CRA considers that the HST/GST treatment of new residential housing purchased for head leasing is different than if it is purchased for leasing

If a person purchases newly constructed housing for the purpose of leasing or licensing it to an individual as a place of residence, it generally will pay the GST/HST on the purchase price subject to any new housing rebate arrangements, and that will be the end of it.  However, as explained in News No. 91, if it instead purchases such housing for the purpose of supplying it under a head lease to another person (the head lessee) who in turn subleases the housing to an individual as a place of residence, it will be required to self-assess itself for GST/HST on the fair market value of the housing at the time possession is given to the head lessee, and it can claim an input tax credit for the GST/HST paid on the housing purchase.

This different treatment of the second (head lease/sublease) scenario is significant if the housing continues to appreciate between its purchase and the time of taking possession.

Neal Armstrong.  Summary of Excise and GST/HST News – No. 91 under ETA – s. 191(1).