CRA discusses the application of the SAM formula to a self-constructed MURC

A selected listed financial institution (SLFI), which is the builder of a multiple unit residential complex (MURC) situated in Ontario and a MURC situated in a non-participating province, is deemed to have made and received a taxable supply by way of sale of those MURCs around the time of substantial completion and occupancy by the first tenant. The special attribution method (SAM) formula in ETA s. 225.2(2) for computing the SLFI tax reads as follows:

[(A - B) x C x (D / E)] - F + G

where in, simplistic terms, A-B is the federal GST paid (A) minus ITCs claimed (B), the middle part of the formula grosses this net federal tax up to a blended HST rate based on the location of the stakeholders in the SLFI, and the F and G components make technical adjustments.

CRA indicated:

• The SLFI is not entitled to the Ontario new residential rental property (NRRP) rebate, by virtue of the prohibition in s. 263.01(1) against paying a rebate of provincial HST to a SLFI.
• The federal GST on the self-supply pursuant to s. 191(3) is included in Element A, whereas the Ontario HST is included in Element F.
• Regarding Element G (which can reflect negative amounts) there would be a negative amount equal to the federal NRRP rebate pursuant to G2(iii) of the formula in s. 46(a) of the SLFI Regulations.

CRA did not provide any numerical example, so I will make one up to illustrate my understanding (or misunderstanding). A REIT which is a SLFI with a blended HST rate of 10%, incurs $5 million of GST and $8 million of Ontario HST on its substantial completion of a (directly held) Ontario apartment building, and it has no federal NRRP rebate because the pro rata value of each unit is over $450,000 and excavation commenced before 2023. Its federal GST is grossed up to $10 million from which it subtracts its Ontario HST of $8 million, so that its net tax insofar as this project is concerned is $2 million. To vary the example, if it qualified for a full federal NRRP rebate of $5 million, it would have a net tax refund of $3 million

Neal Armstrong. Summary of 16 May 2024 GST/HST Interpretation 224829 under ETA s. 225.2(2).