No Tax Rebate for Charity Housing Project's Market Rate Units

  • January 24, 2022
  • Nancy E. Claridge and Adriel N. Clayton

An interpretation letter identified as Case no: 209926 (the “letter”) from the CRA addressed when certain registered charities that qualify as designated municipalities pursuant to subsection 259(1) of the Excise Tax Act (“ETA”) will be eligible for a rebate from the Goods and Services Tax/Harmonized Sales Tax (“GST/HST”) paid on property and services. Specifically, the letter, dated May 25, 2021, and published on November 8, 2021, considered whether the charity’s supply of market units for moderate income households could qualify for a rebate of the GST/HST according to section 259 of the ETA. As all pertinent facts could not be established, the CRA could not issue a written ruling, but instead provided a general explanation of how the legislation might apply in the charity’s situation.

The charity had entered into a multi-year head lease agreement with a developer to lease several self-contained residential units in a multi-unit residential complex. The charity then leased those units to tenants on a Rent-geared-to-income (“RGI”) basis in accordance with the terms of an agreement with a separate organization. The charity planned to lease some of the units to tenants as affordable housing, some units being on an RGI basis, and others on a “deep subsidy” basis. Other units would be rented at the market rate (“Market Units”) and were intended for households with moderate incomes. The charity asked the CRA if the Market Units were eligible for the municipal rebate of GST or federal portion of HST paid on property and services related to these units.