The New Residential Rental Property (NRRP) Rebate

The new Residential Rental Property Rebate (NRRP) is for the owner and landlord of a new residential rental property. Usually, as a new property buyer, you cannot claim HST/GST paid on the purchase of the residential property. However, NRRP allows buyers to claim a part of the HST/GST paid.

Usually, when you buy a residential property for your own (or a family member’s) principal residence, the builder can claim a rebate on your behalf and offset the property price with the rebate amount. This reduces the upfront amount that you need to pay. In the case of residential rental property, the builder cannot claim it on behalf of the owner. Therefore, the property buyer is responsible for payment and must subsequently request the new residential rental property rebate from the Canada Revenue Agency (CRA).

Who Qualifies for a New Residential Rental Property Rebate:

• You have purchased a new house or condo from a builder or engaged someone to build a new home on land you own.
• You must have paid HST/GST on purchasing the new property at closing. When you engage someone to build a house for you on your land, you are assumed to have made a self-supply to yourself. Here, you are assumed to have paid and collected HST/GST based on the property’s fair market value at the time of substantial completion. You need to remit this HST to the CRA on this self-supply.
• Rental property must be occupied by a tenant who has signed a minimum one-year lease; more importantly, the tenant must be the first person to occupy the property. If you purchase the property and start living while searching for the first tenant, you don’t qualify for the HST rebate.
• The tenants must be individuals (not corporations), and the tenants must use the property for residential purposes only.
• The rebate application must be filed within two years of the final closing – interim closing does not qualify for the rebate application.

The Federal Portion of the GST Rebate.

The federal portion of the rebate is calculated at 36% of the Goods and Services Tax (GST) paid on the property’s Fair Market Value (FMV). The maximum rebate is applicable when the FMV is $350,000, capping the federal rebate at $6,300. When the FMV exceeds $350,000, the rebate amount gradually decreases. Once the FMV reaches $450,000 or more, it no longer qualifies for any GST rebate on the federal portion.

Note that the rebate is calculated based on the FMV on the closing date, which may significantly differ from the price you booked the property a couple of years back when the builder started booking.

Ontario Portion of HST Rebate.

The Ontario rebate is calculated at 75% of the Provincial Sales Tax (PST) paid on the property’s Fair Market Value (FMV). Unlike the federal rebate, there is no upper limit for the value of the property that qualifies for the Ontario rebate. However, the Ontario HST rebate applies only to the property’s value of up to $400,000. This means that regardless of the property’s total value, the maximum rebate you can receive is $24,000.

Given the prevailing real estate market scenario, particularly in Ontario, where property prices often exceed $450,000, most new properties may not qualify for federal GST rebates. However, they still qualify for the Ontario portion of the rebate. Since the Ontario rebate is capped at a maximum property value of $400,000, most properties will receive a maximum refund of $24,000.

If you receive the rebate for the new residential rental property and subsequently sell it within one year, CRA may ask you to repay the rebate unless the property is a principal residence for the new buyer.

If you find the new residential rental property rebate application procedure and its qualifications daunting, worry not. Source Accounting experts can assist you by simplifying the rebate application process. With years of professional experience, we can guide you in navigating the intricacies of the CRA’s HST/GST rebate program.

Don’t hesitate to schedule a consultation call by dialing 647-930-8130.

Source Accounting Professional Corporation (CPA) is a full-service accounting firm in Mississauga, dedicated to individuals, small and medium-sized businesses, providing tax preparation, corporate tax filing, accounting, bookkeeping services, payroll solutions, etc. If you are looking for an accountant Mississauga (Brampton, Toronto, GTA) or an accountancy firm Brampton, you are in the right place.

Disclaimer: The above contents are provided for general guidance only, based on information believed to be accurate and complete, but we cannot guarantee its accuracy or completeness. It does not provide legal advice, nor can it or should it be relied upon. Please contact/consult a qualified tax professional specific to your case.