5 December 2003 GST/HST Interpretation 48223 - New Housing Rebate

Please note that the following documents, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ces documents, bien qu'exacts au moment émis, peuvent ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your e-mail request XXXXX concerning eligibility for a GST/HST new housing rebate in the following situation.

•   An individual purchases a completed principal residence from a builder.

•   The homeowner intends to claim the GST/HST New Housing Rebate directly during the two-year eligibility period.

•   During the period starting from the date of ownership and ending before the end of the two-year application limit, the homeowner undertakes improvements ("subsequent improvements") to the property (adds a deck, a swimming pool; a hot tub; finishes the basement; etc.) using various contractors.

All legislative references below are to The Excise Tax Act.

Interpretation Requested

When the homeowner submits the GST/HST New Housing Rebate Application to CCRA, can the homeowner include the GST/HST paid on the purchase price of the property and all of the subsequent improvements made during the application eligibility period?

Interpretation Given

Under the circumstances described above, the homeowner will be entitled to claim a new housing rebate of a portion of the tax paid to the builder for the purchase of the residence pursuant to subsection 254(1). However, this provision does not provide a new housing rebate for tax paid on the subsequent improvements.

Explanation

There are two types of new housing rebates provided under the Excise Tax Act: the "builder-built" rebate provided under section 254 and the "owner-built" rebate provided under section 256.

Pursuant to subsection 254(2), there is eligibility for a "builder-built" rebate where, among other requirements, "a builder of a single unit residential complex...makes a taxable supply by way of sale of the complex ...to a particular individual" (Paragraph 254(2)(a)) and "ownership of the complex...is transferred to the particular individual after the construction or substantial renovation thereof is substantially completed." (Paragraph 254(2)(a))

Pursuant to subsection 256(2), the "owner-built" rebate is available where, among other requirements, "a particular individual constructs or substantially renovates, or engages another person to construct or substantially renovate for the particular individual, a residential complex..." (Paragraph 256(2)(a))

On the basis of the above provisions, it is our position that where a substantially completed residential complex is purchased from a builder, the appropriate rebate provision is section 254, and not section 256. As indicated above, section 254 applies where a builder constructs (or substantially renovates) a residence and then sells it to the homeowner, whereas section 256 applies where the homeowner, in ownership of the property, constructs (or substantially renovates) a residence, or engages someone to do so. It is our understanding that in the situation you describe, the builder completes construction of the residence, and then sells it to the homeowner. Accordingly, section 254 is the applicable rebate provision rather than section 256.

Pursuant to paragraphs 254(2)(h) and (i), the rebate amount is the appropriate percentage, as calculated under those paragraphs, of the "total tax paid by the particular individual" which is defined under paragraph 254(2)(d) as the "tax ... payable in respect of the supply of the complex ... and in respect of any other supply to the individual of an interest in the complex. ..." Accordingly, while the tax paid to the builder upon acquisition of the residence, and the tax paid in acquiring any other interest in the property may qualify for the rebate, the tax paid on improvements made to the property after it has been purchased from the builder would not qualify.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9587.

Yours truly,

J. Michael Place
Senior Rulings Officer
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate