their primary residence. Therefore, it appears to be the case that buyers relying on the FTHB GST Rebate cannot grant occupancy to any relatives alone without also moving in as their primary residence.
There are several important restrictions to bear in mind:
- the FTHB GST Rebate can only be claimed once per individual in a lifetime
- if a buyer's spouse or common law partner has previously claimed the FTHB GST Rebate, then such buyer is not eligible to claim the FTHB GST Rebate
- in instances where there is an assignment of the agreement of purchase and sale, the original agreement of purchase and sale must be dated on or after May 27, 2025
- the FTHB GST Rebate is not available where the agreement of purchase and sale was terminated then subsequently re-entered into for the purposes of qualifying for the FTHB GST Rebate
Impact on Developers/Builders
For developers/builders, the FTHB GST Rebate may influence the design of the end product, and pricing, marketing and sales strategies for new development projects. For example, in certain markets where new home prices exceed $1 million, developers/builders may reassess the mixing of certain products and/or the sizes of units and/or lots in an effort to create inventory that qualifies for the full or partial amount of the FTHB GST Rebate. Moreover, developers/builders may be able to provide the FTHB GST Rebate in advance to qualifying buyers in the form of a reduction in the purchase price for such new home at the time of entering into the agreement of purchase and sale, coupled with an assignment of the FTHB GST Rebate rights from such buyer in favour of such developer/builder, or a credit in favour of the buyer at closing, akin to how the GST/HST New Housing Rebate program is implemented.
However, developers/builders should also be aware that it may be difficult to ascertain whether a particular buyer satisfies all the criteria for qualifying for the FTHB GST Rebate, with similar safeguards and documentation as those used in connection with the GST/HST New Housing Rebate being employed. In addition, key implementation details have yet to be provided and clarified, and further direction from the Canadian government is required to ensure that the intended benefit of the FTHB GST Rebate is effectively delivered to buyers in the marketplace thereby spurring increased home sales to qualifying first-time home buyers.
Furthermore, developers and builders may be able to leverage the FTHB GST Rebate as a manner to offload their unsold and pre-existing built inventory of new condominium units and/or model homes to eligible first-time buyers. For instance, the sale of a new model home to a qualifying buyer can meet all four eligibility criteria for the FTHB GST Rebate. Specifically, the sale of such new units and/or model homes satisfies the timing requirements, as the agreement of purchase and sale will be entered into after May 27, 2025, and before 2031; the construction of such new units and/or model homes commenced before 2031, and was substantially completed before 2036; and legal title to such new units and/or model homes can be transferred or conveyed to the buyer before 2036.
The FTHB GST Rebate is a positive move towards increasing housing accessibility for first-time home buyers that could lead to more new homes being built and sold faster, albeit with highly limited scope given that only first-time home buyers potentially qualify. Developers and builders of new homes are encouraged to review their projects' agreements of purchase and sale and marketing strategies to determine whether they can benefit from the FTHB GST Rebate.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
