Section 256.2

Subsection 256.2(1)

Qualifying Residential Unit

Administrative Policy

RC4231 "GST/HST New Residential Rental Property Rebate" October 2016

Meaning of having "possession" as purchaser

Possession - for GST/HST purposes, generally means that you hold, control, or occupy the property. For example, if you pay the property taxes, have the right to alter the land, control entry or access to the property, or pay insurance coverage, you may be considered to have possession of the property.

Words and Phrases
possession

Paragraph (a)

Subparagraph (a)(iii)

See Also

Tsenkova v. The Queen, 2013 TCC 321 (Informal Procedure)

expectation not governed by lease terms

The appellant acquired a condominium unit for investment purposes, and leased it to a company ("Premier Suites") under an agreement which stated: "Landlord agrees that the intention of the Tenant is to sub-let the premises to corporate executives for the purpose of providing temporary accommodation."

Sheridan J found, notwithstanding this clause, that the appellant intended that the unit be used by a long-term occupant, and that the first subtenant in fact used the unit continuously as a residence for more than a year. Accordingly, and applying interpretation principles in Melinte, the property was a qualifying residential unit.

Boissonneault Groupe Immobilier Inc. v. The Queen, [2013] GSTC 41, 2012 TCC 362

reasonable expectation of lease renewals

The appellant build a 78-unit residential building meant for students at a local Cégep, whose school year ran from August to June. Although the appellant intended to enter into one-year leases, construction delays meant that the initial leases, which commenced on August 1, ran for only 11 months, except for leases with a 12 month term, with the 12th month offered at half the normal monthly rate. The Appellant already owned an adjoining 26-residential unit builidng where the renewal rate was about 90%. The self-supply by the appellant under s. 191(3), which was the time when the reasonable expectation test under s. (a)(iii) was to be applied, also apparently occurred on or shortly before August 1. In 2010, the appellant renewed with 11-month leases.

The Minister denied the s. 256.2 rebate for 42 of the 78 units in the new building on the basis that they wre not continuously occupied for 12 months, as required under s. (a)(ii)(B) of the qualifying residential unit definition.

Tardif J stated (at para. 29):

[T]he right of the appellant to the rebate is determined on the basis of the expected use of the unit. Therefore the test is satisfied if the appellant reasonably expects at the “particular time” that the usage will be as contemplated by clause (B).

He noted (at para. 57) that the Minister's approach instead "relied primiarily on the situation which prevailed upon the expiration of the first round of leases and on the circumstances that led to the second year of leasing."

In finding (at para. 59) that, in light inter alia of the prior experience with the smaller building that, at the particular time:

[T]he appellant’s initial intention, which was reasonable and based on a number of rational, reasonable, even probable, premises was to have all the residential units occupied for minimum periods of one year.

Melinte v. The Queen, 2008 TCC 185 (Informal Procedure)

purchaser was required only to satisfy reasonable expectation rather than actual use test

The appellant took possession in December 2004 of a newly-constructed condo unit and closed its acquistion on March 1, 2005 (when condominium registration was also received). Due to a change in plans, he did not move into the unit and leased it to CIBC World Markets ("CIBC") for a lease term of 11 months ending on December 28, 2005. CIBC was bound to provide housing for one of its employees while she was on a long-term assignment in Toronto from Montreal. CIBC initially planned to lease the unit for several years, but declined to renew the 11-month lease because of cutbacks. The appellant then lesed the unit to a second tenant, who occupied the premise form January 3, 2006 to June 24, 2007. The taxpayer claimed his s. 256.2 rebate sometime in the first year, which CRA denied (aparently based on its stated requirement in RC4231, based on s. (a)(iii) of the "qualifying residential unit" definition, that "the first use of the unit will or can reasonably be expected to be ...the primary place of residence of an indiviual who will occupy the unit continuously for a period of at least one year.")

Webb J (as he then was) found that the property was a "qualifying residential unit," whose "applicable clause" (para. 7) in this case was s. (a)(iii)(B). In particular:

  • the reference to "individuals" in s. (a)(iii)(B) includes a single individual, so it did not matter that there was only one tenant during the relevant period (para. 11);
  • in the situation, for example, where "two individuals occupy the unit – one for a year and the other for six months – ...on the basis that the plural includes the singular, the unit will qualify...by applying the test to the one individual who does occupy the unit for the whole year" (para. 12)
  • "if there is only one occupant of a unit, in order for the unit to qualify based on the actual use test, the unit will have to be occupied by the same individual for a full period of one year (or the shorter period of time contemplated by this clause [((B)])" (para. 20)
  • the phrase "place of residence of individuals" in s. (a)(iii)(B) does not entail a requirement that the individuals be party to the lease, so it did not matter that the CIBC was the lessor (para. 19);
  • the plural reference to "individuals" was intended to adress situations of simultaneous rather than successive ocupation - for example, under the second interpretation "If the first occupant uses the unit for twenty years, the unit would not be used by a second individual for at least a year until twenty-one years after the unit is first occupied" (para. 21), whereas there is a two-year time limitation under s. 256.2(7) for applying for the rebate (para. 26)
  • "at a the particular time" in s. (a)(iii) refers to the time that the unit is acquired (in this case, March 1, 2005) (para. 29);
  • at that time, the appellant reasonably expected that the tenant's occupancy would continue for several years under a lease renewal (para. 31); and
  • "no unit will be able to satisfy the actual use test at the relevant time...unless the actual use is a very short period of time" (para. 24) so that, generally, as was the case here, only the expected rather than acual use test should be applied (para. 32).

Administrative Policy

GST/HST Technical Information Bulletin B-087 “GST/HST new residential rental property rebate” November 2001

12-month test

  • the use as a primary place of residence by each such individual
  • must be for a period of at least one year, although not necessarily under one lease (e.g., an individual could occupy a unit for one year under twelve consecutive monthly leases); or
  • if the period is less than one year, the residential unit could still be a qualifying residential unit provided the unit:
    1. is sold to a recipient who acquires the unit for use as the primary place of residence of the recipient or a relation,
    2. is taken for use as the primary place of residence of the person or a relation, or
    3. is taken as the primary place of residence of a lessor of the complex or a relation of that lessor.

90% test for qualification of units

In general, the occupancy requirements set out in the definition of qualifying residential unit are applied on a unit-by-unit basis. In the case of large multiple unit residential complexes, i.e., 10 or more residential units, the entire complex is considered to meet the expected one-year occupancy test if substantially all of the units (90% or more) meet that test.

Sale of rental unit following claiming of rental rebate

A person who supplies a residential unit by way of lease may be entitled to the new residential rental property rebate where the unit is leased to an individual as a primary place of residence even if the person intends to sell the unit at the earliest opportunity. As provided in the definition of qualifying residential unit, if that sale is made to a recipient who acquires the unit as the primary place of residence of the recipient or a relation, the unit may still be a qualifying residential unit.

However, the rebate will have to be repaid with interest if:

  • the rebate was paid in respect of a single unit residential complex or a residential condominium unit where both the complex or unit and the land were supplied by way of lease by the person,
  • the complex or unit is sold to a purchaser who is not acquiring the unit for use as the primary place of residence of the purchaser or a relation of the purchaser, and
  • the sale is within one year from the time it is first occupied as a place of residence after the construction or last substantial renovation of the unit was substantially completed.

This repayment of the rebate does not apply to deemed sales under section 183 or 184, that is, sales deemed to have occurred due to seizures or repossessions or acquired by insurers on settlement of a claim.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 256.2 - Subsection 256.2(7) 77

16 April 2004 Interpretation 49628

no basis for expecting that the rental property’s tenant (the university) would sublease on a calendar rather than academic year basis

Two Canadian corporations, one of which was designated as the operator of a joint venture, constructed a multi-unit stacked townhouse complex, specifically designed as student residences, and then leased of the entire complex for 10 years to a local university, with the university, in turn, subleasing the townhouse units to students. At the time the joint venture operator self-assessed under s. 191, it was not known whether the sublease between the university and the individual students would be for a term of approximately 8-9 months (i.e. a typical academic year), or a term of 12 months (typically September-August) or a combination of both terms. However, the university then issued a letter stating that upon the departure of the students currently living in the residences at the conclusion of the academic year, the building would not be occupied until the fall. The subleases thus were for terms of approximately 8-9 months only (i.e. a typical academic year).

In finding that the rebate was not available, CRA stated:

[A]t the time GST on the deemed supply became payable by the joint venture operator, it was not expected that the first use of the units will be as the primary place of residence of the first lessees (i.e. the students) for a period of continuous occupancy of at least one year. Further, it is the case that the first use of the units was as primary place of residence of the first lessees for a period of continuous occupancy of 8 to 9 months only.

Subsection 256.2(3)

See Also

Blanche's Home Care Inc. v. The Queen, [2004] GSTC 30, 2004 TCC 192 (Informal Procedure)

purchase of assisted-living facility did not generate rebate

The appellant was not eligible for the new residential rental property rebate in respect of its purchase of a property that was a "personal care home" under the Personal Care Homes Act and Personal Care Homes Regulations, 1996 (Saskatchewan) in light of evidence of the appellant that approximately $1,000 of the $1,750 monthly fee paid by residents of the home (most of whom had a medical issue such as Alzheimer's) was attributable to personal care services. Beaubier J. accepted the submission of the Minister that the appellant was making a single supply of services to the residents under the "Admission Agreements" with them rather than (having regard to the definition of qualifying residential unit before the additio of s, (a)(ii)(A.1) thereof) a supply of accommodation described in Sched. V, Pt. I, s. 6.

Administrative Policy

12 February 2013 Interpretation File 145624

NRRP rebate claimed by beneficial owner rather than bare trustee

A bare trustee (Properties) entered into an agreement for the purchase of a new residential rental unit on behalf of Holdings, so that the statement of adjustments indicated that Properties was the purchaser. Before indicating that the application for the new residential rental property rebate should be filed by Holdings, CRA stated:

[I]n a bare trust situation, it is the beneficial owner that faces the obligations and entitlements under the ETA. As it applies to this scenario, it is the beneficial owner that may be entitled to the NRRP rebate.

RC4231 "GST/HST New Residential Rental Property Rebate" October 2016

Determination of unit FMV

For qualifying residential units that are located in a newly constructed multiple unit residential complex, the percentage of floor space of a qualifying residential unit in comparison to the total floor space for all of the residential units will be multiplied by the FMV of the residential complex to determine the FMV of the unit.

28 May 2004 Ruling RITS 47263

nursing home ineligible prior to new 6.11

The person constructing a nursing home was not eligible for the rebate, given that the supplies to the residents were exempted under s. 2 of Part II of Schedule V rather than under Part I.

Paragraph 256.2(3)(a)

Administrative Policy

GST/HST Info Sheet GI-093 Harmonized Sales Tax: Ontario New Residential Rental Property Rebate July 2010

Similar Ontario rules except available for more expensive units

The rules and conditions for claiming the Ontario new residential rental property rebate generally mirror the rules and conditions for claiming the GST/HST new residential rental property rebate explained in Guide RC4231… . However, the Ontario new residential rental property rebate applies to qualifying rental properties across all price ranges and different rebate rates are used.

Available to co-owners

Where more than one person owns the rental property, the rebate is payable to all of the owners of the property. The CRA will issue one cheque for the rebate amount in respect of both the federal and provincial parts of the HST in the name of all of the owners.

Paragraph 256.2(3)(b)

Administrative Policy

RC4231 "GST/HST New Residential Rental Property Rebate" October 2016

Timing of tax payable on condo purchase

If you purchase a qualifying residential unit that is a residential condominium unit where possession of the unit is transferred to you before the complex is registered as a condominium, the tax is payable (and you have to determine the FMV of the condominium) on the day that is the earliest of the following dates:

  • the day that ownership of the unit is transferred to you; and
  • the day that is 60 days after the day the complex is registered as a condominium. ...

Example: interim occupant and purchaser of condo

James enters into an agreement to purchase a residential condominium unit in September 2013 for $300,000. He does not take possession until May 1, 2016. The complex is not registered as a condominium until July 1, 2016, and the deed of ownership is transferred to James on August 1, 2016. Since tax is payable on the earlier of the day ownership is transferred (August 1, 2016) and 60 days after the complex is registered as a condominium (August 29, 2016), August 1, 2016, is the day that tax is payable.

Example: closing by condo purchaser while tenant of purchser leasing it

Claire enters into an agreement to purchase a residential condominium unit on September 15, 2014. Claire takes possession of the unit and her tenant occupied the unit on March 1, 2016. The complex is registered as a condominium on May 1, 2016. The deed of ownership is transferred to Claire on June 1, 2016. Since tax is payable on the earlier of the day ownership is transferred (June 1, 2016) and 60 days after the complex is registered as a condominium (June 30, 2016), June 1, 2016, is the day that tax is payable. Claire enters June 1, 2016, in Section B [of GST524].

Subsection 256.2(7)

See Also

Liao v. The Queen, 2010 TCC 587, [2010] GSTC 169 (Informal Procedure)

Application sent by ordinary mail thereby received

The appellant’s claim was denied under s.256.2 on the basis that the application was not made within the two year limitation period set out in s. 256.2(7)(a)(iii), which began running from June 30, 2007.

After stating (at para. 7), “Although it is possible that the application was not delivered due to insufficient postage, it is just as likely that the document was lost by the CRA.”, Woods J. in concluding that that application had been timely filed stated:

[S.] 334(1) …provides that anything sent by first class mail is deemed to have been received on the day that it is mailed.

Other locations for this summary
Application sent by ordinary mail thereby received.

Administrative Policy

9 December 2014 Interpretation 165597

rebate form must be signed (or otherwise certified)

An Ontario builder, who submitted multiple applications for the Ontario transitional new housing rebate (OTNHR) using Form RC7000-ON, Ontario Retail Sales Tax (RST) Transitional New Housing Rebate, indicated that the OTNHRs had been assigned to it. However, neither section F, "Certification", nor section G, "Assignment of rebate", of Form RC7000-ON were signed by any of the purchasers. CRA stated:

Where the CRA receives a Form RC7000-ON in respect of the purchase of new housing by an individual and the assignment of that rebate to the builder, sections F and G of Form RC7000-ON must both be signed by the individual. The CRA should not accept that an assignment of the OTNHR has occurred, or pay any amount of a rebate to a supposed assignee, unless both sections F and G are signed by the individual (or there is other evidence of the individual having certified the information in those sections) and the CRA is satisfied as to the validity of the assignment.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 262 - Subsection 262(1) rebate form must be signed (or otherwise certified) 166

GST/HST Technical Information Bulletin B-087 “GST/HST new residential rental property rebate” November 2001

Applying for the New Residential Rental Property Rebate

…Registrants may offset the amount of the rebate on their return when calculating the amount to be remitted and file the claim with their return.

When more than one person is eligible for the rebate, i.e., there is more than one eligible claimant in respect of the property, each person will be required to file an application for the portion of the rebate to which they are entitled.

Paragraph 256.2(7)(a)

See Also

Poirier v. The Queen, 2019 TCC 8

no power to extend 2-year deadline even where new housing rebate mistakenly applied for within 2 years

Before going on to reject an argument based on s. 32 of the Interpretation Act that the appellant should be treated as having applied for the new rental housing rebate within the two-year deadline in s. 256.2(7) and an argument that s. 296(2.1) effectively overrode this limitation, Smith J stated (at para 12):

A number of decisions of this Court have dealt with instances where an appellant, having initially filed the New Housing Rebate form, later applied for the Rental Rebate after the expiry of the two-year deadline. Those decisions stand for the proposition that this Court has no jurisdiction to extend the time limit set out in subsection 256.2(7) and thus, no power to order the Minister to allow the Appellant’s Rental Rebate … .

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 297 - Subsection 297(1) 12 months to bounce a rebate application was “with all due dispatch” 300
Tax Topics - Excise Tax Act - Section 254 - Subsection 254(2) - Paragraph 254(2)(b) intention to occupy vitiated when agreement to lease the new condo 91
Tax Topics - Statutory Interpretation - Interpretation Act - Section 32 failure to state mention material particulars not cured by s. 32 145
Tax Topics - Excise Tax Act - Section 262 - Subsection 262(1) failure to include prescribed information vitiated purported new rental housing rebate application 248
Tax Topics - Excise Tax Act - Section 296 - Subsection 296(2.1) s. 296(2.1)(b) precluded using s. 296(2.1) to overcome the 2-year deadline for claiming the NRRP rebate 270

Ahmad v. The Queen, 2017 TCC 195 (Informal Procedure)

CRA required to determine in assessing HST on house purchase whether an unclaimed rebate was available

CRA correctly assessed an individual (Ahmad) so as to deny the new housing HST rebate (because, due to a change in plans, the first use of the new home was its rental to a third party), and advised him that he might consider applying for the New Residential Rental Property Rebate (NRRPR). Ahmad instead appealed the denial of the new housing rebate, and did not apply for the NRRPR until the two-year deadline for doing so (under ETA s. 256.2(7)(a)) had passed – and also failed to file a Notice of Objection to the CRA assessment denying his NRRPR claim.

Russell J found that Ahmad could not appeal the assessment denying him the NRRPR. However, Russell J found that CRA, in assessing Ahmad for the HST that was payable given the absence of the new housing rebate, had been required under s. 296(2.1) to in fact determine whether that assessment was reduced by another allowable rebate, namely, the NRRPR. Russell J referred this assessment back to CRA for the required determination under s. 296(2.1) as to whether Ahmad was entitled to an allowable rebate for the NRRPR.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 296 - Subsection 296(2.1) CRA was required to determine, when assessing, whether the taxpayer had an unclaimed GST/HST rebate 432

Paragraph 256.2(7)(c)

Administrative Policy

29 May 2006 Interpretation 44287

s. 191 tax not reported in reporting period of first occupancy

Holdco, which constructed and operated an assisted–living facility, has not reported the deemed s. 191 tax in its return for the reporting period in which the tax was deemed to be collected, nor has Holdco remitted such tax. As the condition in s. 256(7)(c) has not been satisfied, Holdco is not entitled to claim the NRRP rebate.