In September 2023, it was announced that the New Residential Rental Rebate Program would be increasing from 36% to 100% for some rental properties (multi-unit residential complexes such as apartment buildings and quadplexes). This is being called the “Enhanced GST Rental Rebate.”

The increase to 100% is available for projects that commenced construction on or after September 14, 2023. CRA's position is that “commencement” is marked by the beginning of excavation.

On May 13, the CRA launched a new webpage dedicated to this topic, accessible at https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/gst-hst-rebates/purpose-built-rental-housing.html. This page provides additional information regarding eligibility criteria, application processes, and other relevant details. Note that paper-filed applications are allowable for the New Residential Rental Rebate program, but for the Enhanced GST Rental Rebate they must be filed online through the client’s My Business Account. Clients without My Business Account access need to be aware of this.

Additionally, on May 14, the CRA released a Tax Tip discussing the importance of supporting affordable housing and how to apply for the GST/HST rebate for purpose-built rentals. You can find this Tax Tip at https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2024/supporting-affordable-housing-apply-gst-hst-rebate-purpose-built-rentals.html.

Perhaps the most confusing aspect is the belief that construction of these properties will now be "GST-free" and that they no longer need to self-assess GST when construction is substantially complete and residential tenants have moved in. However, this is not technically accurate — self-assessment of GST payable will still be required, and the rebate will need to be filed for separately. If a developer does not self-assess they could be subject to interest and penalties and may miss the window to file for the rebate.

This could pose another problem as many clients may not realize the requirement for construction to have commenced on or after September 14, 2023. If they fail to self-assess on a property that began construction before that date at the appropriate time (when construction is complete), they may incur substantial interest charges, as well as the unpleasant surprise of finding out that they did not qualify for the 100% rebate.

If you are constructing a property with the intention to lease it out to residential tenants, KRP’s Indirect Tax team can assist you in the process to ensure you avoid costly mistakes. Our Indirect Tax Advisor, Nathan Sheppard, can be reached at by phone at (587) 525-5915, or by email at nsheppard@krpgroup.com