Self-supply rules for builders who receive government funding

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http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/gnrl/txbl/chrts/rl/bldrs-eng.html

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Self-supply rules for builders who receive government funding

Special self-supply rules apply to builders who receive government funding to construct (or build an addition to) a residential complex where at least 10% of the residential units are intended to be supplied to seniors, youth, students, or individuals with special needs or limited financial resources.

Government funding means financial payments from a grantor that can be measured and identified in your financial statements as government funding and includes:

  • a grantor's payment to support or promote your charity's objectives, but not to pay for goods or services you make; and
  • a forgivable loan you receive from a grantor.

A grantor can be from all levels of government - federal, provincial, and municipal. It also includes Indian bands, as well as bodies established by federal, provincial, or municipal governments to fund charitable and non-profit activities for the government or Indian bands. However, we do not consider federal and provincial Crown corporations that perform only commercial activities to be grantors.

During the construction phase, you can register for GST/HST and claim input tax credits for the goods and services you buy that relate to the construction of the complex.

Under the self-supply rules, when the construction is substantially completed, and you first make available a unit in the building by way of lease, licence, or similar arrangement to an individual for use as a place of residence, you are deemed to have sold the building and the related land. Consequently, you, as the builder, have to calculate and remit GST/HST based on the greater of the following:

  • GST/HST on the fair market value of the building and related land; and
  • the total of all GST/HST you paid or owe for the construction of the building, the land related to the building, and any improvements to it.

Example

Your charity registers for GST/HST to construct a multiple unit residential building for students for which you receive government funding. The building's fair market value is less than the cost to construct it. When you first give possession under lease of a unit in the building to an individual as a place of residence, you have to calculate and account for the deemed tax which is equal to the total of all GST/HST payable for the construction of the building, purchase of the land related to the building, and any improvements to it, since the fair market value is less than the total of these costs. The GST/HST deemed to be collected, will be included in determining your net tax. Any positive amount of net tax must be remitted. As a charity, you can claim the 50% public service bodies' rebate for GST/HST paid or payable on self-assessment.

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Date modified:
2013-04-12