The treatment of Goods and Services Tax/Harmonized Sales Tax (“GST/HST”)[1] on supplies of real property is subject to special rules under the Excise Tax Act (“ETA”). Unlike most other supplies of property and services, exclusions such as not carrying on any commercial activity or being a small supplier, are not available on real property transactions[2]. Resultantly, any supply of real property may potentially be taxable unless the supply falls under a specific exemption[3]. The special rules also include availability of rebates for the recipients of taxable residential property such as, the new residential housing rebates or rebates for new residential rental property.
Pursuant to subsection 256.2(3) of the ETA, one of the conditions to claim the New Residential Rental Rebate (“Rental Rebate”) is that the person claiming the rebate should be the “recipient” of the taxable supply.[4] “Recipient” of a supply is defined under subsection 123(1) of the ETA as a person liable to pay the consideration under the relevant agreement of purchase and sale for the supply.
Denial of rebate claims is a frequently litigated matter. These cases demonstrate how sophisticated transactions may fall short of a basic legal form, disentitling the owner from a rebate claim. One such recent case is BAHA Property Investment Group Inc. v. The Queen, 2019 TCC 279 (“BAHA”)[5] involving a claim for Rental Rebate which was disallowed due to the faulty assignment.
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