GST/HST Technical Information Bulletin B-096

July 2007

GST/HST Rate Reduction and Real Property

Table of contents

• Introduction
• Part I – Supply of real property made otherwise than by way of sale and supplies of services relating to real property
  • General rule for when GST/HST becomes payable
  • General rule for when GST/HST becomes payable on a supply made by way of lease, licence or similar arrangement
  • Override rule for certain supplies of construction, renovation, alteration or repair of real property
• Part II – Supply of real property made by way of sale
  • General rule for supply of real property made by way of sale
  • Exception for a supply of a residential complex made by way of sale
  • Changes to a purchase and sale agreement
• Part III – Deemed supplies
  • General rule for deemed supplies
  • Self-supply of a single unit residential complex or residential condominium unit under subsection 191(1)
  • Self-supply of a residential condominium unit under subsection 191(2)
  • Self-supply of a multiple unit residential complex under subsection 191(3) or of an addition under subsection 191(4)
• Part IV – Maximum housing rebate amounts
  • GST/HST New Housing Rebates
  • GST/HST New Residential Rental Property Rebate
• Part V – Transitional rebate for a residential complex
  • Purchase of a residential complex (building and land)
  • Purchase of a residential complex (building and lease of land)
  • Self-supply of a residential complex
• Part VI – Other legislative amendments
  • Section 193
  • Section 194
  • Subsection 211(4)
  • Section 257

Introduction

This bulletin explains various transitional issues relating to real property as a result of legislative amendments that reduced the rate of the GST from 7% to 6% and the rate of HST from 15% to 14% effective July 1, 2006. It also addresses amendments to sections 193, 211, and 257 of the Excise Tax Act (the Act). These amendments are set out in the Budget Implementation Act, 2006, which received Royal Assent on June 22, 2006.

The transitional rules explained in this bulletin apply in respect of taxable supplies of real property, including deemed supplies, made before July 1, 2006. The transitional rules also apply in respect of certain supplies of real property deemed to be made under section 191 on or after July 1, 2006. Reference should be made to the provisions that apply in determining when a supply is made.

A taxable supply, other than a deemed supply made under section 191, made on or after July 1, 2006, is subject to GST at 6% or HST at 14%. The reduced GST/HST rate of 6% or 14% also applies for purposes of calculating the tax paid or collected in respect of a supply that is deemed to be made, other than under section 191, on or after July 1, 2006.

Part I – Supply of real property made otherwise than by way of sale and supplies of services relating to real property

The GST/HST is generally payable by the recipient of a taxable supply on the earlier of the day consideration for the supply becomes payable and the day consideration for the supply is paid.

For a taxable supply of real property made otherwise than by way of sale (e.g., a supply by way of lease), or a taxable supply of a service relating to real property, the GST/HST applies in the following manner:

• if the GST/HST becomes payable on or after July 1, 2006, without having been paid before that day, GST/HST applies at 6% or 14%;
• if the GST/HST is paid on or after July 1, 2006, without having become payable before that day, GST/HST applies at 6% or 14%; and
• if the GST/HST becomes payable or is paid without having become payable before July 1, 2006, GST/HST applies at 7% or 15%.

General rule for when GST/HST becomes payable

GST/HST generally becomes payable on the earlier of the day the consideration for the supply is paid and the day the consideration becomes due. Generally, the consideration for a supply becomes due on the earliest of:

• the earlier of the day the supplier first issues an invoice in respect of the supply and the date of the invoice;
• the day an invoice would have been issued if there had been no undue delay in issuing the invoice, and
• the day the consideration is required to be paid under an agreement in writing.

Example 1

An individual purchases real property and takes ownership and possession of the property before July 1, 2006. On July 15, 2006, the individual’s lawyer issues an invoice, dated July 15, 2006, for taxable services rendered in relation to the purchase of the property. The individual did not make any payment to the lawyer before the date the lawyer issued the invoice.

In the absence of any other factors (e.g., an undue delay in issuing the invoice), the tax becomes payable when the lawyer issues the invoice. Given that the invoice was issued on July 15, 2006, the lawyer will charge GST/HST at 6% or 14%.

Example 2

On March 1, 2006, a corporation enters into a long-term fixed price contract with a registrant for the provision of custodial services for several buildings owned by the corporation. The amounts payable under the agreement include GST/HST.

All payments that become due under the agreement or that are made without becoming due before July 1, 2006, are subject to GST/HST at 7% or 15%. All payments that become due under the agreement on or after July 1, 2006, and that are not paid before that date, or payments that are made without becoming due on or after July 1, 2006, are subject to GST/HST at 6% or 14%.

General rule for when GST/HST becomes payable on a supply made by way of lease, licence or similar arrangement

Notwithstanding the general rule set out above for when GST/HST becomes payable, for a taxable supply of real property made, under an agreement in writing, by way of lease, licence or similar arrangement, the GST/HST becomes payable on the earlier of the day the payment is made and the day the payment is required to be made under the agreement.

Example 3

On March 1, 2006, a person enters into an agreement in writing for the lease of commercial real property. Under the agreement, the lease payments are due on the first day of each month.

Where lease payments are due on the first day of each month, GST/HST applies at 6% or 14% to a lease payment that becomes due on or after July 1, 2006, unless the payment was made earlier. GST/HST applies at 7% or 15% to the lease payments that became due, or that were made without becoming due, before July 1, 2006.

Example 4

On January 1, 2006, a corporation prepays its lease for the year, i.e., until the end of 2006. Under the agreement in writing for the lease of the commercial real property, the lease payments are due on the first day of each month.

Since the pre-payment of the lease was made before July 1, 2006, GST/HST applies to the prepayment at 7% or 15%.

Note that lessee who provides post-dated cheques to a lessor of real property is not considered to be making a prepayment. GST/HST applies in the same manner as described above in Example 3. Where post-dated cheques include GST/HST at 7% or 15% and relate to lease payments that are due on or after July 1, 2006, an adjustment should be made to reflect the reduction in the GST/HST rate. The lessee may replace these post-dated cheques with new cheques or the lessor may refund or credit the lessee an amount that is in excess of the GST/HST payable at 6% or 14% in accordance with section 232.

Example 5

Under an agreement in writing for the lease of commercial real property, a lease payment becomes due on June 1, 2006, but the payment is not made until July 15, 2006.

Even if paid on or after July 1, 2006, GST/HST applies to the lease payment at 7% or 15% as the lease payment became due before July 1, 2006.

Override rule for certain supplies of construction, renovation, alteration or repair of real property

Where a taxable supply is made under an agreement in writing for the construction, renovation, alteration or repair of real property, the GST/HST becomes payable on the last day of the month following the month during which the construction, renovation, alteration or repair of the property is substantially completed, calculated on the consideration unless the consideration or part of the consideration for the supply has been paid or becomes due before that day.

Example 6

A contractor enters into a written agreement with a person to make certain repairs to real property of the person, agreeing to pay for the repairs in full on September 30, 2006. The repairs are substantially completed on June 15, 2006. The person does not pay any consideration to the contractor before the payment due date specified in the agreement.

Under the override rule, GST/HST becomes payable by the person on July 31, 2006. As the tax becomes payable after July 1, 2006, without having been paid before that date, GST/HST applies at 6% or 14%, calculated on the value of the consideration payable for the repairs unless the consideration was paid before July 1, 2006.

Part II – Supply of real property made by way of sale

General rule for supply of real property made by way of sale

Generally, GST/HST applies at 6% or 14% to a taxable supply of real property made by way of sale where both ownership and possession of the property are transferred on or after July 1, 2006. If either ownership or possession of the real property is transferred before July 1, 2006, GST/HST applies at 7% or 15%.

There is an exception to this general rule for certain supplies of residential complexes, which is explained below. In addition, this general rule does not apply to deemed supplies of real property made by way of sale. Refer to Part III of this bulletin, “Deemed Supplies”, for information on the transitional rules that apply to deemed supplies.

Exception for a supply of a residential complex made by way of sale

A taxable supply of a residential complex made by way of sale, where an agreement of purchase and sale, evidenced in writing, was entered into on or before May 2, 2006, is subject to GST/HST at 7% or 15%, regardless of when ownership or possession of the complex is transferred.

Where the agreement of purchase and sale is entered into after May 2, 2006, the general rule applies, i.e., GST/HST applies at 6% or 14% if both ownership and possession of the complex are transferred on or after July 1, 2006. GST/HST applies at 7% or 15% if either ownership or possession of the complex is transferred before July 1, 2006.

However, if GST/HST applies at 7% or 15% in respect of a supply of a residential complex made by way of sale and both ownership and possession of the complex are transferred to the recipient on or after July 1, 2006, a GST/HST transitional rebate may be available to reflect the reduction in the tax rate.

The transitional rebate is available to any person (i.e., not just an individual) who qualifies, regardless of the value of the consideration for the supply of the residential complex (i.e., there is no maximum amount for the transitional rebate).

Consistent with the general transitional rule, a transitional rebate is not available where either ownership or possession of a residential complex is transferred before July 1, 2006, regardless of when the purchase and sale agreement was entered into.

More information on the transitional rebate and the formulas for calculating the rebate in various circumstances are provided under Part V of this bulletin, “Transitional Rebate for a Residential Complex”.

Changes to a purchase and sale agreement

It is not uncommon for a purchaser of a residential complex to request the builder to make certain changes to the complex after they have entered into an agreement for the purchase of the complex but before possession and ownership of the complex are transferred. For example, a purchaser may want to upgrade the quality of flooring, cabinets, lighting or plumbing fixtures included in the purchase and sale agreement or, the purchaser may have the builder finish the basement of the complex, or provide landscaping services, neither of which was initially included in the initial agreement.

Generally, changes to an agreement of purchase and sale for a residential complex will not have an impact on the transitional rules. For example, if the purchase and sale agreement provides for standard kitchen cabinets and the builder agrees to install upgraded cabinets instead, the amount that the builder charges for the upgrade will be an additional amount payable by the purchaser for the residential complex. The purchaser is not considered to have entered into a new agreement of purchase and sale as a result of the upgrade and there is no impact on the application of the transitional rules. If the purchase and sale agreement, evidenced in writing, was entered into on or before May 2, 2006, and both ownership and possession are transferred on or after July 1, 2006, GST/HST applies at 7% or 15% to the total amount payable for the complex, including the upgrade.

When determining the amount of the transitional rebate, the total amount paid for the complex generally includes any additional amount paid for upgrades.

Example 7

An individual enters into a written agreement with a builder for the purchase of a new residential complex. The agreement is entered into on April 6, 2006, and provides for carpeting to be installed in all areas of the main floor of the complex, except the kitchen and bathroom. The individual decides to have the builder install hardwood flooring instead and a change order to that effect is agreed to on May 19, 2006. No other changes are made to the agreement. Ownership and possession of the complex are transferred to the individual on September 1, 2006.

The change order agreed to on May 19, 2006, does not result in a new agreement for the purchase and sale of the residential complex. Furthermore, the additional amount payable for the hardwood flooring is considered to be an amount payable for the supply of the residential complex.
Since the purchase and sale agreement was entered into before May 2, 2006, GST/HST will apply at 7% or 15% to the total amount payable for the complex even though both ownership and possession of the complex are transferred after July 1, 2006.

It should be noted that regardless of when a purchaser is required to pay an additional amount to a builder in respect of an upgrade to a residential complex, tax in respect of the additional amount is generally payable at the same time the tax in respect of the supply of the residential complex becomes payable. (In Example 7, assuming the residential complex is not a residential condominium unit, tax is payable on the earlier of the day ownership or possession of the complex is transferred to the purchaser, i.e., September 1, 2006).

If the purchaser and the builder renegotiate the terms of an existing agreement for the purchase and sale of a residential complex and enter into a new agreement such that the obligations under the previous agreement no longer prevail, the transitional rules will apply based on the new agreement.

Example 8

On April 28, 2006, an individual and a builder enter into a written agreement for the purchase and sale of a residential complex. The agreement is terminated and the builder and the individual enter into a new agreement on June 21, 2006. Ownership and possession of the complex under the new agreement are transferred on September1, 2006.

GST/HST at 6% or 14% will apply to the supply of the complex in this case, as the new agreement was entered into after May 2, 2006, and both ownership and possession are transferred on or after July 1, 2006.

Novation

A purchase and sale agreement may be modified, varied or otherwise materially altered to the extent that it is considered to be a new agreement. This is referred to as novation. If novation has occurred, the application of the transitional rules will be based on the date the new agreement is entered into, as well as the date or dates that possession and ownership are transferred under that new agreement. If novation has not occurred, the application of the transitional rules will be based on the date that the parties originally entered into the agreement. Generally, a change in the purchaser (i.e., the person liable to pay for the supply) would result in novation (i.e., a new agreement). To determine whether novation has occurred, reference should be made to GST/HST Policy Statement P-249, Agreements and Novation.

Part III – Deemed supplies

Transitional rules apply to deemed supplies of real property to determine the rate of tax payable in respect of the deemed supply. A general rule applies to a deemed supply of real property other than a deemed supply of a residential complex under section 191. Specific transitional rules apply to deemed supplies of residential complexes, or additions to multiple unit residential complexes, under the provisions of section 191 (i.e., the “self-supply rules”). For general information about the deemed supply of a residential complex or an addition to a multiple unit residential complex, refer to GST/HST Memoranda 19.2.3, Residential Real Property – Deemed Supplies.

General rule for deemed supplies

In the case of a deemed supply of real property, other than a deemed supply under section 191 (which is explained below), GST/HST applies at 7% or 15% if the supply is deemed to be made before July 1, 2006. If the supply is deemed to be made on or after July 1, 2006, GST/HST applies at 6% or 14%.

Example 9

An individual uses capital real property in his business. The property is not a residential complex. On June 15, 2006, the individual appropriates the real property for his personal use. Under subsection 190(2), the individual is deemed to have made a taxable supply by way of sale of the real property immediately before the property was appropriated for personal use and to have paid, as recipient, and collected, as supplier, tax in respect of the deemed supply calculated on the fair market value of the property at that time.

Since the supply is deemed to be made before July 1, 2006, the GST/HST deemed to have been paid and collected is calculated at 7% or 15%.

Self-supply of a single unit residential complex or residential condominium unit under subsection 191(1)

Where a builder is deemed to have made a supply of a single unit residential complex or residential condominium unit under subsection 191(1), GST/HST applies at 6% or 14% if the supply of the complex or unit is deemed to be made on or after July 1, 2006, unless the deemed supply is in respect of an exempt supply by way of sale of a building and a supply by way of lease, or an assignment of a lease, of the land forming part of the complex or unit.

Example 10

A builder constructs a residential condominium unit and under an agreement for the lease of the unit, gives possession of the unit to two individuals who occupy the unit as their primary place of residence. Construction of the unit is substantially completed on June 25, 2006. Possession of the unit is given to the individual on July 1, 2006.

The builder is deemed to have made a supply of the unit on July 1, 2006, (i.e., the later of the time construction of the unit is substantially completed and the time possession of the unit is given to the individuals). Therefore, the builder accounts for the GST/HST at 6% or 14%, calculated on the fair market value of the unit.

If possession of the unit were given before July 1, 2006, the builder would have been deemed to have made a supply of the unit before July 1, 2006, and the builder would have had to account for the GST/HST at 7% or 15%.

Self-supply where complex or unit is situated on leased land

Where a builder is required to self-assess tax under subsection 191(1) in respect of an exempt supply by way of sale of the building part of a single unit residential complex or a residential condominium unit and a supply by way of lease, or an assignment of a lease, of the land forming part of the complex or unit, the rate of tax payable in respect of the deemed supply is determined by the date the agreement for the purchase and sale of the building was entered into. Where the agreement was entered into on or before May 2, 2006, GST/HST at 7% or 15% will apply to the deemed supply made by the builder even if the deemed supply is made on or after July 1, 2006.

Example 11

A builder constructs a single unit residential complex. The building part of the single unit residential complex is sold to two individuals under an agreement in writing that also includes a lease of the land on which the building is situated. The agreement is entered into on April 28, 2006, and construction of the complex is substantially completed on August 1, 2006, the same day that possession of the complex is given to the individuals.

Even though the builder is deemed to have made a supply of the complex on August 1, 2006, the builder must account for the GST/HST at 7% or 15%, calculated on the fair market value of the complex (building and land), as the agreement was entered into on or before May 2, 2006.

Where GST/HST applies at 7% or 15% on a deemed supply under subsection 191(1) in respect of a supply by way of sale of the building and lease of the underlying land, and possession is given under an agreement in writing entered into on or before May 2, 2006, the purchaser may be entitled to a GST/HST transitional rebate to reflect the reduction in the tax rate. For information on the transitional rebate, refer to Part V of this bulletin, “Transitional Rebate for a Residential Complex”.

Self-supply of a residential condominium unit under subsection 191(2)

Where a builder is deemed to have made a supply of a residential condominium unit under subsection 191(2) as a result of the termination of an agreement for purchase and sale of the unit, the deemed supply is deemed to have been made at the time the agreement is terminated. GST/HST applies at 6% or 14% to a supply of a residential condominium unit deemed to be made under subsection 191(2) on or after July 1, 2006, unless possession of the unit was transferred before July 1, 2006, in which case GST/HST applies at 7% or 15%.

Example 12

An individual enters into an agreement with a builder for the purchase of a residential condominium unit. The agreement is not conditional upon the individual obtaining the necessary financing. The builder gives possession of the unit to the individual on June 15, 2006. The condominium complex in which the unit is situated has not yet been registered as a condominium. The individual’s financial circumstances change and the individual is unable to go ahead with the purchase of the unit. The purchase and sale agreement is terminated on July 15, 2006, otherwise than by performance of the agreement, and no other purchase and sale agreement is entered into between the builder and the individual in respect of the unit. In these circumstances, subsection 191(2) provides that the builder is deemed to have made a supply of the unit on the date the agreement is terminated, i.e., July 15, 2006.

While the supply is deemed to be made after July 1, 2006, the individual had possession of the unit before July 1, 2006, therefore, the builder must account for the GST/HST at 7% or 15%, calculated on the fair market value of the unit.

If possession of the unit had been given on July 1, 2006, instead of June 15, 2006, GST/HST would apply at 6% or 14%.

Self-supply of a multiple unit residential complex under subsection 191(3) or of an addition under subsection 191(4)

Where a builder is deemed to have made a supply of a multiple unit residential complex, or an addition thereto, under subsection 191(3) or 191(4), other than a self-supply as a result of an exempt sale of a building or part of a building and a supply by way of lease or an assignment of a lease of the underlying land, GST/HST applies at 6% or 14% if the supply is deemed to be made on or after July 1, 2006.

Example 13

A builder begins construction of a triplex in April 2006. The construction of the triplex (a multiple unit residential complex) is substantially completed in October 2006. On November 1, 2006, the first individual to occupy a residential unit in the triplex as a place of residence is given possession under an agreement for the lease of a unit in the triplex.

Since the possession of a unit is given on November 1, 2006, (the later of the time construction of the residential complex is substantially completed and the transfer of possession), the builder is deemed to have made a supply of the complex on November 1, 2006, and is required to account for the GST/HST at 6% or 14%, calculated on the fair market value of the complex.

Self-supply where multiple unit residential complex is situated on leased land

Where a builder is required to self-assess tax in respect of a supply made by way of sale of the building part of a residential unit in a multiple unit residential complex, or an addition thereto, situated on leased land, GST/HST applies at 7% or 15% where

• the agreement of purchase and sale was entered into on or before May 2, 2006, or
• another agreement of purchase and sale for the building part of another residential unit in the complex or addition was entered into with another person on or before May 2, 2006, and that other agreement was not terminated before July 1, 2006.

In these circumstances, the purchaser may be entitled to a transitional rebate in respect of the purchase of the building part of a residential unit in the complex or addition to the complex. The builder may also be entitled to a transitional rebate. For information on the transitional rebate and the formulas for calculating the rebate in various circumstances, refer to Part V of this bulletin, “Transitional Rebate for a Residential Complex”.

Example 14

On April 25, 2006, a builder enters into an agreement with a particular individual for the purchase and sale of the building part of residential unit in a newly constructed multiple unit residential complex situated on leased land. The particular individual takes possession of a unit in the building on July 15, 2006.

As the agreement was entered into on or before May 2, 2006, GST/HST applies at 7% or 15% in respect of the deemed supply even though the supply is deemed to be made on or after July 1, 2006. (The builder is deemed to have made a supply of the complex on July 15, 2006.)

Suppose instead that the builder had entered into an agreement with the particular individual on May 15, 2006, rather than April 25, 2006. Also suppose that the builder entered into a similar agreement with another individual for another residential unit in the complex on April 30, 2006, and that other agreement was not terminated before July 1, 2006. The other individual takes possession of a unit on August 1, 2006. GST/HST applies at 7% or 15% in respect of the deemed supply on July 15, 2006, which is triggered when the individual is given possession of a unit in the complex on July 15, 2006.

If the agreement with the other individual had been terminated prior to July 1, 2006, and no other agreement for the purchase and sale of a unit in the complex was entered into on or before May 2, 2006, GST/HST would apply at 6% or 14% in respect of the deemed supply made on July 15, 2006.

Part IV – Maximum housing rebate amounts

To reflect the reduction in the rate of the GST/HST, the maximum new housing rebate amounts have been reduced. The following section deals with amendments to the GST/HST new housing rebate and the GST/HST new residential rental property rebate. For general information about these rebates, see guides RC4028, GST/HST New Housing Rebate, and RC4321, GST/HST New Residential Rental Property Rebate.

GST/HST New Housing Rebates

To reflect the reduction in the GST/HST rate, the maximum new housing rebate amounts have been reduced from $8,750 to $7,560 in respect of:

Where GST/HST applies at 7% or 15% to the purchase of a single unit residential complex or residential condominium unit, the new housing rebate is equal to the lesser of $8,750 and 36% of the GST or the federal portion of the HST paid.

Where GST/HST applies at 6% or 14% to the purchase of a single unit residential complex or residential condominium unit, the new housing rebate is equal to the lesser of $7,560 and 36% of the GST or the federal portion of the HST paid.

It should be noted that the maximum rebate amount of $8,750 is approximately 36% of the GST or the federal portion of the HST payable at 7% where the consideration payable for the residential complex is $350,000. The maximum rebate amount of $7,560 is 36% of the GST or the federal portion of the HST payable at 6% where the consideration for the residential complex or residential condominium unit is $350,000.

The amount of the new housing rebate is gradually reduced where the consideration for the supply of a single unit residential complex or residential condominium unit exceeds $350,000 and is not available for a complex or unit where the consideration for the supply is $450,000 or more.

A purchaser may be entitled to a transitional rebate if GST/HST applies at 7% or 15% to the purchase of a single unit residential complex or residential condominium unit and both ownership and possession of the complex or unit are transferred on or after July 1, 2006, even if the consideration for the supply is $450,000 or more. Refer to Part V of this bulletin, GST/HST Transitional Rebate for a Residential Complex for more information regarding the eligibility to claim a transitional rebate.

Example 15

An individual purchases a newly constructed single unit residential complex from a builder for use as her primary place of residence. The consideration payable for the purchase is $350,000.

If ownership and possession of the single unit residential complex is transferred before July 1, 2006, GST/HST applies at 7% or 15% to the purchase. The GST or federal portion of the HST payable on the consideration of $350,000 is $24,500. The amount of the new housing rebate is equal to $8,750 (i.e., the lesser of $8,750 and $8,820 which is 36% of $24,500).

If the agreement to purchase the residential complex was entered into after May 2, 2006, and both ownership and possession are transferred on or after July 1, 2006, GST/HST applies at 6% or 14% to the purchase. The GST or federal portion of the HST payable on the consideration of $350,000 is $21,000. The amount of the new housing rebate will be $7,560 (i.e., the lesser of $7,560 and $7,560 which is 36% of $21,000).

The new housing rebate for an owner-built home is 36% of the GST or the federal portion of the HST paid, generally to a maximum of $7,560. However, recognizing that an individual may pay GST/HST at 7% or 15% and GST/HST at 6% or 14% in respect of costs incurred (including the land) in the construction or substantial renovation of a single unit residential complex or residential condominium unit, a rebate claimant will be required to determine the extent to which they paid GST/HST at 7% or 15% to determine the maximum amount of the new housing rebate.

The amendment to subsection 256(2) provides that the maximum amount of the new housing rebate for an owner-built home is equal to the lesser of:

Example 16

An individual builds a single unit residential complex in a non-participating province and will occupy the complex as her primary place of residence. The fair market value of the complex at the time of substantial completion is $350,000. GST of $23,000 was paid on costs relating to the construction of the complex. Of the $23,000 in GST paid, 39.13% or $9,000 was GST paid at 7%, while the remaining $14,000 was GST paid at 6%.

In this case, the amount of GST paid on the land and construction costs at the rate of 6% is less than 90% of the total GST paid so the maximum amount of the new housing rebate is the lesser of:

The maximum amount the individual may claim is $8,053.

The amount of the new housing rebate for owner-built homes is gradually reduced where the fair market value of the single unit residential complex or residential condominium unit exceeds $350,000. A new housing rebate is not available for a complex or unit with a fair market value of $450,000 or more.

The changes to the maximum amount of the new housing rebate for an owner-built home apply to rebate applications filed on or after July 1, 2006.

The maximum amount for the new housing rebate in respect of the purchase of the building part of a single unit residential complex or a residential condominium unit situated on leased land is equal to the lesser of $7,560 and 2.04% of the consideration payable for the purchase. Note that such consideration may include consideration relating to the sale of other structures that form part of the residential complex, but does not include consideration that can reasonably be regarded as rent for the land or consideration for an option to purchase the land. The amount of the new housing rebate is gradually reduced where the fair market value of the residential complex exceeds $371,000. A new housing rebate is not available where the fair market value of the residential complex is $477,000 or more. The amount of $107,000 in the formula in paragraph 254.1(2)(i) that is to be used where the fair market value of the residential complex exceeds $371,000 is replaced by $106,000.

The amendment to subsection 254.1(2) provides that where the fair market value of the complex exceeds $371,000 but is less than $477,000, the amount of the new housing rebate is determined by the formula:

where

A is the lesser of $7,560 and 2.04% of the total consideration for the complex, and

B is the fair market value of the complex.

Generally, the amendments relating to the maximum amount of the new housing rebate, the formula and the threshold amounts for a new housing rebate under subsection 254.1(2) apply where possession of the complex or unit is given to the individual on or after July 1, 2006.

However, the amendments do not apply if the builder of the complex or unit is deemed to have paid GST/HST at 7% or 15% in respect of a deemed supply of the complex.

A purchaser may be entitled to a transitional rebate if GST/HST applies at 7% or 15% to the deemed supply of the complex or unit made by the builder and both ownership and possession are transferred on or after July 1, 2006, even if the fair market value of the complex exceeds $481,500. Refer to Part V of this bulletin, GST/HST Transitional Rebate for a Residential Complex for more information regarding the transitional rebates for residential complexes.

The maximum amount of the new housing rebate for the purchase of a share in a co-operative housing corporation or of an interest in the corporation is equal to the lesser of $7,560 and 2.04% of the consideration payable for the share or interest. The amount of the new housing rebate is now gradually reduced where the consideration for the shares or interest exceeds $371,000. A new housing rebate is not available where the consideration for the share or interest is $477,000 or more. The amount of $107,000 in the formula in paragraph 255(2)(h) that is to be used where the consideration for the share or interest exceeds $371,000 is replaced by $106,000.

The amendment to subsection 255(2) provides that where the consideration for the share or interest in the corporation exceeds $371,000 but is less than $477,000, the amount of the new housing rebate is determined by the formula:

where

A is the lesser of $7,560 and 2.04% of the total consideration for the complex, and
B is the fair market value of the complex.

Generally, the amendments relating to the maximum amount of the new housing rebate, the formula and the threshold amounts for a new housing rebate under subsection 255(2) apply where the rebate application is filed on or after July 1, 2006.

However, the amendments do not apply if the supply of the complex (deemed or otherwise) to the co-operative housing corporation was subject to GST/HST at 7% or 15%.

GST/HST New Residential Rental Property Rebate

To reflect the reduction in the GST/HST rate, the maximum amount of the new residential rental property rebate is $7,560 in respect of the following:

Generally, the maximum amount of the new residential rental property rebate in respect of a qualifying residential unit that forms part of a new residential complex, or an interest therein, purchased by a purchaser-landlord is $7,560, where both ownership and possession of the complex are transferred on or after July 1, 2006.

However, if the agreement, evidenced in writing, for the supply of the residential complex or an interest therein was entered into on or before May 2, 2006, the maximum amount of the new residential rental property rebate in respect of a qualifying residential unit that forms part of the complex is $8,750. In this case, the sale is subject to GST/HST at 7% or 15%.

A purchaser-landlord may be entitled to a transitional rebate if GST/HST applies at 7% or 15%. For more information about transitional rebates, refer to Part V of this bulletin, Transitional Rebate for a Residential Complex.

The maximum amount of the new residential rental property rebate in respect of a qualifying residential unit that forms part of a residential complex (including a multiple unit residential complex), or an addition to a multiple unit residential complex that is subject to self-supply by a builder-landlord is $7,560, where tax in respect of the complex or addition is deemed to have been paid by the builder on or after July 1, 2006.

A new residential rental property rebate may be available to a builder in respect of a supply by way of sale of a building part of a residential complex, or an addition to a multiple unit residential complex, situated leased land.

Generally, the maximum amount of the rebate in respect of a qualifying residential unit in such a complex or addition is $7,560 if the builder is deemed to have made a supply of the residential complex or addition on or after July 1, 2006.

However, where a builder is required to self-supply in respect of the complex or addition, situated on leased land, the maximum amount of the new residential rental property rebate, in respect of a qualifying residential unit, is $8,750 if:

• the agreement for the purchase and sale was entered into on or before May 2, 2006, or
• another agreement of purchase and sale for another residential unit in the complex or addition was entered into with another person on or before May 2, 2006, and that other agreement was not terminated before July 1, 2006.

Note that where GST/HST applies at 7% or 15% in respect of the self-supply, the maximum amount of the rebate is $8,750. In this case, a transitional rebate may be available to the builder. For more information about transitional rebates, see Part V of this bulletin, Transitional Rebate for a Residential Complex.

Part V – Transitional rebate for a residential complex

New sections 256.3 to 256.6 provide a transitional rebate, available to any person, including an individual, a non-profit organization or a corporation, who purchases a newly constructed or substantially renovated residential complex and pays GST/HST at 7% or 15%, if the conditions for claiming the rebate are met. The transitional rebate is available regardless of the value of the consideration for the supply of the residential complex (i.e., there is no maximum amount for the transitional rebate). Consequently, the transitional rebate may be available even if the person is not entitled to a new housing rebate or a new residential rental property rebate.

Consistent with the general transitional rule, a transitional rebate is not available where either ownership or possession of a residential complex is transferred before July 1, 2006, regardless of when the agreement of purchase and sale was entered into.

The legislative provisions for the transitional rebate require that the purchase and sale agreement in respect of the complex must be evidenced in writing. In most cases, the purchaser will have entered into an agreement in writing for a purchase of a residential complex or a residential condominium unit. Where the agreement of purchase and sale is not in writing, it is possible that other documents in writing may serve as evidence of the agreement. A person claiming a transitional rebate must provide documents evidencing the agreement and that the conditions for claiming the transitional rebate, such as the condition that the agreement was entered into by the parties on or before May 2, 2006, are met.

Purchasers of new residential complexes or condominium units who are eligible to claim a transitional rebate must file the rebate application form GST193, GST/HST Transitional Rebate Application for Purchasers of New Housing directly with the CRA. A builder cannot pay or credit an amount for the transitional rebate to the purchaser. If two or more individuals purchase a residential complex, all of the individuals must meet the eligibility criteria for the transitional rebate, but only one individual can claim the transitional rebate. If the individuals are also eligible to claim the new housing rebate, the individual who claimed the housing rebate must also claim the transitional rebate. It should be noted that where the new housing rebate was assigned to a builder and forwarded to the CRA by that builder, the builder is not the claimant and cannot claim the transitional rebate on behalf of the purchaser.

In certain limited circumstances, a builder of a residential complex or an addition to a multiple unit residential complex that is the subject of a self-supply may also be entitled to a transitional rebate. A builder that is eligible to claim a transitional rebate must complete form GST192, GST/HST Transitional Rebate Application for Builders of New Housing on Leased Land, directly with the CRA.

The rebate applications are available on the CRA Web site at www.cra.gc.ca/forms or may be obtained by calling 1-800-959-2221. The circumstances in which a transitional rebate may be claimed are described below.

Purchase of a residential complex (building and land)

To reflect the reduction in the GST/HST rate, a person may be entitled to claim a transitional rebate where the person purchases a residential complex, pays GST/HST at 7% or 15% and both ownership and possession are transferred on or after July 1, 2006. The transitional rebate may be available in respect of a taxable supply of a residential complex made by way of sale to:

Simplified calculation for the transitional rebate

While the legislation provides a formula to determine the amount of the transitional rebate for each situation, the following is a simplified version of the formula. This simplified formula is included in form GST193, GST/HST Transitional Rebate Application for Purchasers of New Housing, and may be used to calculate the amount of the transitional rebate for the purchase of a residential complex (building and land).

The simplified calculation for the transitional rebate is:

where

B is the GST or the federal portion of the HST payable in respect of the residential complex (i.e., A × 7% where A is the consideration payable for the residential complex), and

C is the amount of the new housing rebate, the new residential rental property rebate or the public service bodies’ rebate in respect of GST or federal portion of the HST, if any, that a person, other than a co-operative housing corporation, may claim in respect of the purchase of the residential complex. In the case of a co-operative housing corporation where the corporation is, or can reasonably be expected to be, eligible for a GST/HST new residential rental property rebate or where a purchaser of a share of the capital stock of the corporation is, or can reasonably be expected to be, eligible for a GST/HST new housing rebate in respect of the purchase of the share, and the corporation is not entitled to a public service bodies’ rebate, C is 36% of B. If the corporation is entitled to claim a public service bodies’ rebate, C is the amount of that rebate that is in respect of the GST or the federal portion of the HST.

Example 17

On March 17, 2006, an individual enters into an agreement in writing for the purchase of a residential complex from a builder. Ownership and possession of the complex are transferred to the individual on September 1, 2006. The individual will be using the complex as their primary place of residence and is entitled to claim a new housing rebate under subsection 254(2). The consideration payable for the complex is $320,000 and, in accordance with the transitional rules set out in Part II of this bulletin, “Supply of Real Property Made by Way of Sale and the Exception for a Residential Complex”, GST/HST applies at 7% or 15%. The amount of the new housing rebate determined in accordance with subsection 254(2) is $8,064.

The new housing rebate must be taken into account in determining the transitional rebate. The simplified calculation for the transitional rebate is:

where

B is $320,000 × 7% = $22,400, and

C is $8,064

The amount of the transitional rebate is: ($22,400 – $8,064) ÷ 7 = $2,048

For more information on calculating the new housing rebate, see GST/HST Memoranda 19.3.1, Rebate for Builder-Built (Land Purchased) or guide RC4028, GST/HST New Housing Rebate.

Detailed formulas for the transitional rebate

The formulas for determining the amount of a transitional rebate, as set out in the Act, and any additional conditions for claiming the rebate are described below under the headings for each situation.

The following conditions apply for claiming a transitional rebate in situations (a) through (e) described below, and are in addition to any conditions that may be included in the detailed information provided under the respective headings for each situation:

• a taxable supply by way of sale of a residential complex is made under an agreement of purchase and sale, evidenced in writing, and entered into on or before May 2, 2006;
• both ownership and possession of the complex are transferred to the purchaser on or after July 1, 2006;
• the purchaser has paid the GST or the federal component of the HST at 7% in respect of the supply; and
• in accordance with subsection 256.3(7), the purchaser files an application for the transitional rebate within two years after the day ownership of the residential complex is transferred to the person.

(a) Transitional rebate for an individual entitled to claim a new housing rebate under subsection 254(2)

An individual may be entitled to claim a transitional rebate under subsection 256.3(5) where the individual is entitled to claim a new housing rebate under subsection 254(2) in respect of a purchase of a residential complex.

The amount of the transitional rebate is determined by the following formula:

where

A is the total consideration payable for the complex or an interest in the complex in respect of which the individual paid GST or the federal portion of the HST at 7%, and

B is the amount of the new housing rebate that the individual is entitled to claim under subsection 254(2).

Example 18

Using the same information as in Example 17, on March 17, 2006, an individual enters into an agreement in writing for the purchase of a residential complex from a builder. Ownership and possession of the complex are transferred to the individual on September 1, 2006. The individual will be using the complex as their primary place of residence and is entitled to claim a new housing rebate under subsection 254(2). The consideration payable for the complex is $320,000 and, GST/HST applies at 7% or 15%. The amount of the new housing rebate determined in accordance with subsection 254(2) is $8,064.

The new housing rebate must be taken into account in determining the transitional rebate. The amount of the transitional rebate is calculated as follows:

$320,000 × {0.01 – [($8,064 ÷ $320,000) ÷ 7]}

= $320,000 × {0.01 – [.0252 ÷ 7]}
= $320,000 × {0.01 - .0036}
= $2,048

The same individual who claimed the new housing rebate must file the application for the transitional rebate. The transitional rebate must be filed with the CRA and cannot be paid or credited by the builder to the individual.

Under subsection 256.3(6), if a supply of a residential complex is made to two or more individuals, all of the individuals must meet the conditions for claiming the transitional rebate, but only one individual (i.e., the individual who claimed the new housing rebate) can claim the transitional rebate.

(b) Transitional rebate for a person, other than a co-operative housing corporation, who is not entitled to claim an ITC or a rebate, other than the transitional rebate

A person, other than a co-operative housing corporation, may be entitled to claim a transitional rebate under subsection 256.3(1) where the person is not entitled to claim an ITC or rebate (other than the transitional rebate) in respect of a purchase of a residential complex.

The amount of the transitional rebate is equal to 1% of the value of the consideration for the purchase of a residential complex.

Example 19

In April 2006, a person enters into an agreement in writing for the purchase of a residential complex from a builder. Ownership and possession of the complex are transferred to the person in October 2006. GST/HST applies at 7% or 15% to the purchase. The consideration payable for the complex is $500,000. The person is not entitled to claim an ITC or a rebate in respect of the tax payable on the purchase of the complex.

The person will be entitled to claim a transitional rebate calculated as 1% of the value of the consideration for the supply of the residential complex. The amount of the transitional rebate is calculated as follows:

$500,000 × 1%

= $5,000

(c) Transitional rebate for a person, other than a co-operative housing corporation, who is entitled to claim a new residential rental property rebate under subsection 256.2(3)

A person, other than a co-operative housing corporation, may be entitled to claim a transitional rebate under subsection 256.3(2) provided the person is entitled to claim a new residential rental property rebate under subsection 256.2(3), in respect of any residential unit situated in the complex.

The amount of the transitional rebate is determined by the formula:

where

A is the total consideration payable for the complex, and

B is the amount of the new residential rental property rebate that the person is entitled to claim under subsection 256.2(3).

Example 20

On April 15, 2006, a person enters into an agreement in writing for the purchase of a residential complex from a builder. Ownership and possession of the complex are transferred to the purchaser on August 15, 2006. The person will use the complex to make supplies of long-term residential rents that are exempt under section 6 of Part I of Schedule V. The person is entitled to claim a new residential rental property rebate under subsection 256.2(3) in respect of all of the qualifying residential units in the complex.

The consideration payable for the complex is $250,000 and GST/HST applies at 7% or 15%. The person is eligible for a new residential rental property rebate and the amount of the rebate, determined in accordance with subsection 256.2(3), is equal to $6,300.

The new residential rental property rebate must be taken into account in determining the amount of the transitional rebate. The amount of the transitional rebate is calculated as follows:

where

A = $250,000, and

B = $6,300

Therefore, $250,000 × {0.01 – [($6,300 ÷ $250,000) ÷ 7]}

= $250,000 × {0.01 – [.0252 ÷ 7]}
= $250,000 × {0.01 – 0.0036}
= $1,600

For more information on calculating the new residential rental property rebate, refer to Technical Information Bulletin B-087, GST/HST New Residential Rental Property Rebate or guide RC4231, GST/HST New Residential Rental Property Rebate.

(d) Transitional rebate for a person, other than a co-operative housing corporation, who is entitled to claim a public service bodies’ rebate under section 259

A person, other than a co-operative housing corporation, may be entitled to claim a transitional rebate under subsection 256.3(3) provided the person is entitled to claim a public service bodies’ rebate under section 259 and is not entitled to claim any ITC or any other rebate, (other than the transitional rebate) in respect of the purchase of a residential complex.

The amount of the transitional rebate is determined by the following formula:

where

A is the total consideration payable for the complex, and

B is

Example 21

On March 1, 2006, a charity enters into an agreement in writing for the purchase of a residential complex from a builder. The residential complex is located in a participating province. Ownership and possession of the complex are transferred to the charity on July 15, 2006. The charity uses the complex to make exempt supplies of accommodation to seniors and is entitled to claim a public service bodies’ rebate under section 259.

The consideration payable for the complex is $600,000 and the HST payable in respect of the complex is $90,000. The charity is entitled to claim a public service bodies’ rebate of $45,000 (50% × $90,000). The amount of the public service bodies’ rebate that is in respect of the federal component of the HST is $21,000 (i.e., $600,000 × 7% x 50%).

The amount of the transitional rebate is calculated as follows:

where

A = $600,000, and

B = $21,000

Therefore, $600,000 × {0.01 – [($21,000 ÷ $600,000) ÷ 7]}

= $600,000 × {0.01 – [.035 ÷ 7]}
= $600,000 × {0.01 – 0.005}
= $3,000

(e) Transitional rebate for a co-operative housing corporation

A co-operative housing corporation may be entitled to claim a transitional rebate under subsection 256.3(4) provided the corporation is not entitled to claim an ITC or a rebate (other than a new residential rental property rebate under section 256.2, a public service bodies’ rebate under section 259, or a transitional rebate) in respect of a purchase of a residential complex.

The amount of the transitional rebate is determined by the following formula:

where

A is the total consideration payable for the complex, and

B is

Example 22

In February 2006, a co-operative housing corporation that is not a public service body enters into an agreement in writing for the purchase of a residential complex from a builder. The complex is situated in a non-participating province. Ownership and possession of the complex are transferred to the corporation in October 2006. The corporation purchases the complex for the purpose of selling shares of its capital stock in the corporation to individuals whose share purchase will entitle them to use a residential unit in the complex as their primary place of residence.

The co-operation pays consideration of $2,000,000 and GST of $140,000 to the builder for the complex.

The amount of the transitional rebate is calculated as follows:

where

A = $2,000,000, and

B = $50,400*

Therefore, $2,000,000 × {0.01 – [($50,400 ÷ $2,000,000) ÷ 7]}

= $2,000,000 × {0.01 – [0.0252 ÷7]}
= $2,000,000 × {0.01 – 0.0036}
= $12,800

*For the purpose of determining element B in the above formula, the corporation is not entitled to claim a public service bodies’ rebate, therefore paragraph (i) of the description of element B does not apply. However, the corporation purchased the complex with the intent of selling shares of its capital stock that will entitle an individual purchasing a share to use a unit in the complex as the individual’s primary place of residence and the corporation reasonably expects that an individual purchasing a share will be entitled to claim a new housing rebate under section 255. As such, the new housing rebate must be taken into account in determining the transitional rebate and element B is equal to $50,400, i.e., 36% of the GST paid in respect of the purchase of the complex.

Note that if the co-operative housing corporation intended to make supplies of long-term residential accommodation in respect of the units in the complex and was entitled to claim a new residential rental property rebate under section 256.2, with respect to one or more residential units in the complex, element B would still be 36% of the GST paid on the purchase of the complex. Alternatively, if the corporation expected a new residential rental property rebate to be available in respect of some of the units in the complex and a new housing rebate to be available in respect of other units in the complex, element B would be 36% of the GST paid on the purchase of the complex in any case.

However, if the co-operative housing corporation were entitled to a public service bodies’ rebate, for example at 50%, element B in this example would be $70,000 (i.e., 50% of the GST paid in respect of the purchase of the complex) and the amount of the transitional rebate would be calculated as follows:

$2,000,000 × {0.01 – [($70,000 ÷ $2,000,000) ÷ 7]}

= $2,000,000 × {0.01 – [0.035 ÷7]}
= $2,000,000 × {0.01 – 0.005}
= $10,000

Finally, if the corporation was not entitled to a public service bodies’ rebate and could not reasonably expect to be entitled to claim a new residential rental property rebate and could not reasonably expect a purchaser of a share to be entitled to claim a new housing rebate in respect of any unit in the complex, the transitional rebate would be equal to 1% of the value of consideration for the purchase of the residential complex.

Purchase of a residential complex (building and lease of land)

Refer to Self-supply of a residential complex in Part V of this bulletin for information on those limited situations where a builder is entitled to claim a transitional rebate.

Simplified calculation for the transitional rebate

While the legislation provides a formula to determine the amount of the transitional rebate for each situation, the following is a simplified version of the formula. This simplified formula is included in form GST193, GST/HST Transitional Rebate Application for Purchasers of New Housing, and may be used to calculate the amount of the transitional rebate for the purchase of a residential complex (building and lease of land).

The simplified calculation for the transitional rebate is:

where

B is equal to A × 0.0654 if the residential complex is located in a non-participating province; and A × 0.0609 if the residential complex is located in a participating province. In either case, A is the consideration payable for the building part of the residential complex (i.e., A may include consideration for the sale of other structures that form part of the residential complex, but does not include any amount that is rent for the land or that is consideration for an option to purchase the land), and

C is the amount of the new housing rebate, if any, that the person may claim in respect of the purchase of the residential complex.

Detailed formulas for the transitional rebate

The formulas for determining the amount of a transitional rebate, as set out in the Act, and any additional conditions for claiming the rebate are described below under the headings for each situation.

The following conditions apply for claiming a transitional rebate in situations (a) through (d) described below and are in addition to any conditions that may be included in the detailed information provided under the respective heading for each situation:

• under an agreement, evidenced in writing, entered into on or before May 2, 2006, with a builder, the person is the recipient of,

• possession of the complex or unit is given to the person on or after July 1, 2006;
• the builder is deemed to have made a supply of the complex, unit or addition, as the case may be, and is deemed to have paid GST/HST at 7% or 15% in respect of the deemed supply; and
• in accordance with subsection 256.4(4) or 256.5(3), the person must file an application for the transitional rebate within two years after the day possession of the complex or unit, as the case may be, is transferred to the purchaser.

(a) Transitional rebate for an individual who is entitled to claim a new housing rebate under subsection 254.1(2) in respect of the purchase of a single unit residential complex or residential condominium unit on leased land

A transitional rebate may be available to an individual, calculated under paragraph 256.4(1)(e) in respect of a single unit residential complex or a residential condominium unit where the individual is entitled to claim a new housing rebate under section 254.1(2) in respect of the complex or unit.

Although subsection 256.4(1) refers to a person, in order to be entitled to a new housing rebate under subsection 254.1(2), the person acquiring the single unit residential complex or residential condominium unit must be an individual.

The amount of the transitional rebate is determined by the following formula:

where

A is the amount determined by the following formula:

where

B is the amount of the new housing rebate that the individual is entitled to claim under subsection 254.1(2).

Example 23

On April 20, 2006, an individual enters into a purchase agreement in writing with a builder to purchase a single unit residential complex situated on leased land. Construction of the complex is substantially completed on July 29, 2006, and the builder gives possession of the complex to the individual on August 1, 2006. Under the same agreement, the builder makes an assignment to him of the leasehold interest in the land that forms part of the complex. The complex is situated in a non-participating province.

The consideration for the sale of the building part of the complex and other appurtenances that form part of the complex is $300,000. On the day possession of the complex is given to him, the fair market value of the entire complex (i.e., building and land) is $425,000. The individual will use the complex as his primary place of residence and he is entitled to claim a new housing rebate under subsection 254.1(2).

The builder is deemed to have made a supply of the complex when the builder gives possession of the complex to the individual (i.e., August 1, 2006). Although the supply is deemed to be made on or after July 1, 2006, the builder is required to account for GST/HST at 7% calculated on the fair market value of the complex, since the agreement was entered into on or before May 2, 2006. For more information on determining the rate of tax that applies in respect of the self-supply, see Part III of this bulletin, “Deemed Supplies”.

Given that GST applied to the deemed supply at 7%, and the agreement was entered into before May 2, 2006, the amount of the new housing rebate is calculated based on the wording of subsection 254.1(2) prior to the amendments made as a result of the reduction in the GST/HST rate. Therefore, the amount of the new housing rebate determined in accordance with that subsection is $3,707. For more information on calculating the new housing rebate, refer to GST/HST Memorandum 19.3.2, Rebate for Builder-Built Unit (Land Leased) or guide RC4028, GST/HST New Housing Rebate.

The new housing rebate must be taken into account in determining the transitional rebate. The amount of the transitional rebate is calculated as follows:

where

A = $300,000 × (100/107) = $280,374

B = $3,707

Therefore, $280,374 × {0.01 – [($3,707 ÷ $280,374) ÷ 7]}

= $280,374 × {0.01 – [0.0132 ÷ 7]}
= $280,374 × {0.01 - .0019}
= $2,271

Subsection 256.4(3) provides that if the supply by the builder of the single unit residential complex or residential condominium unit described above is made to two or more individuals, all of the individuals must meet the eligibility criteria for the transitional rebate and only the individual who claimed the new housing rebate under subsection 254.1(2) can claim the transitional rebate.

The conditions for claiming a transitional rebate under subsection 256.4(2) are similar to those under subsection 256.4(1). The difference is that the transitional rebate under subsection 256.4(2) is available where the person is not entitled to claim a new housing rebate in respect of the single unit residential complex or residential condominium unit.

The amount of the transitional rebate is determined by the following formula:

where

A is the total consideration payable for the building part of the complex or unit, including any other structure that forms part of the complex or unit, but not including consideration that can reasonably be regarded as rent for the land or an option to purchase the land, and

B is, if the complex or unit is situated in a participating province, 115 and, in any other case, 107.

Example 24

On April 20, 2006, a person enters into an agreement in writing for the purchase of a single unit residential complex situated on leased land from a builder. Construction of the complex is substantially completed on July 29, 2006, and the builder gives possession of the complex to the person on August 1, 2006. Under the same agreement, the builder makes an assignment of the leasehold interest in the land that forms part of the complex. The complex is situated in a participating province.

The consideration for the sale of the building part of the complex and other appurtenances that form part of the complex is $200,000. On the day possession of the complex is given to the person, the fair market value of the entire complex (i.e., building and land) is $300,000. The person will not use the complex as their primary place of residence and is not entitled to claim a new housing rebate under subsection 254.1(2).

The builder is deemed to have made a supply of the complex when the builder gives possession of the complex to the person (i.e., August 1, 2006). Although the supply is deemed to be made on or after July 1, 2006, the builder is required to account for HST at 15%, calculated on the fair market value of the complex, since the agreement was entered into on or before May 2, 2006. For more information on determining the rate of tax that applies in respect of the self-supply, refer to Part III of this bulletin, “Deemed Supplies”.

The amount of the transitional rebate is calculated as follows:

where

A = $200,000, and

B = 115

Therefore, $200,000/115

= $1,739

Subsection 256.4(3) provides that if the supply by the builder of the single unit residential complex or residential condominium unit described above is made to two or more individuals, all of the individuals must meet the eligibility criteria for the transitional rebate.

A transitional rebate may be available to a purchaser, calculated under paragraph 256.5(1)(g), in respect of a purchase of a multiple unit residential complex, or an addition to it, situated on leased land where the purchaser is not an individual who is entitled to claim a new housing rebate under subsection 254.1(2).

A person is entitled to claim a transitional rebate calculated under paragraph 256.5(1)(g) where the following conditions are met:

• the builder is deemed to have made a supply of the residential complex or addition as a result of giving possession:
  • of a residential unit to the person under the agreement for the purchase of the building, or part of the building, in which a residential unit forming part of the complex or addition is situated on leased land, or
  • of another residential unit forming part of the complex, or addition, to another person under a similar agreement entered into between the other person and the builder;
• if the supply is deemed to be made on or after July 1, 2006, the builder and
  • the person entered into a written agreement on or before May 2, 2006, or
  • a person, other than the purchaser, entered into a similar written agreement, in respect of the complex or addition on or before May 2, 2006, and that agreement was not terminated before July 1, 2006.

The amount of the transitional rebate is determined by the following formula:

where

A is the total consideration payable for the building part of the complex, including any other structure that forms part of the complex, but not including consideration that can reasonably be regarded as rent for the land or an option to purchase the land, and

B is, if the complex is situated in a participating province, 115 and, in any other case, 107.

Example 25

On May 15, 2006, a person enters into an agreement in writing for the purchase of a part of newly constructed multiple unit residential complex situated on leased land from a builder. Construction of the complex is substantially completed on July 29, 2006, and the builder gives possession of a unit in the complex to the person on August 1, 2006. Under the same agreement, the builder leases the land that forms part of the complex. The complex is situated in a non-participating province.

The consideration for the sale of the building part of the complex and other appurtenances that form part of the complex is $125,000. On the day possession of the complex is given to the person, the fair market value of the entire complex (i.e., building and land) is $375,000. The person is not entitled to claim a new housing rebate under subsection 254.1(2).

On April 30, 2006, the builder entered into a similar agreement with another person in respect of another residential unit in the complex and that agreement is not terminated before July 1, 2006. Possession of the unit under the second agreement is given on September 15, 2006.

The builder is deemed to have made a supply of the complex when the builder gives possession of a unit in the complex to the person (i.e., August 1, 2006). Although the supply is deemed to be made on or after July 1, 2006, the builder is required to account for GST at 7%, calculated on the fair market value of the complex, since the builder entered into an agreement with another person on or before May 2, 2006. For more information on determining the rate of tax that applies in respect of the self-supply, refer to Part III of this bulletin, Deemed Supplies.

The amount of the transitional rebate is calculated as follows:

where

A = $125,000

B = 107

Therefore, $125,000 ÷ 107 = $1,168.22

Subsection 256.5(2) provides that if the supply is made by the builder to two or more individuals, all of the individuals must meet the eligibility criteria for this transitional rebate.

The conditions for claiming a transitional rebate that is calculated under paragraph 256.4(1)(f) are similar to those under paragraph (c) above. The difference is that the transitional rebate calculated under paragraph 256.5(1)(f) is available where the purchaser is an individual who is entitled to claim a new housing rebate under subsection 254.1(2). Although subsection 256.5(1) refers to a person, in order to be entitled to a new housing rebate under subsection 254.1(2), the person must be an individual.

The amount of the transitional rebate is determined by the following formula:

where

A is the amount determined by the following formula:

where

B is the amount of the new housing rebate that the individual is entitled to claim under subsection 254.1(2).

Subsection 256.5(2) provides that if the supply by the builder is made to two or more individuals, all of the individuals must meet the eligibility criteria for the transitional rebate and only the individual who claimed the new housing rebate under subsection 254.1(2) can claim the transitional rebate.

Self-supply of a residential complex

To reflect the reduction in the GST/HST rate, a builder may be entitled to claim a transitional rebate in limited circumstances. A builder may claim a transitional rebate, where the builder sells:

In accordance with subsections 256.4(4) and 256.6(2), a builder must file an application for the transitional rebate under subsections 256.4(1), 256.4(2) and 256.6(1) within two years after the end of the month in which the tax in respect of the deemed supply is deemed to be paid by the builder.

A transitional rebate may be available to a builder of a single unit residential complex or residential condominium unit situated on leased land, calculated under paragraph 256.4(1)(f) where the following conditions are met:

• under an agreement, evidenced in writing, entered into on or before May 2, 2006, with the builder, an individual is the recipient of,

• possession of the complex or unit is given to the individual on or after July 1, 2006;
• the builder is deemed to have made a supply of the complex or unit under subsection 191(1) and is deemed to have paid GST/HST at 7% or 15% in respect of the deemed supply;
• the individual is entitled to claim a new housing rebate under subsection 254.1(2); and
• the builder is not entitled to claim an ITC or a rebate (other than a new residential rental property rebate under subsection 256.2(4) or the transitional rebate) in respect of the deemed tax paid on the self-supply.

The amount of the rebate is determined by the following formula:

where

E is the fair market value of the complex or unit at the time the builder is deemed to have made the supply,

F is the amount determined by the following formula:

where

and

G is the amount, if any, of the new residential rental property rebate the builder is entitled to claim under subsection 256.2(4).

Example 26

Following the facts in Example 23, on April 20,2006, an individual enters into an agreement in writing for the purchase of a single unit residential complex situated on leased land. Construction of the complex is substantially completed on July 29, 2006, and the builder gives possession of the complex to the individual on August 1, 2006. Under the same agreement, the builder makes an assignment of the leasehold interest in the land that forms part of the complex. The complex is situated in a non-participating province.

The consideration for the sale of the building part of the complex and other appurtenances that form part of the complex is $300,000. On the day possession of the complex is given to the individual, the fair market value of the entire complex (i.e., building and land) is $425,000. The individual is entitled to claim a new housing rebate under subsection 254.1(2).

The builder is deemed to have made a supply of the complex when the builder gives possession of the complex to the individual (i.e., August 1, 2006). Although the supply is deemed to be made on or after July 1, 2006, the builder is required to account for GST at 7%, calculated on the fair market value of the complex, because the agreement was entered into on or before May 2, 2006. For more information on determining the rate of tax that applies in respect of the self-supply, see Part III, of this bulletin, Deemed Supplies.

The amount of the new housing rebate, determined in accordance with subsection 254.1(2), is $3,707. Based on the facts in this example, the builder is not entitled to claim a new residential rental property rebate. For more information on calculating the new residential rental rebate, see Technical Information Bulletin B-087, GST/HST New Residential Rental Property Rebate or guide RC4231, GST/HST New Residential Rental Property Rebate.

The amount of the transitional rebate is calculated as follows:

where

E is $425,000

F = $300,000 × (100/107) = $280,374

G is 0

Therefore, ($425,000 – $280,374) × {0.01 – [$0 ÷ ($425,000 – $280,374)] ÷ 7}

= $144,626 × {0.01 – 0}
= $1,446

The conditions for claiming a transitional rebate for a builder under subsection 256.4(2) are similar to those under subsection 256.4(1) described above. The difference is that the transitional rebate under subsection 256.4(2) is available where the purchaser is not entitled to claim a new housing rebate in respect of the single unit residential complex or residential condominium unit.

The amount of the transitional rebate is determined by the following formula:

where

C is the fair market value of the residential complex or unit at the time the builder is deemed to have made the self-supply under subsection 191(1),

D is the total consideration payable for the building part of the complex or unit, including any other structure that forms part of the complex or unit, but not including consideration that can reasonably be regarded as rent for the land or an option to purchase the land, and

E is, if the complex or unit is situated in a participating province, 115 and, in any other case, 107.

Example 27

Following the facts in Example 24, on April 20, 2006, a person enters into an agreement in writing for the purchase of a single unit residential complex situated on leased land from a builder. Construction of the complex is substantially completed on July 29, 2006, and the builder gives possession of the complex to the person on August 1, 2006. Under the same agreement, the builder makes an assignment of a leasehold interest in the land that forms part of the complex. The complex is situated in a participating province.

The consideration for the sale of the building part of the complex and other appurtenances that form part of the complex is $200,000. On the day possession of the complex is given to the person, the fair market value of the entire complex (i.e., building and land) is $300,000. The person is not entitled to claim a new housing rebate under subsection 254.1(2).

The builder is deemed to have made a supply of the complex when the builder gives possession of the complex to the person (i.e., August 1, 2006). Although the supply is deemed to be made on or after July 1, 2006, the builder is required to account for HST at 15%, calculated on the fair market value of the complex since the agreement was entered into on or before May 2, 2006. For more information on determining the rate of tax that applies in respect of the self-supply, see Part III of this bulletin, “Deemed Supplies”.

The builder is not entitled to claim a new residential rental property rebate in respect of the tax deemed paid.

The amount of the transitional rebate is calculated as follows:

where

C = $300,000

D = $200,000

E = 115

Therefore, 0.01 × {$300,000 – [$200,000 × (100 ÷ 115)]}

= 0.01 × {$300,000 – $173,913}
= $1,261

A builder of a multiple unit residential complex or addition to it, situated on leased land, may be entitled to claim a transitional rebate under subsection 256.6(1) where the following conditions are met:

• under an agreement, evidenced in writing, entered into on or before May 2, 2006, with a builder of the complex or of an addition to it, the purchaser is the recipient of,
  • an exempt supply by way of lease (or an assignment of a lease) of the land forming part of the complex, and
  • an exempt supply by way of sale of the building or part of the complex or addition;
• the builder is deemed to have made a supply, under subsection 191(3) or 191(4), of the complex or addition as a result of giving possession of:
  • a residential unit in the complex or addition to the purchaser under the agreement, or
  • another residential unit forming part of the complex, or addition, to another person under a similar agreement entered into between the builder and the other person;
• the builder is deemed to have paid GST/HST at 7% or 15% in respect of the deemed supply of the complex or addition;
• the builder and
  • the purchaser entered into the agreement on or before May 2, 2006, or
  • another person entered into a similar written agreement, in respect of a residential unit situated in the complex or addition on or before May 2, 2006, and that agreement was not terminated before July 1, 2006; and
• the builder is not entitled to claim an ITC or a rebate (other than a new residential rental property rebate under subsection 256.2(4) or the transitional rebate) in respect of the tax paid on the deemed supply.

The amount of the transitional rebate is determined by the following formula:

where

A is the amount determined by the following formula:

where

B is the amount, if any, of the new residential rental property rebate the builder is entitled to claim under subsection 256.2(4).

Example 28

Following the facts in Example 25, on May 15, 2006, a person enters into an agreement in writing for the purchase of a part of a multiple unit residential complex from a builder. Construction of the complex is substantially completed on July 29, 2006, and the builder gives possession of a unit in the complex to the person on August 1, 2006. Under the same agreement, the builder leases the land that forms part of the complex. The complex is situated in a non-participating province.

The consideration for the sale of the building part of the complex and other appurtenances that form part of the complex is $125,000. On the day possession of the complex is given to the person, the fair market value of the entire complex (i.e., building and land) is $375,000.

On April 30, 2006, the builder entered into a similar agreement with another person in respect of another residential unit in the complex and that agreement is not terminated before July 1, 2006. The consideration payable by the person for the sale of the building part of the complex and other appurtenances that form part of the complex is $150,000.

The builder is deemed to have made a supply of the complex when the builder gives possession of the complex to the person (i.e., August 1, 2006). Although the supply is deemed to be made on or after July 1, 2006, the builder is required to account for GST at 7%, calculated on the fair market value of the complex, since an agreement with the other person was entered into on or before May 2, 2006. For more information on determining the rate of tax that applies in respect of the self-supply, refer to Part III of this bulletin, “Deemed Supplies”.

The builder is not entitled to claim a new residential rental property rebate in respect of the tax paid on the deemed supply of the complex.

The amount of the transitional rebate is calculated as follows:

where

A = $375,000 – [$275,000 × (100 ÷ 107)] = $117,991*

B = 0

Therefore, $117,991 × {0.01 – [(0 ÷ $117,991) ÷ 7]}

= $1,180

*Note that $275,000 is the consideration payable by all persons who purchased part of the multiple unit residential complex

Part VI – Other legislative amendments

Section 193

Section 193 generally provides for an ITC where a registrant makes a taxable supply of real property by way of sale in circumstances where the GST/HST paid on the last acquisition of the property, or on an improvement thereto, was not previously fully recovered by the registrant through an ITC or a rebate.

Subsections 193(1) and 193(2) are amended to make the ITC available under these subsections subject to subsection 193(2.1).

Subsection 193(2.1) only applies where a public sector body makes a taxable supply of real property by way of sale referred to in subsection 193(1) or (2) to another person with whom the public sector body is not dealing at arm’s length. Therefore, if the taxable supply under subsection 193(1) or (2) is made by a person that is not a public sector body or is made by a public sector body to a person at arm’s length from the body, the provisions of subsection 193(2.1) do not apply.

Where subsection 193(2.1) applies, the value of element A in the formula in subsection 193(1) which is used to determine the amount of the ITC and the ITC calculated under subsection 193(2) cannot exceed the lesser of:

where

A is the basic tax content of the property at the time,

B is the amount that would be the basic tax content of the property at the time if that amount were determined without reference to the description of element B in paragraph (a) and the description of element K in paragraph (b) of the definition of “basic tax content” in subsection 123(1), and

C is the tax that is or would, in the absence of section 167, be payable in respect of the particular taxable supply of real property made by way of sale.

The above formula requires that the amount of GST/HST payable in respect of the sale of the real property (or that would be payable in the absence of section 167) be multiplied by the ratio that the actual basic tax content of the property at the time of the sale bears to the amount that would be the basic tax content if amounts (other than ITCs) that the person was entitled to recover by way of rebate, remission or otherwise, or would have been so entitled if the property had been acquired for use exclusively in activities that are not commercial activities, were not deducted in calculating the basic tax content.

Subsection 193(2.1) applies to any supply in respect of which GST/HST becomes payable, or would have become payable in the absence of section 167, on or after July 1, 2006.

Example 29

On August 1, 2004, a charity that is registered for the GST/HST acquires real property and pays GST at 7% in respect of the acquisition in the amount of $21,000. The charity was entitled to claim a public service bodies’ rebate of $10,500 in respect of the acquisition of the property. On September 1, 2006, the charity makes a taxable supply by way of sale of the property to a person with whom the charity (i.e., a public sector body) is not dealing at arm’s length. The GST payable at 6% on the sale of the property is $18,000. The basic tax content of the property at the time of sale is $10,500. The basic tax content takes into account the rebate previously claimed by the charity. However, if element B in paragraph (a) of the definition of “basic tax content” were zero, the basic tax content of the property would be $21,000.

Subsection 193(1) provides that the value of element A in that subsection, which is used to calculate the ITC available to the charity as a result of the sale, is equal to the lesser of the basic tax content of the property at the time of sale and the tax that is or would be, if not for section 167, payable in respect of the sale. The value of element A in subsection 193(1) would be, in the absence of subsection (2.1), $10,500 (i.e., the lesser of $10,500 and $18,000). However, in this example, because the charity is selling the real property to a person with whom the charity is not dealing at arm’s length, subsection 193(2.1) provides that element A in subsection 193(1) cannot exceed the lesser of:

($10,500 ÷ $21,000) × $18,000

= $9,000

The amount of $21,000 in the above calculation represents the basic tax content of the property if element B in paragraph (a) of the definition of “basic tax content” were zero (i.e., if the charity was not entitled to claim the rebate of $10,500).

Therefore, element A in subsection 193(1) will be $9,000 and, when multiplied by the extent to which the charity was using the property otherwise than in the course of commercial activities immediately before the sale of the property, will be the amount of the ITC that the charity can claim for the reporting period in which tax on the supply of the property by the charity becomes payable.

Section 194

Section 194 imposes a liability for tax on a supplier who makes a taxable supply of real property by way of sale and incorrectly states or certifies, in writing, to the recipient of the supply that the supply is an exempt supply of a residential complex or an exempt supply of real property under sections 5.1, 5.2, 5.3, 8 or 9 of Part I of Schedule V to the Act.

As a result of the rate reduction, the amendment to section 194 removes the reference to 7%. For any supplies of real property to which section 194 applies and for which ownership and possession under the agreement for the supply are transferred on or after July 1, 2006, references to “7%” will be replaced by “the rate set out in subsection 165(1)”. As such, element A in section 194 will be 14% in respect of a supply made in a participating province and 6% in any other case.

Subsection 211(4)

Under subsection 211(4), where an election that was made under subsection 211(2) is revoked, the public service body is deemed to have made and received a supply of the real property by way of sale and to have collected as supplier and paid as recipient, tax on the deemed sale. The amendment to subsection 211(4) provides that, where an election is revoked and ceases to have effect on or after May 2, 2006, and the person does not cease to be a registrant on that day, the tax collected on the deemed sale and the tax deemed to have been paid on the deemed acquisition is equal to the basic tax content of the real property on the day the election ceases to be in effect. Prior to the amendment, the tax deemed collected and paid was based on the fair market value of the property.

The following example illustrates the application of subsection 211(4) before and after the amendment.

Example 30

On August 1, 2000, a public service body (PSB) purchases real property for $400,000 and pays GST at 7% in the amount of $28,000 in respect of the acquisition. An election under subsection 211(2) was filed by the PSB in respect of the real property on the day of its acquisition. Also, on the day of acquisition, the PSB began to use the property 25% in its commercial activities. The PSB is entitled to claim a PSB rebate of 50%.

Where the election under section 211 is revoked prior to May 2, 2006

On April 15, 2006, the PSB revoked the section 211 election and the fair market value of the property on that day was $500,000. The PSB continued to use the property 25% in its commercial activities. No capital improvements were made to the property from the day of acquisition until the day of revocation.

As a result of the revocation, the PSB is deemed to have made a taxable sale of the property immediately before the day of revocation and to have paid tax on the sale of the property on the day of revocation. The effect on the PSB is as follows:

Tax paid on original acquisition ($400,000 × 7%)	$28,000
ITC claimed on acquisition ($28,000 × 25%)	$ 7,000
PSB rebate claimed on acquisition [($28,000 – $7,000) × 50%]	$10,500
BTC on April 15, 2006 ($28,000 – $14,000)
Note: $14,000 is the amount that the PSB would have been entitled to claim as a PSB rebate if it were not engaged in commercial activities.	$14,000
Day of Revocation
Deemed tax collected 7% × $500,000 (fair market value)	$35,000
Subsection 193(1) credit ($14,000 × 75%)	$10,500
A × B
where
A is the lesser of:
(i) BTC ($14,000)
(ii) tax payable for deemed sale ($35,000)
B is the extent of use in non-commercial activities (75%)
Deemed tax paid	$35,000
Immediately following revocation
PSB rebate in respect of deemed tax paid on April 15, 2006 ($35,000 × 50%)	$17,500
ITC entitlement	Nil

Where the election under section 211 is revoked after May 2, 2006

Assume the same facts as above, but rather than revoking the section 211 election on April 15, 2006, the PSB revokes the election on August 15, 2006, and the fair market value of the property on that date is $500,000. The PSB continues to use the property 25% in its commercial activities. No capital improvements were made to the property from the day of acquisition until the day of revocation.

As a result of the revocation, the PSB is deemed to have made a taxable sale of the property immediately before the day of revocation and to have paid tax on the sale of the property on the day of revocation. The effect on the PSB is as follows:

Tax paid on original acquisition ($400,000 × 7%)	$28,000
ITC claimed on acquisition ($28,000 × 25%)	$ 7,000
PSB rebate claimed on acquisition [($28,000 – $7,000) × 50%]	$10,500
BTC on August 15, 2006 ($28,000 – $14,000)
Note: $14,000 is the amount that the PSB would have been entitled to claim as a PSB rebate if it were not engaged in commercial activities.	$14,000
Day of Revocation
Deemed tax collected (equal to BTC)	$14,000
Subsection 193(1) credit ($14,000 × 75%)	$10,500
A × B
where,
A is the lesser of:
(i) BTC ($14,000)
(ii) tax payable for deemed sale ($14,000)
B is the extent of use in non-commercial activities (75%)
Deemed tax paid	$14,000
Immediately following revocation
PSB rebate in respect of deemed tax paid [Footnote 1]	Nil
ITC entitlement	Nil

Section 257

Section 257, which applies to non-registrants, parallels section 193, which applies only to registrants. Section 257 generally provides for a rebate where a non-registrant makes a taxable supply of real property by way of sale in circumstances where the GST/HST paid on the last acquisition of the property, or on an improvement thereto since the property was last acquired, was not fully recovered by the non-registrant through a rebate.

Subsection 257(1) is amended to make the rebate available under that subsection subject to subsection 257(1.1).

Subsection 257(1.1) only applies where a public sector body makes a taxable supply of real property by way of sale referred to in subsection 257(1) to another person with whom the public sector body is not dealing at arm’s length. Therefore, if the taxable supply under subsection 257(1) is made by a person that is not a public sector body or is made by a public sector body to a person with whom the public service body deals at arm’s length, the provisions of subsection 257(1.1) do not apply.

Where subsection 257(1.1) applies, the rebate under subsection 257(1) cannot exceed the lesser of:

The above formula requires that the amount of GST/HST payable in respect of the sale of the real property (or that would be payable in the absence of section 167) be multiplied by the ratio that the actual basic tax content of the property at the time of the sale bears to the amount that would be the basic tax content if amounts (other than ITCs) that the person was entitled to recover by way of rebate, remission or otherwise, or would have been so entitled if the property had been acquired for use exclusively in activities that are not commercial activities, were not deducted in calculating the basic tax content.

Subsection 257(1.1) applies to any supply in respect of which GST/HST becomes payable, or would have become payable in the absence of section 167 on or after July 1, 2006.

Example 31

On November 20, 2003, a non-profit organization that is not registered for GST/HST purposes acquires real property and pays GST at 7% in respect of the acquisition in the amount of $10,000. The organization was entitled to claim a public service bodies’ rebate of $5,000 in respect of the acquisition of the property. On July 31, 2006, the organization, which is a public sector body, makes a taxable supply by way of sale of the property to a person with whom the organization, is not dealing at arm’s length. The tax payable on the sale of the property is $6,000. The basic tax content of the property at the time of sale is $5,000. The basic tax content takes into account the rebate previously claimed by the organization. However, if element B in paragraph (a) of the definition of “basic tax content” were zero, the basic tax content of the property would be $10,000.

Subsection 257(1) provides that the rebate that the organization may claim as a result of the sale is equal to the lesser of the basic tax content of the property at the time of sale and the tax that is or would be, if not for section 167, payable in respect of the sale. The amount the rebate under subsection 257(1) would be, in the absence of subsection 257(1.1), $5,000 (i.e., the lesser of $5,000 and $6,000). However, in this example, because the non-profit organization is selling the real property to a person with whom the organization is not dealing at arm’s length, subsection 257(1.1) provides that the rebate in subsection 257(1) cannot exceed the lesser of:

Therefore, the amount of the rebate under subsection 257(1) that may be claimed by the non-profit organization is $3,000 [($5,000 ÷ $10,000 [Footnote 2]) × $6,000].

Footnotes

[Footnote 1]

The definition of “non-creditable tax charged” in subsection 259(1) was amended to remove the tax deemed to have been collected under subsection 211(4) from the definition of that phrase. This means that, under the amendment, the PSB cannot claim a PSB rebate based on the deemed tax paid upon revocation under subsection 211(4). However, under the amendments, the PSB is still entitled to claim an ITC under subsection 193(1), to the extent that it is eligible to do so.

[Footnote 2]

This amount represents the basic tax content of the property if element B in paragraph (a) of the definition of “basic tax content” were zero (i.e., if the organization was not entitled to claim the rebate of $5,000).