Building or substantially renovating residential property to lease or occupy yourself

In some special instances, builders have to pay the GST/HST on the fair market value of a residential property they have constructed or substantially renovated. You will need to calculate the GST/HST owing if:

• you are a builder, and you claimed input tax credits (ITC) during the construction or substantial renovation;
• you have built or substantially renovated a residential complex, a residential condominium unit, or a multiple-unit residential complex, or built an addition to a multiple-unit residential complex; and
• you rent or occupy the property as a place of residence.

If you meet the above conditions, you are considered to have sold and at once bought back (self-supplied) the residential property at the later of:

• the time of substantial completion of the building; or
• when the first unit is leased to an individual, or occupied by yourself.

You will calculate the GST/HST you owe based on the fair market value of the real property at that time. The self-supply rules ensure that the GST/HST is charged on newly constructed or substantially renovated premises that you rent or occupy as places of residence before you sell them. The later sale of these used properties will usually be exempt from the GST/HST.

Self-supply rules also apply to residential condominium sales agreements that are terminated after the buyer has occupied the unit and before you register the condominium. You pay the GST/HST on the fair market value of the unit when the agreement terminates.

The self-supply rules do not apply when all of the following conditions are met:

• the builder is an individual;
• no ITCs have been claimed for the construction or renovation of the complex or acquisition of the land;
• after substantial completion, the builder or a relative of the builder occupies the residence for use primarily as a place of residence; and
• the residence has not been used primarily for any other purpose prior to being occupied by the builder.

Self-supply rules also do not apply to certain communal organizations when they construct or substantially renovate residences for their members. Nor do they apply to universities, school authorities, or public colleges when they construct or substantially renovate student residences. Special self-supply rules apply for government-funded residential buildings. For more information, see Subsidized housing.

You may qualify for a new residential property rebate. The rebate will go to the person who paid the GST/HST: the landlord for rental accommodation, or the lessor of the land for leased land. For more information, see Guide RC4231, GST/HST New Residential Rental Property Rebate.

Generally, you may be eligible to claim the provincial new residential property rebate if you qualify for the federal new residential property rebate for a rental property located in Ontario or BC and you paid the HST. To claim your provincial new residential property rebate, use Form RC7524 BC, GST524 British Columbia Rebate Schedule, or Form RC7524 ON, GST524 Ontario Rebate Schedule. For more information, see Ontario new residential rental property rebate or BC new residential rental property rebate.

Transitional rules for the HST in Ontario and BC could apply to certain transactions for housing that straddle the July 1, 2010 implementation date. For more information, see Housing.

A retail sales tax (RST) transitional new housing rebate - Ontario and a provincial sales tax (PST) transitional housing rebate - British Columbia is available for new or substantially renovated housing in those provinces in certain situations where the construction straddles the July 1, 2010, implementation date.

Effective January 1, 2008, the GST rate is reduced from 6% to 5%, and the HST rate from 14% to 13%. In certain cases, GST at 6% or 7% or HST at 14% or 15% will apply to the purchase of a new house even where ownership and possession are transferred after December 31, 2007. In this case, you may be entitled to claim a transitional rebate. For more information, see GST/HST transitional rebates.

Forms and publications

• Guide RC4231, GST/HST New Residential Rental Property Rebate
• Form GST524, GST/HST New Residential Rental Property Rebate Application
• GST/HST Memoranda Series Chapter 19-0, Special Sectors: Real Property
• Form RC7524 BC, GST524 British Columbia Rebate Schedule
• Form RC7524 ON, GST524 Ontario Rebate Schedule

Related topics

• Guide RC4028, GST/HST New Housing Rebate
• Form GST190, GST/HST New Housing Rebate Application for Houses Purchased from a Builder
• GST/HST Technical Information Bulletin B-092, Substantial Renovations and the GST/HST New Housing Rebate