HST Rebate on Rental Construction

Update and Overview of the HST Tax Rebate for Rental Accommodation in Nova Scotia

100% Rebate on HST

By Dan White, CEO West Nova Chamber of Commerce.

Here is a condensed version as an introduction to the newly announced HST Tax Rebate. for rental accommodation in Nova Scotia, as there have been significant developments in recent weeks.

On September 14, the Federal Government made an important announcement regarding the GST, and the Nova Scotia government followed suit by addressing the provincial tax portion of the HST. These actions signify that when a multi-unit rental project is completed, builders will no longer be required to pay the HST.

The financial implications of this change are substantial. For instance, on a project valued at $1,000,000, the builder would have previously incurred $150,000 in HST payments to the Canada Revenue Agency (CRA). Importantly, there is no upper limit on the project’s value, meaning that this rebate applies regardless of the project’s scale.

This development holds the potential to make the construction of rental housing economically viable and attractive for developers. It represents a significant step in the right direction and has the potential to reduce or eliminate a significant source of tension between developers and the Canada Revenue Agency (CRA). This change carries considerable implications for developers and their advisors.

To provide more details, this change applies specifically to new purpose-built rental housing, including apartment buildings, student housing, and senior residences designed for long-term rental accommodation. The enhanced GST Rental Rebate increases the rebate percentage from 36% to 100% and eliminates the previous phase-out thresholds for purpose-built rental housing projects. This enhancement applies to projects that commence construction on or after September 14, 2023, and conclude construction by December 31, 2035.

While specific legislation has not yet been drafted, here is a summary of the expected changes based on the Department of Finance’s recent announcement:

  1. The existing “self-supply” GST rule remains in place, but the GST rebate for landlords increases from 36% to 100%.
  2. Developers must report GST liability when the building opens, but they can simultaneously file a rebate claim form to fully offset this tax payment liability.
  3. Developers must adhere to the existing rebate rule, including the condition that tenants must reasonably expect to reside in the property for at least one year.
  4. The value threshold for units eligible for the rebate is eliminated, meaning there is no value ceiling for qualifying units.
  5. The rebate applies to buildings with a minimum of four private apartment units or at least ten private rooms or suites, with 90% of residential units designated for long-term rental.
  6. Construction must commence on or after September 14, 2023, and conclude by December 31, 2035.
  7. Projects converting non-residential real estate into a residential complex may be eligible for the enhanced GST Rental Rebate if they meet the specified conditions. Public service bodies are also eligible to access this rebate.
  8. The enhanced GST Rental Rebate does not apply to individually-owned condominium units, single-unit housing, duplexes, triplexes, housing co-ops, owned houses on leased land, and residential trailer parks. However, these types of housing may still qualify for the existing GST Rental Rebate if they meet the conditions.
  9. To ensure that the enhanced GST Rental Rebate stimulates new supply and does not lead to renovictions, it does not apply to substantial renovations of existing residential complexes.

Please note that the enhanced GST Rental Rebate is effective immediately, pending the passage of implementing legislation.