CRA stretches the meaning of “pay” to mean “repay,” so as to avoid a requirement to repay an NRRP Rebate that was never claimed
A builder constructs a new residential condominium complex containing 300 units. Although most are sold, it rents 10 units to individuals pursuant to 1-year leases on January 1, 2021. However, on January 15, 2021, it sells the units (with the closing on February 15, 2021) so that the third-party purchaser becomes the landlord. The builder does not claim the new residential rental property (“NRRP”) Rebate respecting any of the 10 rental units in its January 2021 return (as such rebate would be required to be immediately repaid under s. 256.2(10) as the units’ purchaser did not acquire for personal use).
On a literal reading of s. 256.2(10), the builder is required to pay an amount equal to the NRRP Rebates to which it would have been entitled had it not sold the 10 units (even though, in fact, it never claimed or received the rebates) given that the operative phrase in s. 256.2(10) is “entitled to claim” the NRRP Rebates. However, CRA inferred inter alia from the reference in the Explanatory Notes to s. 256.2(10) establishing a requirement to “repay” the rebate (s. 256.2(10) itself instead uses the word “pay”) that the requirement to “repay” the rebates only arose when the rebates had actually been received, so that there was an amount to pay back:
In conclusion, subsection 256.2(10) would only apply if the person claimed a New Residential Rental Property Rebate and within the first year, no longer qualified for that rebate.
Neal Armstrong. Summary of 25 March 2021 CBA Commodity Taxes Roundtable, Q.3 under ETA s. 256.2(10).