Federal Government Enhances GST Rental Rebate

  • October 13, 2023
  • Kassandra Grenier, Randy Schwartz, Caine Chapman, and Sara Baxter, McCarthy Tétrault

To help address a growing shortage of rental housing, the Canadian government announced, on September 14, 2023, an enhancement to the Goods and Services Tax Rental Rebate (“GST Rental Rebate”), commonly referred to as the landlord’s rebate. The enhanced GST Rental Rebate will provide full relief for the 5% GST (or 5% federal component of the Harmonized Sales Tax (“HST”)) paid by builders and purchasers of new “purpose-built rental housing” such as apartment buildings, student housing, and senior residences for use as a place of residence by individuals provided certain conditions are met.

Landlords that are builders of new residential housing are required to self-assess GST/HST, which is generally non-recoverable, on the fair market value of residential housing at later of the time of substantial completion and the building is first occupied. Prior to the announcement, the Excise Tax Act (Canada) (the “ETA”) allowed landlords to claim a partial rebate equal to 36% of the GST paid by subject to the phase-out thresholds described below. The purpose of the enhanced GST Rental Rebate is to encourage the development and construction of new residential rental housing by reducing in full the unrecoverable GST paid by builders and landlords of new rental housing.

Although draft legislation has not yet been released, the government indicated that the new measures are effective as of September 14, 2023.