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.
GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 247708
Business Number: […]
Dear [Client]:
Subject: GST/HST interpretation - […][the Company] and the purpose-built rental housing (PBRH) rebate
Thank you for your correspondence of May 21, 2024, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to […][the Company] and their eligibility to claim the PBRH rebate.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
We understand that [the Company] may construct two duplexes on land having a single legal land description. There will be two separate buildings on this single legal land description once the duplexes are constructed. Each building will have two residential units and each unit in the duplexes will be rented to individuals as their place of residence. As an alternative, [the Company] may consider connecting the two duplexes with a hallway.
RULING REQUESTED
You would like to know whether [the Company] would be entitled to claim the PBRH rebate with respect to these duplexes.
It should be noted that a ruling provides the Canada Revenue Agency’s (CRA’s) position on specific provisions of the legislation as these relate to a clearly defined fact situation of a particular person, and where all of the relevant facts and supporting documentation have been presented in writing. The CRA reserves the right not to issue a ruling where it considers that one would not be appropriate. Since your request involves a matter that includes an alternative course of action, we are unable to provide a ruling at this time. As discussed […], we are issuing an interpretation for this ruling request, which is a general explanation of the applicable provisions and how the legislation will apply.
INTERPRETATION GIVEN
Eligibility for the PBRH rebate
Generally, the PBRH rebate is available to a builder of purpose-built rental housing for 100% of the GST (or the federal part of the HST) that is deemed to have been paid and collected by the builder on the self-supply of the property provided certain conditions are met. One of the conditions is that, generally, the construction of the purpose-built rental housing must begin after September 13, 2023 but before 2031 and must be substantially completed before 2036.
In addition, under paragraph 256.2(3.1)(a) and subsection 4(2) of the Real Property (GST/HST) Regulations (Regulations), the builder must have received a taxable sale of a multiple unit residential complex where:
- the multiple unit residential complex includes at least four residential units and at least four of those units each contains private kitchen facilities, a private bath and a private living area, or at least ten residential units; and
- 90% or more of the residential units that form part of the multiple unit residential complex are qualifying residential units held for the purpose of making certain exempt supplies of the unit or making exempt supplies that include giving possession or use of a unit to a person for occupancy of the unit as an individual’s place of residence.
A “multiple unit residential complex” is defined in subsection 123(1) as a residential complex that contains more than one residential unit, but does not include a condominium complex.
In subsection 123(1), a “residential complex” is defined to include, under paragraph (a) of that definition, that part of a building in which one or more residential units are located, together with:
(i) that part of any common areas and other appurtenances to the building and the land immediately contiguous to the building that is reasonably necessary for the use and enjoyment of the building as a place of residence for individuals, and
(ii) that proportion of the land subjacent to the building that that part of the building is of the whole building.
A “residential unit” is defined in subsection 123(1) and includes a detached house, semi-detached house or rowhouse unit that is occupied or is intended to be occupied by an individual as a place of residence or lodging.
Therefore, a residential complex generally includes a building (or a part of a building), appurtenances to the building and land related to the building. Where there are two separate buildings each containing residential units, there would generally be two separate residential complexes because a residential complex includes, among other things, a building (or a part of a building).
Generally, under section 191, where [the Company] gives possession or use of a newly constructed duplex under a lease, licence or similar arrangement entered into for the purpose of its occupancy by an individual as a place of residence and the individual is the first individual to occupy the duplex as a place of residence after the substantial completion of the duplex’s construction, then [the Company] would be deemed to have made and received a taxable supply by way of sale of that particular residential complex and to have paid and collected tax on the fair market value of the complex. The taxable supply would be deemed to occur at the later of the time the construction of the duplex would be substantially complete and the time possession or use of the duplex would be so given to the individual. If there are two residential complexes, there would be two separate taxable supplies under this provision.
Where each residential complex does not contain at least four residential units, the condition under subsection 4(2) of the Regulations, that a multiple unit residential complex must include at least four residential units, would not be met.
Therefore, where [the Company] constructs two duplexes on the one parcel, [the Company] would not be entitled to claim a PBRH rebate with respect to the GST (or federal part of the HST) that it is deemed to have paid and collected on the self-supply of a residential complex.
Hallway connection
Where [the Company] constructs the two duplexes and connects the two duplexes by a hallway, it is not clear that this would be considered to be the construction of a multiple unit residential complex containing four residential units. For purposes of the PBRH rebate, the development would have to be considered to be a single building rather than two separate buildings in order for the condition under subsection 4(2) of the Regulations, that the multiple unit residential complex include at least four residential units, be satisfied. In addition, where [the Company] constructs only one multiple unit residential complex, there would be only one self-supply of the multiple unit residential complex containing four residential units, under subsection 191(3).
The term “building” is not defined in the ETA. As such, the general meaning of the term is applied.
Determining whether adjoining structures constitute one building or more than one building is a question of fact. Such determination must be made on a case-by-case basis, in view of the particular circumstances. No one factor alone is conclusive in making a determination. These factors would include the degree of structural connectivity, the degree of annexation, the degree of functional independence (such as separate mechanical systems for heating, cooling, electrical, etc.), and the provisions of any applicable by-laws or planning laws with respect to structures on the property.
If [the Company] will connect the two duplexes by a hallway and you would like a determination as to whether the development would be considered to be a single building or two separate buildings, please provide further information such as structural plans and drawings with a further explanation of how these two structures will function as a single building along with a copy of applicable by-laws or planning laws with respect to the type of structure or structures that may be constructed on the subject property.
Provincial PBRH rebate
The Government of [Province A] has introduced a provincial PBRH rebate for 100% of the provincial component of the HST for new purpose-built rental housing situated in [Province A]. Although not applicable to the construction of two duplexes on one parcel, where conditions for the federal PBRH rebate are met for a particular residential complex, [the Company] may be eligible for this provincial rebate. The conditions for the federal PBRH rebate are explained above. Subsection 5(1) of the Regulations provides for this provincial rebate.
GST/HST new residential rental property rebate
Where [the Company] is not entitled to claim the federal PBRH rebate, it may be entitled to claim a GST/HST new residential rental property (NRRP) rebate for the GST (or federal part of the HST) that it is deemed to have paid and collected on the self-supply of each residential complex. The GST/HST NRRP rebate is generally 36% of the GST (or federal part of the HST) that it is deemed to have been paid and collected on the self-supply of a residential complex, subject to a maximum amount of $6,300 for each qualifying residential unit. For qualifying residential units with a fair market value between $350,000 and $450,000, the rebate for some of the GST (or federal part of the HST) is gradually reduced. No rebate is available with respect to a particular unit if the unit has a fair market value of $450,000 or more.
For purposes of the GST/HST NRRP rebate, a multiple unit residential complex situated on a single legal land description that contains not more than two residential units where each unit contains private kitchen facilities, a private bath and a private living area is considered to be a single unit residential complex. Therefore, the above thresholds and phase out provisions apply to the value of the entire complex (that is, both units) rather than the value of each unit.
Please refer to the guide RC4231, GST/HST New Residential Rental Property Rebate for further information on this rebate.
DISCLAIMER
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, the interpretations given in this letter on the ETA and the Regulations including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to these proposed Regulations, if enacted, or to the CRA’s interpretative policy could affect the interpretations or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 306-914-1122.
Should you have additional questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287 or by fax to 1-418-566-0319.
Sincerely,
Ron Litzenberger
Industry Sector Specialist
Real Property Unit 1
Financial Institutions and Real Property Division
GST/HST Rulings Directorate
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