Section 254

Subsection 254(2) - New Housing Rebate

See Also

Al-Hossain v. The Queen, 2014 TCC 379

co-owner was not occupant and bare trust declaration was too late

After signing an agreement to purchase a new home, the appellant was advised that to secure mortgage financing, he would need to obtain a co-obligor who would also be a co-owner. Accordingly, his friend ("Khandaker") agreed to co-sign the mortgage documents and to be placed on title as a co-owner. At the same time as the appellant applied for the new housing rebate, they signed a statutory declaration stating that the appellant was the 100% beneficial owner and that Khandaker held a 0.01% interest in trust for the appellant. The appellant occupied the home as his principal place of residence to the exclusion of Khandaker.

Before citing Davidson, Lyons J stated (at para. 17) that "where a supply is made to the particular individual as [part of] a group, subsection 254(2) applies so that each individual in the group must meet the criteria in paragraph 254(2)(b)." She found (at para. 22) that since both executed the agreements (and, at para. 29, that "Khandaker understood the nature of his involvement and that he was signing as a co-purchaser and co-owner"), "both individuals are the particular individual and both assumed liability" and "each must therefore meet the requirements in paragraphs 254(2)(a) to (g)." Ss. 254(2)(b) and (g) were not satisfied as Khandaker did not purchase as a primary place of residence and for occupation.

Respecting the statutory declaration, she stated (at para. 27):

The creation of a trust must be properly documented containing the requisite elements of a trust, dated, signed and in existence prior to or contemporaneous with the matter that is the subject of the trust arrangement.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Effective Date bare trust declaration was too late 126
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1) bare trust declaration was too late 126

Goyer v. The Queen, [2010] GSTC 163, 2010 TCC 511 (Informal Procedure)

denied where two non-occupying individuals were co-owners for financing reasons

Angers J. denied the rebate to the appellant who, along with two other individuals, purchased vacant land in Quebec and signed an agreement for the construction of a unit thereon. Only the appellant resided in it and the other two (Miserany and Auger) were co-owners for financing reasons and co-signed the hypothec loan agreement. Angers J rejected a submission that Miserany and Auger were mere prête‑noms for financing reasons and found (at para. 13) that the purchase agreement showed that the unit was constructed for all three individuals. He further stated (at para. 14):

This rebate is also available when the provision of the residential unit is made for a number of individuals, as is the case here, except that the references to a particular individual apply to the entire group. ... In this case, the immovable in question was never used as the primary place of residence of Mr. Miserany and Ms. Auger.

Davidson v The Queen, [2002] GSTC 25 (TCC)

rebate not available where registered co-owner not an occupant

The appellant purchased a new duplex. Title was taken in his name and of another ("Waterhouse"), who was not a beneficial owner and was joined as owner for mortgage purposes only. McArthur J held (at para. 8):

The Certificate of Title and the mortgage sets out both individuals, as joint tenants. Pursuant to subsection 262(3), therefore, the references to a "particular individual" in section 254 necessarily refer to both the Appellant and to Ms. Waterhouse. This requires that Ms. Waterhouse also satisfy the conditions of section 254 before the Appellant may claim the GST/HST rebate. As Ms. Waterhouse did not enter into liability with the intention of acquiring the complex for use as her primary place of residence, and is not a relative of the Appellant, the conditions of section 254 have not been met. The Appellant is therefore not eligible to claim the new housing rebate.

Paragraph 254(2)(a)

See Also

Crooks v. The Queen, 2016 TCC 52 (Informal Procedure)

accommodation co-owner was not supplied her interest directly by the builder

The appellant agreed in 2010 to purchase an (as yet, unconstructed) condo unit and in 2012, one month before closing and as a result of a deterioration in her credit rating, was required by the mortgage lender (the “Credit Union”) to find an additional party with a better credit rating to be liable on the mortgage. As a result, an amended purchase and sale agreement executed before closing added a friend (Ms. Richards) as a purchaser (without stating the nature or extent of her interest), and the title transfer documents on closing showed Ms. Richards as becoming a 1% owner. CRA denied the new housing rebate to the appellant on the basis that a 1% interest in the condo was acquired by an unrelated particular individual (Ms. Richards) otherwise than for use as a residence.

Hershfield J. found that Ms. Richards was not a “particular individual”, stating (at paras. 16, 17 & 19):

[S. 254(2)(a)] requires the builder to make a supply by sale to Ms. Richards in order for her to be a particular individual.

… Ms. Richards not only believed that she had acquired no interest in the subject unit, but…at law, she had no beneficial interest…

[T]he only supply made by the builder was the supply made pursuant to the original agreement. The supply of the 1% interest was made by the Appellant. She received consideration for this supply in the form of a guarantee made by Ms. Richards to the Credit Union.

Hershfield J. further stated (at para. 29):

[A] possible reading of paragraph 254(2)(a) requires that a supply made by the builder to Ms. Richards be a supply for consideration in order for her to be a particular individual. …Further, paragraph 254(2)(b) clearly and expressly contemplates that the particular individual become liable to the builder for the supply. Having concluded that Ms. Richards should not be seen as having incurred any liability to the builder, it strikes me that, arguably at least (even if I had found that the builder had made a supply to Ms. Richards), there has not been the type of supply made here that would include her as a particular individual.

He went on to apply (at paras. 44-46) the “ultimate liability” Bondfield doctrine to find that because the taxpayer “accepted ultimate liability for payment to the builder in the unlikely event the builder was able to make a case against [her friend],” the taxpayer was the sole “recipient” of the supply by the builder, so that the s. 123 “recipient” definition deemed the builder to supply the condo solely to the taxpayer.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Recipient “ultimate liability” doctrine indicated an accommodation co-purchaser of condo was not a recipient 277
Tax Topics - Excise Tax Act - Section 262 - Subsection 262(3) accommodation co-purchaser (for financing purposes) of condo was not a recipient of supply by builder 213
Tax Topics - General Concepts - Substance the addition of an accommodation co-purchaser (for financing purposes) of condo did not reflect the parties' true intentions 167
Tax Topics - General Concepts - Sham the addition of an accommodation co-purchaser (for financing purposes) of condo might have been a sham if done for tax purposes 125
Tax Topics - Statutory Interpretation - Benefits-Conferring Legislation interpretation to favour conferral of intended benefits 183

Administrative Policy

June 27, 2000 Interpretation 25236

NHS rebate available to assignee of original purchaser

A agreed to purchase a unit in a condo development under the “PA” from the builder (the Vendor). A then assigned his rights under the purchase agreement, including rights to a parking stall and locker, and the benefit of the deposits he had made, to B in consideration for a stipulated sum.

CRA found that B was entitled to a GST new housing rebate if all the conditions of s. 254 of the ETA were met.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Schedules - Schedule V - Part I - Section 2 assignment of interest in condo before completion was exempt if assignor not a builder 141

Paragraph 254(2)(b)

Cases

Canada v. Cheema, 2018 FCA 45

third party who did not intend to occupy was liable at the purchase agreement time

Because of lender requirements respecting the taxpayer’s purchase of a new home, the purchase agreement was signed by the friend of the taxpayer (Dr. Akbari) as well as by the taxpayer. At the subsequent closing (after the home had been constructed), Dr. Akbari acquired an undivided 1% interest in the home, with the taxpayer and his spouse acquiring the remaining undivided 99% interest. On the date of closing, the parties also signed a trust declaration in which Dr. Akbari acknowledged that he was holding the 1% interest in trust for them as beneficial owners. “From the beginning it was understood that Dr. Akbari would not have any real interest in the property” (para. 4).

In finding that the taxpayer had not met the requirement in s. 254(2)(b), given that s. 40 of the New Harmonized Value-added Tax System Regulations, No. 2 also required Dr. Akbari to satisfy that requirement, Stratas JA stated (at paras 92, 94, 95, 96, and 101) :

…Dr. Akbari … never intended to occupy the property as his primary residence. ...

… It is the relationship of the person acquiring the complex to the builder—one of purchase and sale—that is relevant, not the relationship between co-purchasers.

The fact that Dr. Akbari was acquiring the complex only as a trustee is of no consequence. … [S]ection 254 [does not] provide any exception for trustees. ...

In any event, para. 254(2)(b) requires us to examine the purchaser’s intended use of the complex at the time the purchaser “becomes liable or assumes liability under an agreement of purchase and sale of the complex.” Even if we are to give effect to the trust agreement, it did not exist at that point in time.

…“[B]y way of sale” in para. 254(2)(a)… does not nullify the deeming effects of section 133… . If Parliament intended for supplies “by way of sale” to be immune from the deeming effects of section 133, it would have done so. Not only did Parliament not do this, it expressly provided that the definition of supply in section 123 is subject to section 133 and its deeming effects.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 133 s. 133 effectively deemed an acquisition of a future new home at the time of signing the purchase agreement 255
Tax Topics - Statutory Interpretation - Ordinary Meaning Court should not depart from usual interpretation principles in seeking a sensible result 118
Tax Topics - Statutory Interpretation - Ease of Administration interpretation that favours administrative efficiency is to be favoured 190
Tax Topics - Excise Tax Act - Regulations - New Harmonized Value-Added Tax System Regulations, No. 2 - Section 40 co-purchaser with no intended beneficial interest was required to satisfy ETA s. 254(2) rules 165
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1) "legal acquirer" rather than intended beneficial owner was the purchaser 213

See Also

Poirier v. The Queen, 2019 TCC 8

intention to occupy vitiated when agreement to lease the new condo

Smith J found that the appellant was not entitled to the New Housing Rebate for a new condo unit purchased by him given that after agreeing to the unit, he entered into a lease agreement with two tenants on March 23, 2012 for a one-year term commencing at around the closing date for the condo closing. Smith J stated (at para 9):

… [W]hile the Appellant and his spouse may have initially intended to occupy the Property as their primary place of residence, … such intention was vitiated when they entered into the lease agreement.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 297 - Subsection 297(1) 12 months to bounce a rebate application was “with all due dispatch” 300
Tax Topics - Excise Tax Act - Section 256.2 - Subsection 256.2(7) - Paragraph 256.2(7)(a) no power to extend 2-year deadline even where new housing rebate mistakenly applied for within 2 years 120
Tax Topics - Statutory Interpretation - Interpretation Act - Section 32 failure to state mention material particulars not cured by s. 32 145
Tax Topics - Excise Tax Act - Section 262 - Subsection 262(1) failure to include prescribed information vitiated purported new rental housing rebate application 248
Tax Topics - Excise Tax Act - Section 296 - Subsection 296(2.1) s. 296(2.1)(b) precluded using s. 296(2.1) to overcome the 2-year deadline for claiming the NRRP rebate 270

Zheng v. The Queen, 2017 TCC 132 (Informal Procedure)

rebate form was signed and completed in the name of an individual who was acting as agent

The appellant (“Qun”), of Richmond Hill, Ontario was asked by her older sister (“Yu-Lian”) and Yu-Lian’s ex-husband (“Kwong”), both of the Vancouver area, to search for a house in the Toronto area, which would be a place for their daughter (“Lucy”) to reside at once she moved to Toronto to attend university over a year later. At the request of Yu-Lian and Kwong, Qun signed the purchase agreement for a home to be constructed in the Markham area, as Kwong, the intended purchaser, was in China on business. Yu-Lian and Kwong funded the $40,0000 deposit. Two weeks later Kwong was available and promptly had his name added as a named purchaser to the purchase agreement, but the developer refused to delete Qun ‘s name. Kwong entered into a mortgage on the Markham property and title was taken solely in his name. Although the developer prepared an Ontario new home rebate application form in the name of Qun and got her to sign it, at the closing Kwong, as purchaser, was credited with the $24,000 Ontario rebate. Although Kwong made a written appointment of Qun as his attorney, this was not signed until four days after the closing and its scope was restricted to the sale and management of the property, rather than its purchase. The availability of the Ontario rebate turned on whether it was applied for by a “particular individual” as per s. 254(2)(b) of the ETA. The Minister denied the rebate on the basis that Qun acquired the new home for the use only of Lucy, who was a "relation" of Kwong but not of Qun.

Notwithstanding the absence of written authorization of Qun as agent of Kwong at the closing of the acquisition, Russell J found that the rebate was available on the basis of an implied agency, and that the appeal should be allowed, stating (at paras 30, 32, 34-35):

Qun, was acting on the directions of and for the benefit of her former brother-in-law and his ex-wife, being the Appellant’s older sister, in being able to arrange suitable accommodation in Toronto for those two ex-spouses’ university student daughter. … In respect of Fourney, control of Qun was “manifested in the authority” Kwong and Yu-Lian gave her in buying and eventually selling the Markham property for them. ...

An implied agency simply reflects existence of an agency relationship in the absence of formal or explicit documentation identifying that agency relationship. … Actual conduct rather than existence of formal agency agreement normally governs [a finding of implied agency]. …

It was Kwong who obtained the benefit of the Rebate. …

The Rebate application was not made by Qun...on her own behalf but rather by her in her capacity as agent for...Kwong…he being titular owner of the Markham property … .

Locations of other summaries Wordcount
Tax Topics - General Concepts - Agency rebate application was made and signed as agent 185
Tax Topics - Excise Tax Act - Section 279 rebate application made and signed as agent 76

Parthiban v. The Queen, 2017 TCC 30 (Informal Procedure)

a UK visitor acquired a new home in Ontario as his principal place of residence

The Appellant and his wife were U.K. citizens and passport holders who sold their U.K. home, moved to Canada in 2011 with the status of visitors, and had all of their personal possessions shipped to Canada after they arrived. The Appellant entered into an agreement of purchase and sale for a new home in December 2011 in Markham, Ontario, which closed a year later, after which they occupied the home as their only residence. CRA denied his rebate application on the basis that the home could only be considered as a secondary place of residence since his status while in Canada when he agreed to buy it and when he moved in was that of a visitor. In rejecting this position and finding that the rebate was available, Boyle stated (at paras 18, 19):

[T]he requirement to be satisfied… is whether the housing unit was occupied as a place of residence. That is very distinct from either the buyer’s residence status in Canada for income tax law purposes, which is a characterization of the person’s status, or whether the buyer is lawfully present or resident in Canada for immigration law purposes….

… The use of the word “habituelle” in French…makes it even more clear and certain that the use of the word “primary” to qualify “place of residence” in English is not to suggest that the new housing rebate is only available to those who also have at least a second home also used as a place of residence.

He further stated (at para 32) that it was irrelevant that the Appellant’s established intention to have the home occupied as his family’s residence might have been rendered ineffectual by a deportation order.

Cheema v. The Queen, 2016 TCC 251 (Informal Procedure), rev'd 2018 FCA 45

unrelated individual acquiring interest as bare trustee did not deny the rebate

Because of lender requirements respecting the taxpayer’s purchase of a new home, on the closing of the purchase, a friend of the taxpayer (Dr. Akbari) acquired an undivided 1% interest in the home, with the taxpayer and his spouse acquiring the remaining undivided 99% interest. On the date of closing, the parties also signed a trust declaration in which Dr. Akbari acknowledged that he was holding the 1% interest in trust for them as beneficial owners and that he would convey that interest on demand (which subsequently occurred to their son with the mortgage lender’s approval).

In finding that the taxpayer was entitled to the new housing rebate (“NHR”) notwithstanding that Dr. Akbari (who never occupied the property) was a legal purchaser, Smith J. stated (at paras 54-55):

The notion of a bare trust as an agency relationship…is well known and well established, at least in the common law jurisdictions. … For tax purposes, a bare trust is considered a non-entity in the sense that a beneficiary as principal, is considered to deal directly with property through the trustee as agent or nominee… .

… Since I have concluded that Dr. Akbari was a bare trustee and that only the Appellant was a “particular individual” for the purposes of subsection 254(2) of the ETA, it necessarily follows that the Appellant was also the person “who was liable under the agreement to pay the consideration” for the purpose of the definition of a “recipient”. The fact that the builder may have had a legal recourse against Dr. Akbari for the consideration changes nothing to the notion that it is the Appellant, as legal and beneficial owner, who was ultimately liable for the consideration under the terms of the Trust Declaration.

Words and Phrases
bare trust
Locations of other summaries Wordcount
Tax Topics - General Concepts - Agency bare trustee is transparent for tax purposes 147

Gill v. The Queen, 2016 TCC 13 (Informal Procedure)

primary-residence intention determined at signing of purchase contract

The appellant signed a conditional pre-habitation [“préoccupation”] agreement with a home builder on September 1, 2011, and subsequently acquired title at the closing of the purchase. In finding that the relevant time for determining whether the appellant satisfied the test in s. 254(2)(b) that she was “acquiring the complex…for use as the primary residence of [her] or a relation” was September 1, 2011, Smith J stated (at para. 22, TaxInterpretations translation):

[T]he expression “aux termes du contrat de vente” [“under an agreement of purchase and sale”] in the French version of paragraph 254(2)(b) of the ETA must be interpreted broadly to include a promise to purchase or, to refer to the wording of Article 1785 of the Civil Code, “a preliminary contract by which a person promises to buy the immovable.” This interpretation accords a common meaning to the two versions of the provision. Given this conclusion, we must now examine the evidence from the time of signing the promise to purchase.

Smith J went on to find that, in any event, the appellant was not entitled to the rebate, stating (at para. 33) that “at best, her occupation of the house was temporary and sporadic” (i.e., at most, occupying for several weekends, or perhaps also alone for a few days without her children, before she moved back in with her husband and rented out the house).

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 254 - Subsection 254(2) - Paragraph 254(2)(g) post-acquisition occupation was "temporary and sporadic" 65
Tax Topics - Statutory Interpretation - French and English Version interpretation of French version confromed to prior interpretation of more ambiguous English version 180

Administrative Policy

GST/HST Policy Statement P-228 Primary Place of Residence 30 March 1999

Summary of listed factual indicia
  1. Address listed for mailing, tax return, voting, school tax and telephone purposes.
  2. Location of personal effects.
  3. Any failure to occupy explained by specific frustrating event.
  4. Stated use in insurance policy.
  5. Disposition plan for previous residence.
  6. Where 2 residences, relative time spent, distance to work, level of amenities.
Ruling 1

A new house that the Smiths plan to move to once their children finish their elementary school year qualifies.

Ruling 2

Recreational seasonal residence does not qualify.

Ruling 3

Substantially renovated country house, which will be moved to from a small urban apartment when retirement occurs next year, qualifies.

Ruling 4

Canadian property, used by American couple on weekends and holidays in summer and fall, does not qualify.

Ruling 5

After getting new job in City 2, wife took up residence in (qualifying) new condo there, where she resided alone for 8 months before being joined by husband after first residence in City 1 was sold.

Paragraph 254(2)(e)

Administrative Policy

26 July 2013 Interpretation 149707

owner does not refer to beneficial owner

In finding that the rebate was not available where a corporation acquired a new residential complex as agent fro an individual, CRA stated:

Paragraph 254(2)(e) requires that ownership of the residential complex be transferred to the particular individual after the construction of the complex is substantially complete. For purposes of paragraph 254(2)(e), the term "ownership" is a reference to legal ownership rather than beneficial ownership of the complex where legal and beneficial ownership are separated. In this case, the documentation submitted indicates that legal ownership of the Property was not transferred to the Individual.

We would also point out that an interest in a residential complex is not itself a residential complex. If it were, the expression "a residential complex or an interest therein" would not be necessary in several places in the ETA in which it appears (such as in paragraphs 254(2)(c) and 254(2)(d), and in section 2 of Part I of Schedule V to the ETA). As the Individual in this case is acquiring only an interest in the Property (i.e., the beneficial interest), the condition in paragraph 254(2)(e), i.e., that ownership of the residential complex transfer to the individual, is not met.

Paragraph 254(2)(g)

Cases

Ranjbar v. Canada, 2016 FCA 116

s. 254(2)(g)(ii) satisfied as alternative to (i)

The trial Judge found that a purchase of a townhome satisfied s. 254(2)(b) because at the time of the agreement of purchase and sale, the appellant intended to use the property as her primary place of residence, but did not satisfy s. 254(2)(g)(i)(A) because she never occupied the property. The appeal was allowed on the basis inter alia that she satisfied s. 254(2)(g)(ii), so that it was not necessary to satisfy s. 254(2)(g)(ii).

Although the trial judge was “required at law to have regard to objective manifestations of purpose (Symes v. Canada, [1993] 4 S.C.R. 695, at page 736” in making his determination respecting the satisfaction of s. 254(2)(b) (para. 7), it was inappropriate to infer that the trial judge had failed to do so having regard to the presumption:

that “[t]rial judges are presumed to know the law with which they work day in and day out” (F.H. v. McDougall, 2008 SCC 53, [2008] 3 S.C.R. 41, at paragraph 54… .)

Locations of other summaries Wordcount
Tax Topics - General Concepts - Purpose/Intention regard to objective manifestations of purpose 127

See Also

Diktakis v. The Queen, 2016 TCC 262 (Informal Procedure)

occupation of the new home could have been through a 2-year half sister and her mother

Whether the appellant was eligible for the rebate depended in part on whether a relation of hers was the first occupant of the Quebec condominium in question, which had been purchased in her name. A daughter (“NR”) was born of a relationship which her father had had with Érika Lachance, who was not a spouse or common-law partner of him. The taxpayer maintained that, following the purchase date, the property was occupied by her relations (Érika Lachance and NR), as required by s. 254(2)(g).

Smith J found that, as Érika Lachance was not married to the taxpayer’s father and that they did not have a conjugal relationship, she was not the taxpayer’s stepmother. (para 30). However, Smith J found that NR was the taxpayer’s half-sister and therefore her relation within the meaning of the ETA, stating (at para 34).

[I]t appears to be accepted that the definition of brother and sister includes half-sisters and half-brothers born of a common parent. This principle was recognized… in Huntley2010 TCC 625, at paragraph 17.

After referring to s. 158 of the Civil Code of Quebec, which provided that “an act that may be performed by a minor alone may also be validly performed by his representative,” Smith J further found that, in light of the age of NR, the acts of NR (e.g., home occupation) could be performed by her representative (Érika Lachance).

However, Smith J found that the appellant had failed to establish that NR and Érika Lachance were the first occupants.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 251 - Subsection 251(6) - Paragraph 251(6)(a) taxpayer and her two years old half-sister were related 160

Gill v. The Queen, 2016 TCC 13 (Informal Procedure)

post-acquisition occupation was "temporary and sporadic"

The appellant was not entitled to the rebate as “at best, her occupation of the house was temporary and sporadic:” at most, following acquisition, she occupied the new home for several weekends, or perhaps also alone for a few days without her children, before she moved back in with her husband in the family home and rented out the new house to a third party.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 254 - Subsection 254(2) - Paragraph 254(2)(b) primary-residence intention determined at signing of purchase contract 224
Tax Topics - Statutory Interpretation - French and English Version interpretation of French version confromed to prior interpretation of more ambiguous English version 180

Paragraph 254(2)(h)

Administrative Policy

GST/HST Memorandum 19.3.1.2 “Stated Price Net of Rebate” December 2007

Amount of consideration where price is net of rebate

7. The “consideration” payable for the purchase of a unit is the amount to be paid for the unit before any calculation of the tax payable and rebate entitlement in respect of the purchase of the unit. If the builder and the purchaser agree to use a stated price net of rebate for the unit, the rebate amount credited by the builder must be considered in determining the value of the consideration payable for the unit upon which the tax is payable.

GST/HST Memorandum 19.3.1 “Rebate for Builder-Built Unit (Land Purchased)” July 1998

Determination of consideration

10. In addition to amounts paid or payable in respect of the purchase of the unit (e.g., the housing rebate when the purchaser and builder agree to include it as part of the consideration for the unit), total consideration includes payment to the builder for:

....(c) other supplies (for example, free-standing appliances) if they:

(i) form part of an all-inclusive single consideration made at the time of signing the agreement of purchase and sale for the unit and for which there is no separate identification in the agreement for the consideration paid or payable for the supplies,

(ii) are of the type normally supplied by the builder for similar residences, that is, they were not custom ordered (as opposed to simple colour changes or normal upgrades), are offered generally by others in the construction industry, and relate to the use and enjoyment of the unit by the purchaser, and

(iii) the purchaser did not have a choice of taking a cash discount or other supply instead of the supply in question; ...

(d) the supply by the builder of an interest in the unit prior to the sale of the actual unit

Paragraph 254(2)(i)

Administrative Policy

23 March 2017 CBA Commodity Taxes Roundtable, Q.21

fee paid for assignment of a non-builder’s new house purchase contract does not affect the GST/HST new housing rebate

Mr. A no longer wishes to purchase a new home and has agreed to assign the agreement of purchase and sale to Mr. B for $150,000 (representing the appreciation over the purchase price of $250,000) plus GST/HST. On closing, title is transferred directly by the builder to Mr. B. How would the value of the consideration for the rebate be calculated? CRA responded:

[T]he formula outlined in paragraph 254(2)(i) … makes reference to the “total consideration” … described in paragraph 254(2)(c) … [as] the sum of the consideration payable for the housing itself (that is, the purchase price of $250,000) and the consideration payable for any other taxable supply of an interest in the housing (that is, the assignment fee of $150,000). …[I]f Mr. A [instead] were not a builder, his assignment of the agreement of purchase and sale would be an exempt supply … and the consideration for the exempt assignment would not be included in determining the “total consideration” as described in paragraph 254(2)(c). …

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 254 - Subsection 254(4) - Paragraph 254(4)(d) where two successive builders, individual can file for rebate directly 130

Subsection 254(3)

Forms

GST190 GST/HST New Housing Rebate Application for Houses Purchased from a Builder

Subsection 254(4)

Administrative Policy

GI-120 Assignment of a Purchase and Sale Agreement for a New House or Condominium Unit 6 July 2011

Assignment of purchase agreement is assignemtn of interest in house

This publication addresses the situation where

  • a purchaser (referred to as the first purchaser) enters into a purchase and sale agreement with a builder (Builder A) for the construction and sale of a new house, and
  • the first purchaser subsequently assigns the agreement to an assignee (referred to as the assignee purchaser) before Builder A transfers possession or ownership of the house to the first purchaser and before any individual has occupied the house as a place of residence or lodging.

Generally, upon entering into an agreement for the construction and sale of a new house, the first purchaser is considered to have acquired an interest in the house. For GST/HST purposes, the assignment of the agreement to the assignee purchaser is normally considered to be a sale of the first purchaser's interest in the new house. The sale of an interest in a new house is generally taxable where the person selling the interest is a builder of the house.

S. 254(4) mechansim generally not available to assignee of first purchaser

Claiming a GST/HST new housing rebate when there is more than one builder

In some cases, the builder of a new house pays or credits the amount of the GST/HST new housing rebate, and where applicable, a provincial new housing rebate, to the purchaser of the house. In this case, the builder credits the amount of the new housing rebates to the purchaser by reducing the total amount payable for the purchase of the house by the amount of the expected rebates.

Where this happens, the purchaser and the builder have to sign Form GST190, GST/HST New Housing Rebate Application for Houses Purchased from a Builder, and the builder has to send the form to the Canada Revenue Agency (CRA). As the purchaser receives the amount of the rebate from the builder, the builder may claim the amount as a credit against its net tax when it files its GST/HST return.

Only one new housing rebate application can be made for each new house. Therefore, an assignee purchaser cannot submit a rebate application through a builder (Builder A) for the tax paid to Builder A on the purchase of the house and submit a second rebate application through the first purchaser (the assignor), or directly to the CRA, for the tax paid to the first purchaser on the purchase of the interest in the house.

In such cases, the assignee purchaser may want to file their new housing rebate application directly with the CRA rather than through Builder A. In this way, the assignee purchaser can include in the new housing rebate application the tax paid to Builder A and the tax paid to the assignor in determining the amount of their GST/HST new housing rebate and, where applicable, a provincial new housing rebate.

Paragraph 254(4)(c)

See Also

9118-5322 Québec Inc. v. The Queen, 2018 CCI 96

failure to obtain and transmit prescribed forms on timely basis

Lafleur J indicated that a builder cannot deduct from net tax for the amount of new housing rebates credited to its home purchasers in a reporting period unless it submits the signed prescribed forms of the purchasers to the ARQ (or CRA, as applicable) in that month. Here, the builder not only failed to transmit the signed forms as required by s. 254(5)(a), but also failed to get the forms signed by the purchasers on a timely basis as required under s. 254(4)(c).

Words and Phrases
directory provision
Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 254 - Subsection 254(5) - Paragraph 254(5)(a) transmitting purchaser new home rebate forms to CRA (or the ARQ) is imperative to the claiming by the builder of the rebate amount 281

Administrative Policy

23 May 2017 Interpretation 182665

electronic signature possible

CRA was amenable to permitting new home HST rebate applications, that are provided electronically to the home purchasers, to be signed electronically using a digital stylus pen, so that the forms can be stored and transmitted by the builder in electronic form. CRA stated:

We confirm that an electronic signature produced using […] or [a] similar device is acceptable for purposes of filing a GST/HST rebate application, provided the signature and any related electronic records exhibit the characteristics of reliability, integrity, and authenticity, as discussed in GST/HST Memorandum 15.2, Computerized Records.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 254 - Subsection 254(5) rebate forms can be signed electronically 218

Paragraph 254(4)(d)

Administrative Policy

23 March 2017 CBA Commodity Taxes Roundtable, Q.21

where two successive builders, individual can file for rebate directly

Mr. A no longer wishes to purchase a new home and has agreed to assign the agreement of purchase and sale to Mr. B for $150,000 (representing the appreciation over the purchase price of $250,000) plus GST/HST. On closing, title is transferred directly by the builder to Mr. B. Can Mr. B assign the rebate to the builder pursuant to s. 254(4)? CRA responded:

Although the new housing rebate cannot be assigned per se to a builder, generally the builder who has sold the housing may, pursuant to subsection 254(4), pay or credit the amount of the rebate to the individual purchaser. However, in the situation where there are two builders, such as in your example, the individual purchaser (that is, Mr. B) could file a rebate directly with the Canada Revenue Agency.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 254 - Subsection 254(2) - Paragraph 254(2)(i) fee paid for assignment of a non-builder’s new house purchase contract does not affect the GST/HST new housing rebate 161

Subsection 254(5)

Administrative Policy

23 May 2017 Interpretation 182665

rebate forms can be signed electronically

A law firm provides clients who are new home purchasers with an electronic version of form GST190 (respecting the new home rebate) and has them sign their rebate application electronically using a digital stylus pen, so that the purchasers “write” their signatures in the same manner they would if they were using a regular pen and paper, except that the signatures are produced and stored electronically rather than in ink on a hard copy document.

Where the builder credits the rebate to the purchaser then, once form GST190 has been so “signed” by the client, it is saved as an electronic file that the law firm subsequently transmit to the builder, who then either prints a hard copy of the signed form GST190 and mails it to the CRA, or submits the rebate application electronically through Netfile or My Business Account. In either case, the builder is required to keep a copy of the form GST190 (electronic and/or hard copy) as supporting documentation in its books and records. CRA stated:

We confirm that an electronic signature produced using […] or [a] similar device is acceptable for purposes of filing a GST/HST rebate application, provided the signature and any related electronic records exhibit the characteristics of reliability, integrity, and authenticity, as discussed in GST/HST Memorandum 15.2, Computerized Records.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 254 - Subsection 254(4) - Paragraph 254(4)(c) electronic signature possible 91

Paragraph 254(5)(a)

See Also

9118-5322 Québec Inc. v. The Queen, 2018 CCI 96

transmitting purchaser new home rebate forms to CRA (or the ARQ) is imperative to the claiming by the builder of the rebate amount

The taxpayer credited the new housing rebate to the purchasers of its newly-constructed homes but did not obtain the prescribed form from them due to being unaware of this requirement. When this deficiency emerged on audit, it promptly obtained signed copies of the form from most of the purchasers and provided the forms to the ARQ. However, this occurred after the two-year period referenced in ETA s. 254(4)(c).

In confirming the assessments of the taxpayer for the amounts of the rebates previously claimed by the taxpayer, Lafleur J stated (paras. 43 and 52, TaxInterpretations translation):

The Court is of the view that the formalities provided under the ETA are imperative in the context of our system of self-assessment in matters of sales tax. The scrupulous respect of the rules and formalities prescribed by the ETA is essential to the proper functioning of the system. …

[T]he builder simply cannot grant the credit without having already received the prescribed form of the purchaser as described in paragraph 254(4)(c). It is not until the form is received within the prescribed two-year period from the transfer of the property that the builder is permitted to grant the credit to a purchaser and claim a deduction in the computation of its net tax under subsection 234(1) for the reporting period of the builder for which the credit is granted.

After indicating that there was an imperative requirement in the wording of s. 254(5)(a) that the builder forward the purchaser forms with its return claiming the rebate amount, she stated (at para. 64):

Consequently, the builder who has not conformed with the requirements of s. 254(5)(a) cannot deduct an amount in this regard in the computation of its net tax … .

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 254 - Subsection 254(4) - Paragraph 254(4)(c) failure to obtain and transmit prescribed forms on timely basis 83

Subsection 254(6) - Joint and Several Liability

See Also

GF Partnership v. The Queen, 2013 TCC 53, aff'd 2013 FCA 260

developer ought to have known that development levies not incurred by it as agent

The registrant ("Mattamy"), which was a housing developer, paid municipal development levies at the time it entered into a subdivision agreement with the municipality, or when the municipality issued building permits. The sales agreements with home purchasers stated the parties' agreement that "as part of …the Purchase Price herein, the Vendor has or will pay on behalf of the Purchaser…all applicable development charges…." The development levies which were so reimbursed by the home purchasers were found to be part of the taxable consideration for such home sales, with the result that Mattamy was found to have been understating the sales price to the purchasers. As the new housing rebates ("NHRs") of the purchasers (which they had assigned to Mattamy and which it had rebated to them as contemplated in s. 234(1)) decreased as the sales price increased above $350,000, this increased taxable consideration decreased the NHRs which were properly claimable on some of the sales.

In finding that Mattamy was liable under s. 254(6) for the overstated amount of the NHR rebate claims, Woods J stated (at para. 92) that "in accordance with judicial interpretation of the phrase ‘ought to have known'…the test is an objective one," and then stated (at para. 94):

In my view, a reasonable person in Mattamy's circumstances would have concluded, based on competent professional advice, that the Purchasers did not pay development charges qua development charges. Quite simply, this is the only reasonable conclusion that may be drawn from the Purchase Agreements. Because the amount of a NHR is a function of the consideration for the home, it follows that a reasonable person would have known that some of the amounts paid or credited by Mattamy in respect of Purchasers' NHR claims were excessive.