The History of HST Real Estate Rebates in Canada

The History of HST Real Estate Rebates in Canada

HST stands for Harmonized Sales Tax – it’s essentially a combination of two taxes. The first tax is a 5% Federal Goods and Services Tax, which is commonly referred to as GST. The second tax is an 8% Ontario Provincial Sales T, commonly referred to as PST. In combination, the HST totals 13%.

Introduced across Canada by the Canada Revenue Agency (CRA), the HST was imposed on real estate transactions when purchasing a pre-construction condominium or home. Before the HST came into practice, Ontario real estate transactions were obligated to pay only the 5% GST.

The idea of an HST real estate rebate is for the federal government to refund a significant amount of HST on various types of real estate purchases (as defined by the program). Applicants must follow certain rules and regulations, and also abide by specific qualification guidelines.

new housing rebate ontario

There are several different purchasing opportunities for recovering HST on real estate:

  • end-users or investors who buy a pre-construction condominium or house
  • those who have purchased a newly built, not previously lived-in residence
  • those who have built a personal residence (or have dramatically renovated)

Although both end-users and real estate investors could be eligible for an HST rebate, there are two different avenues of approach for each. For end-users who plan to live in a new home or new condominium, they must apply for a rebate through the New Home Rebate Program (NHR).

The New Home Rebate Program (NHR)

Under this program, eligible applicants must occupy the property as a principal resident, which means living there for most of the time, and at least for the first complete year. In most situations, the property developer claims the NHR, and the buyer receives a “rebate” built into a discounted purchase price. Without living in the premises for at least the first year, purchasers may well be required to pay Canada Revenue Agency back the entire HST rebate amount.

Also important with the NHR, is to formally claim the new residence as a “principal” residence. It means changing over address details on all relevant documents (driving license and health card).

Under the NHR, purchasers could also receive an HST rebate when an immediate member of the family will live in the new home. This provision only applies to direct relatives, like parents, or grandparents, or husbands/wives). More distant relatives are not eligible here.

Residential Rental Property Rebate

Real estate investors who plan to lease a new home or condo after purchase, must apply for their HST rebate through the Residential Rental Property Rebate. These types of investors, including foreign nationals, are eligible for an HST rebate. They must provide a formal one-year residential lease agreement that proves the newly built premises will be leased to a tenant.  These investors must pay the required HST amount when purchasing, and will be reimbursed after processing.

Under the Residential Rental Property Rebate, investors who “flip” ownership of their property prior to one year of ownership will be required to pay the HST amount in full, and without getting a rebate. After the first complete year, the premises can be sold without sacrificing the rebate.

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