Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number : 184857
Dear [Client]
Subject: GST/HST INTERPRETATION
Eligibility for the New Residential Rental Property Rebate
This […] is in response to your fax of [mm/dd/yyyy] wherein you enquired about the eligibility requirements for the GST/HST New Residential Rental Property Rebate (NRRPR). More specifically, you enquired as to whether it is a requirement that all recipients of a taxable supply by way of sale of a residential complex meet all the conditions in section 256.2 for any of the recipients to be eligible for an NRRPR under this section.
All legislative references are to the Excise Tax Act (ETA), unless otherwise indicated.
[…][INTERPRETATION REQUESTED]
You would like to know if requirements exist for the NRRPR with respect to the eligibility criteria applying to all individuals as a group. You provided the following example:
[…][Individual 1] and […][Individual 2] are two individuals who enter into an agreement with a builder to purchase a single unit residential complex. The individuals are not related. At closing [Individual 1] has second thoughts about purchasing a property with [Individual 2]. [Individual 2] pays for the property […] and the title of the property is registered in [Individual 2]’s name only. The Agreement of purchase and Sale was never amended. [Individual 2] holds the property for the purpose of making exempts supplies by way of lease which includes giving possession of the unit to an individual for the use as a place of residence. It is reasonably expected that the first use of the unit will be as the primary place of residence of the first tenant for at least one year.
Is it possible for [Individual 2] to obtain a NRRPR in this scenario? Or is [Individual 2] not entitled to the rebate since [Individual 1] was also a recipient of the supply but did not pay tax and never held the property?
[…][INTERPRETATION GIVEN]
Based on the limited information provided, it would appear that [Individual 2] would meet all of the eligibility requirements of the NRRPR, whereas [Individual 1] would not. Furthermore, [Individual 1]’s ineligibility for the NRRPR would not impact [Individual 2]’s eligibility for this rebate.
EXPLANATION
Section 256.2 provides for a NRRPR where certain eligibility requirements are met. Consequently, in a situation where a group of persons is applying for the NRRPR, the group would not be treated as the person applying for the NRRPR. Each person would be treated separately and would have to meet the eligibility requirements for that person to claim an NRRPR. As such, if one person does not meet all the eligibility requirements, it will not preclude the other person(s) from qualifying for the rebate, provided that other person(s) meets all the eligibility requirements.
In the example you provided, there are two individuals who are involved, [Individual 2] and [Individual 1]. Therefore, to determine who would be entitled to receive the NRRPR (in this case the rebate under subsection 256.2(3) which is the rebate in respect of land and building for residential rental accommodation), it would have to be determined who meets the eligibility requirements for the NRRPR. Each person that meets all of the eligibility requirements would be eligible to claim the NRRPR.
As mentioned above, the provision that sets out the eligibility requirements for this particular NRRPR is subsection 256.2(3), which states in part:
If
(a) a particular person, other than a cooperative housing corporation,
(i) is the recipient of a taxable supply by way of sale (in this subsection referred to as the "purchase from the supplier") from another person of a residential complex or of an interest in a residential complex and is not a builder of the complex, or
(ii) is a builder of a residential complex, or of an addition to a multiple unit residential complex, that gives possession or use of a residential unit in the complex or addition to another person under a lease entered into for the purpose of its occupancy by an individual as a place of residence that results in the particular person being deemed under section 191 to have made and received a taxable supply by way of sale (in this subsection referred to as the "deemed purchase") of the complex or addition,
(b) at a particular time, tax first becomes payable in respect of the purchase from the supplier or tax in respect of the deemed purchase is deemed to have been paid by the person,
(c) at the particular time, the complex or addition, as the case may be, is a qualifying residential unit of the person or includes one or more qualifying residential units of the person, and
(d) the person is not entitled to include the tax in respect of the purchase from the supplier, or the tax in respect of the deemed purchase, in determining an input tax credit of the person,
the Minister shall, subject to subsections (7) and (8), pay a rebate to the person equal to the total of all amounts each of which is an amount, in respect of a residential unit that forms part of the residential complex or addition, as the case may be, and is a qualifying residential unit of the person at the particular time, determined by the formula […]
The first eligibility requirement is found in paragraph 256.2(3)(a). Generally, it sets out who can claim the rebate. The person must either be the recipient of a taxable supply of a residential complex by way of sale (and not be the builder of the residential complex) or the person must be the builder of a residential complex who gives possession or use of the residential complex by way of lease to an individual for the purpose of occupying it as a place of residence that results in a deemed taxable self-supply under section 191. The person must only meet one of these two conditions to meet the first requirement.
Based on the limited information provided in the example, it would appear that subparagraph 256.2(3)(a)(ii) is not applicable as the individuals would not meet the definition of “builder” in subsection 123(1).
Since both individuals are not builders, subparagraph 256.2(3)(a)(ii) is not applicable. Therefore, in order for the individuals to be eligible to claim a NRRPR, they must meet the requirement under subparagraph 256.2(3)(a)(i). They must be the recipient of a taxable supply by way of sale of the single unit residential complex. Subsection 123(1) defines “recipient” of a supply of property or a service to mean:
(a) where consideration for the supply is payable under an agreement for the supply, the person who is liable under the agreement to pay that consideration,
(b) where paragraph (a) does not apply and consideration is payable for the supply, the person who is liable to pay that consideration, and
(c) where no consideration is payable for the supply,
(i) in the case of a supply of property by way of sale, the person to whom the property is delivered or made available,
(ii) in the case of a supply of property otherwise than by way of sale, the person to whom possession or use of the property is given or made available, and
(iii) in the case of a supply of a service, the person to whom the service is rendered,
and any reference to a person to whom a supply is made shall be read as a reference to the recipient of the supply;
By applying the definition of “recipient” to the example you provided, we determined that both individuals are the recipients of the residential complex under paragraph (a) as both of the individuals entered into an agreement of purchase and sale with the builder and both would be liable to pay the consideration for the residential complex.
The […][second] requirement for the NRRPR is that tax became payable on the supply of the residential complex. For the purpose of this interpretation request, we assume that GST/HST became payable on the purchase of the residential complex.
The third requirement for the NRRPR is that the residential complex is a qualifying residential unit. A qualifying residential unit of a person, at a particular time, is defined under subsection 256.2(1) to mean, in part:
(a) a residential unit of which, at or immediately before the particular time, the person is the owner, a co-owner, a lessee or a sub-lessee or has possession as purchaser under an agreement of purchase and sale, or a residential unit that is situated in a residential complex of which the person is, at or immediately before the particular time, a lessee or a sub-lessee, where […]
From the definition above, a person must be the owner, a co-owner, a lessee or a sub-lessee of the residential unit or have possession as a purchaser under an agreement of purchase and sale. As per the example provided, the title of the property is registered in [Individual 2]’s name. Therefore, it is only [Individual 2] who would be the owner of the single unit residential complex. One can argue that [Individual 1] would have possession as purchaser under the agreement. However, as the title is in [Individual 2]’s name, it would be reasonable to say that [Individual 1] would not have possession of the residential unit even if his name is on the agreement of purchase and sale. That being said, only [Individual 2] meets the requirement in 256.2(3)(c).
The last requirement deals with the entitlement to claim an input tax credit (ITC). To meet this requirement, the individual must not be entitled to claim an ITC for the tax paid on the purchase of the qualifying residential unit. For the purpose of this interpretation, we assumed that both [Individual 2] and [Individual 1] are not entitled to claim an ITC for the tax paid on the purchase of the residential unit.
Therefore, it would appear that only [Individual 2] would meet all the requirements. Consequently, only [Individual 2] would be eligible to claim an NRRPR.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
If you require further clarification with respect to any of the issues addressed in this letter, please call me at 506-349-7596.
Yours truly,
Nicole Collins
Real Property 2 Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
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