Explaining the Details of the HST Rebate Process for New Real Estate

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How does the HST Rebate for real estate work on the provincial and federal levels?

 
The HST New Housing Rebate allows buyers of new construction to reclaim some of the federal portion of the HST, which is 5% in Ontario. For homes with a base price (exclusive of any HST or rebates) up to $350,000, Purchasers may recover a rebate of 36% of this 5% federal portion. The rebate portion declines on a weighted scale for purchase prices between $350,000 and $450,000. If the base price is or exceeds $450,000, there is no federal portion to the rebate.
 
For the remaining 8% of the HST, which is the Ontario rebate portion, purchasers may recover up to 75% of the 8% provincial HST up to a maximum of $24,000. Unlike the federal portion, the amount of the provincial portion of HST rebate does not change with purchase prices over $350,000.00. The provincial portion of the rebate simply does not apply to any purchase price over the $450,000 mark, therefor maxing out the provincial portion of the rebate to $24,000.00.
 
The calculations for the HST rebate schedules become very complicated and CRA has released a 74-page manual with instructions of how to file for one’s HST Rebate. If you are in need of assistance, please call us at HST Relief. We have filed thousands of HST rebates and recovered millions of dollars for real estate investors across Ontario.
 
HST applies to all new construction purchased from a vendor or builder. The term "vendor” generally includes a person in the business of constructing or substantially renovating homes for sale, but may also include:
  • a manufacturer or vendor of a mobile home or floating home that is purchased new;
  • a person who buys a previously unoccupied new home or condo for resale;
  • a person who acquires an interest in a house while the house is under construction or substantial renovation and completes or engages another person to complete the construction or substantial renovation; or
  • a person who has converted a non-residential property into a residential property without substantially renovating it
When a new build home, townhome or condo is purchased from a developer, buyers often assign the right to be HST rebate over to their builder. The builder will apply for the rebate on the purchaser’s behalf, as the builder will cover the HST for the purchaser upon closing. Builders are very careful about this scenario, as they are continuously audited by CRA. If you run into a problem with the builder not believing how you intend to use the property, give us a call at HST Relief. We have helped many clients through these situations.
 
Do you qualify for the HST Rebate? Below is a list of conditions real estate buyers must meet in order to qualify for the HST rebate:
  • One must have bought a new or substantially renovated house from a developer and HST was due on closing;
  • If the builder sold the purchasers’ the house and related land on which the house is located under the same written purchase agreement;
  • If the purchasers signed a purchase agreement and it was intended to be the primary place of residence for the purchasers or their immediate relations;
  • If ownership of the house is transferred to the purchasers after construction or substantial renovation (defined as 90% renovated, to the studs) is completed;
  • If no one has occupied the new construction before possession by the purchasers; and
  • If the purchasers or their relations are the first to occupy the home after substantial renovation (defined as 90% renovated, to the studs).
For the builder to apply the New Housing Rebate to a purchaser(s), they (all) must be using it as a primary residence. Otherwise, one of their immediate family members may move in as well, as defined by:
  • Immediate family members related by blood, including children, parents and siblings but excluding other relatives such as aunts/uncles, nieces/nephews or cousins
  • Family members related by marriage, common-law partnership or adoption that are defined by the Income Tax Act

How does the New Residential Rental Property Rebate work?

 
The NRRP Rebate is not credited to the buyer on closing by the builder and the investor must pay the portion of HST due on closing. The investor of new construction must file with CRA for the NRRP Rebate within 2 years after final closing of the property. The rules for eligibility are generally the same as listed above, with the addition that the purchaser must prove that they are using the property for rental income and provide a 1 year lease. CRA has many loopholes to deny the HST rebate in these cases, so it is important that investors are well educated on the process. Please call us at HST Relief for free consultation on how to avoid the pitfalls in your rebate application and to have HST Relief file your HST Rebate. As always when dealing with the CRA, you want to fully understand the implications of your filings to avoid future audits and tax vulnerability. For more online reading, check out our clients’ FAQs with our team’s detailed answers posted here.

Investment properties line of credit (loc) in Canada

Can I get a line of credit to help me with some of the expenses and HST and other closing costs for my new investment income property that I purchased in Ontario?

Answers

By HST Relief (Admin)
Technically, the schedule A banks are not mandated to lend for tax-related purposes, which means that a bank will not provide a line of credit to cover the HST due on closing.  Mortgages can not be increased to include things like closing costs and the HST due on closing either. Often times, it is a condition of the bank that the source of funds not be from a line of credit for closing costs.
 
Luckily, our company, HST Relief: Rebate & Loans, will offer loans for the $17,000 - $29,000 an investor owes in HST on final closing of the property.  The process works like this: we determine the exact amount you will owe on closing, qualify you for the loan and collect some documentation, then we will send the funds to your real estate lawyer's trust account to be paid out to CRA on the final closing date.  The day after closing, we will file for the HST rebate, get your money back and use this to pay off the loan we provided you.  It is a short term loan that allows you to close on your property without putting the $17,000 - $29,000 HST rebate amount upfront on closing.
 
Give us a call for more information: 1.866.832.1990 or email us at: info@hstrelief.ca
 
 

HST rebate forms

Where do I find the forms to file for an HST rebate?

Answers

By HST Relief (Admin)
The forms can be found on the CRA website along with a 74-page instruction manual.  If you have questions about qualifying for the rebate, what supporting documentations to submit, or how to correctly complete the forms, call us.  We offer HST rebate filing services for a very small fraction (about 2.5%!) of your rebate amount. Take comfort in our service knowing that you are filing correctly and will receive your cheque for $17,000 - $29,000 without stress.
 
1.866.832.1990 or info@hstrelief.ca
 

HST Rebates and expensive homes over 1 million in the Greater Toronto Area

My father-in-law bought a preconstruction house for 1.5M in Richmond Hill.  He think he may not live there but instead rent it and use it soley as an investment.  However, we heard that properties over 1 million dollars don't qualify for the HST Rebate.  If that's true, then should he just plan to move in and make it his primary residence?  

Answers

By HST Relief (Admin)
It's not true that properties over 1M do not qualify for any HST rebate.  It is true that at the mark over 450k, houses no longer are eligible for the Federal portion of the HST in rebate form.  Essentially, any house over $450,000 will have a HST rebate amount of $24,000, which is the maximum Provincial amount.  Now, usually builders will include the HST minus the rebate amount in the sticker price for which you sign the purchase agreement.  So, if you are paying the HST on closing because the house will be an investment property, be sure to get a 1 year lease.  For this 1M home, you will owe $24,000 on closing in HST and you can get the $24,000 back with your 1 year lease by filing for the rebate.
 
Call us to put together your rebate filing or to inquiry about further questions: 1.866.832.1990  or info@hstrelief.ca
 

Wouldn't have closed my financial district BOND condo with you!

Thanks to HST Relief for helping me close my condo at Peter and Adelaide in the financial district of Toronto.  The condo called BOND is lovely and I'm really excited about owning my first investment condo.  It's been a great financial decision, but I couldn't have dealt with the HST without your help.  I have you to thank for getting my investment secured!

HST and purchasing under a numbered company

Hello,
 
My real estate agent told me that if I purchase a new condo with her and close it in a company name, that I will not owe any HST on closing.  Is this true?  Please confirm as it will be a large part of my decision to purchase this investment condo in Toronto.  Thank you.

Answers

By HST Relief (Admin)
No, this is not true.  Sadly, there is a lot of misinformation floating around out there on the subject of HST as applied to new construction. 
 
The only time that there is not a portion of HST due on the closing of a new construction property is if it will be used as your place of residence, or as your primary residence, as termed by CRA.  Generally, you would not close your primary residence in a numbered company or a holding company.  Usually, investors use holding companies to close their investment properties in.  However, just because you close a new build investment property in a holding company's name, does not mean that you escape the HST.  In fact, you will absolutely owe the rebate portion on closing and then you can file for an HST rebate to recover this money you paid.  An important note here is that you need to make sure you get the appropriate assignment from the builder if you are going to be closing the investment property in the company's name, and the original Agreement was made in your personal name, so that the name on title and the Agreement of Purchase and Sale match.  If not, in theory, CRA can use this as a reason to deny your rebate.
 
Call us with additional questions or concerns and inquire about our HST rebate filing service info@hstrelief.ca and 1.866.832.1990.

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