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My Experience With the New Residential Rental Property Rebate (HST Rebate)

HST Rebate: background info:

I wrote about the HST issue a couple months ago, calling it the “Elephant in the Room” with respect to the pre-construction condo market. I wanted to follow up this post with my own personal experience with dealing with the HST rebates (New Residential Rental Property Rebate-NRRP) when buying a new condo for investment. In short, it was a surprisingly quick and painless process to get back my rebate money once I figured out all the forms and the calculations.

The photo above is of One Park West, or 260 Sackville Street. The building was recently registered and I own a unit in the building which happens to be the Smallest Condo in Toronto. I recently closed on the unit and as an investor-owner had to pay an additional amount for HST on final closing. Here is my story for getting that money back from Revenue Canada:

Note: APS= Agreement of Purchase and Sale

In order to qualify for the rebate, I had to have a tenant in the property and a signed lease for a minimum 1 year (which I did). All in all it only took just 40 days from the time I sent in my application to the time I received my rebate monies back in full. Quite contrary to some of the reports I have heard of it taking as long as a year to get your money back. If you have your paperwork in order and you complete the forms properly this seems to be the result you get. I even was paid some interest on my rebate amount (presumably taking into the account the time I paid it until the time I was paid it back).

HST New Condo Rebate: Additional Learnings

  • Provincial tax (PST) is the biggest portion of the rebate by far
  • Federal tax (GST) is the smaller one
  • Provincial rebate is 100% until Fair Market Value (FMV) hits $450K, then is zero after that
  • Federal rebate is 100% until FMV hits 350K, then reduces down to zero when you hit $450K
  • Therefore if your FMV is less than $350K you should receive 100% of your HST monies back. If your FMV is between $350K-$450K you will receive most of it back. If your FMV is greater than $450K you will receive zero back.

Potential Problems I see with the HST rebate process

  • If the FMV of your condo is $450K you will receive back more than $20K. If the FMV is $451K you will receive zero. What policy maker in Ottawa came up with this scheme??
  • FMV is still a conundrum to me. Who determines it? How is it determined? What happens if the government doesn’t agree with your FMV number?
  • FMV of your unit does not take into account what you will actually ‘net’ on your unit if you sold it at FMV (it does not take into account selling costs).
  • A better system might be to simply add an additional tax on investors who flip their unit after final closing as a percentage of their actual profit. Under the current system, you might both lose money on your sale (due to closing costs when buying and selling), and also have to pay tens of thousands extra in HST just for the ‘right’ to lose money on the transaction. Doesn’t make sense.
  • Is the government in the business of discouraging people from investing in real estate unless that real estate is priced below an arbitrary figure of $450K??
  • FMV is the crux of the calculations used to figure out if you qualify for the rebate. FMV is determined at the time that the HST is paid (at final closing in Ontario). The higher the FMV, the lower the rebate amount. Therefore I observed that it might be better for investors to actually pay the HST amount UP FRONT when buying a pre-construction condo, because this will result in a lower FMV and therefore a higher rebate amount!

Questions about the New Residential Rental Property Rebate (HST rebate)? Wondering if you qualify for the rebate or need help completing the application process with Revenue Canada? Leave a comment below.

October 2012 Edit: It is my understanding that if the FMV is greater than $450K, you will receive the maximum rebate amount up to the value of $450K which is $24K, then any amount over and above the $450K you will be responsible for paying the full HST rebate out of pocket.



66 Responses to “My Experience With the New Residential Rental Property Rebate (HST…”


  1. Is FMV bases on market value of the condo at registration or the purchase price per the APS?

  2. Andrew la Fleur

    good question. According to a person I spoke to at Revenue Canada, FMV is supposed to be based on “What you would be able to sell the unit for on the open market” at the time you paid the HST. This is rather ambiguous and raises many questions/concerns which I spoke about in the blog post…


  3. Awesome insight! So much more helpful hearing it explained by someone who went through it.

  4. Adam

    Why does a higher FMV = a lower rebate?

  5. Maxwell

    As an x-CRA appeals officer, I saw a few of this types of rebates in my workload… if the FMV was close or over the $350K mark (I worked prior to HST)… usually an appraiser from CRA would be bought in… and some portion of the rebate might be disallowed. If the person getting the rebate wanted to disagree they would have to hire an appraiser and go to tax court. As for the the $350-$450K arbitrary amount was set decades ago… and never had a built in mechanism to allow for inflation. Back in 1991 or 1996… the average house for middle class folk was well under $350K. Not so much anymore, but the amount was never adjusted. The building industry hasn’t really fought for the amount to be increased because they get their HST back through claiming ITC (input tax credits.) And… the odd citizen complaining about this rebate won’t get far because the average citizen has higher priorities, and won’t be marching/protesting to adjust this amount higher. (Because, think about it… if you can afford a new house or a rental property to earn more income… you can certainty afford to pay GST/HST, on the full value.) The government makes this process difficult so that people don’t claim what their entitled to… And.. then… worse is the deadlines… why would the government impose a 2 year deadline on filing this type rebate?… So that.. why… this process is nightmarish… and you give up. And in today’s economic climate… this might be something the government might phase out.

  6. Andrew la Fleur

    @Adam
    The rebates start to fade out after FMV=$350K, then become zero after FMV>$450K. Why these numbers? As Maxwell says in his comment, the numbers are completely arbitrary and were set 20 years ago and have never changed.

  7. Andrew la Fleur

    @Maxwell,
    Thanks for your insight. Very interesting comments and as I suspected-the $350/$450K numbers are arbitrary and were set a long time ago and need to be updated.

    I agree the process is frustrating and meant to discourage the average consumer from participating, however, when FMV=$449K, there is a very large sum of money on the line and so most will try to recover it. Also, as I pointed out, if FMV=$451K the rebate is zero which makes no sense at all when the average 2 bedroom condo is now priced around this number in Toronto.

    Do you have any insight from your experiences into what happens when an investor claims to be the owner-occupant when in fact they are not (in order to avoid the entire rebate process)?

  8. Adam

    @ Andrew. Thanks I wasn’t sure what u were referring to. I remember reading a lawyers blog about the history and reasoning behind the rebate program. If I remember correctly the reason why a rebate for an investor can’t be assigned back to the builder is because of a flaw or problem when the program was being created. Years after they created the rebate application process to address the concern. As far as the values they defiantly need to to be increased.
    A further complication I can see is for people who purchased assignments. Both pre 09 and post 09. Say someone bought a unit for 100k. The builder included the portion of the HST that is not part of the credit. Now if that unit on closing is worth 200k you probably will have to pay the nonrefundable tax on the increased 100k. Another concern will be how the builder treats the assignment.

    Did you have to apply for this rebate under a business name? Also 1 year lease from closing date may be a problem for those that rented it out early.

  9. Andrew la Fleur

    @Adam
    You don’t need a business number to apply for it, but it helps speed up the process apparently if you do have one. I don’t think they care when the 1 year lease starts, just as long as there is one in place

  10. Jenny

    Hi, Andrew: when you buy a 2 bedroom condo over $450k, you will get only the ontario portion rebate at $24k, you will not have gst rebate, but sure you will have pst rebate , i am not sure why you are saying the rebate will be zero if the FMV is $451k? Please explain:)

  11. Andrew la Fleur

    Jenny,
    My understanding is that if FMV is over $450K you get nothing back. you pay the full rebate portion as an extra cost at final closing. If you have other information please share it.

  12. Figsdawg

    a couple of issues here.

    Federal:
    the maximum federal rebate is where the property is valued @ $350,000 (rebate is 36% of 5% federal portion of HST or $6,300) for values between $350,000 to $450,000 this rebate is ground down; thus never being more than $6,300
    Provincial (Ontario)
    rebate is capped @ FMV’s of $400,000 (75% of 8% provincial portion or $24,000). provincial rebate is available for FMV’s > $400,000 or even $450,000 whereas the federal rebate is not.

    just as an additional FYI provincial rebates are slightly different in BC for the few months they have left with HST

  13. Andrew la Fleur

    @Figsdawg,
    So you are saying that if FMV is over the pre determined point, you still can get the maximum rebate allowable, but for the amount over the pre determined amount, some portion of the HST is fully payable? this is not how it was explained to me by the folks at CRA but I hope you are correct.

  14. Figsdawg

    Hopefully this clarifies things, there are two potential rebates available:
    The first is the Federal Rebate (maximum rebate of $6,300). This rebate is contingent on the FMV of the property. Once the proeprty value is over $350,000 the rebate will pay out less than $6,300 and is ultimately phased out to $nil when the FMV is $450,000
    The second is the Provincial Rebate (maximum rebate of $24,000). This rebate is not restricted in any way to the FMV of the property.
    A $1,000,000 property would yield a $nil federal rebate but still be eligible for the $24,000 provincial rebate.

  15. Amy

    @Figsdawg,

    Thanks for the clarification. Do we still get the provincial rebate if we rent our new house and the FMV of the house is more than $450,000 ?
    Thanks,

  16. Figsdawg

    @ Amy

    A new rental house would still eligible for the provincial rebate if the FMV of the house is $450,000.

    However, the provincial rebate would be capped at $24,000 ($400,000 x 8% provincial x 75% rebate).

    Sorry for the delay, tax season started early this year.

  17. Tammy

    Hi Andrew, thanks for the great post. It really helps as I walk through the rebate guides on CRA website. However, I have a couple quesions to clarify:

    1) Instead of 13% HST that we should worry about paying at closing, it is really the HST rebate amount which sums to 7.8% in your case. Worst case scenario, I have to add 7.8% to the cost of purchase,best case scenario, I get it all back. Is this logic correct?

    2) In an APS that I have at hand, it says “vendor and buyer agree that the purchase price includes HST, net of rebate”. Does this mean the builders are using current sales price to do the rebate calculation? Even if the pre-construction condo will be my primary residence 4 years from now at closing, if the FMV is greater than $450,000 by then, I may still end up paying part of the rebate back because the builder used the wrong value at its initial calculation?

    3) In the last paragraph, you had encouraged investors to pay the HST up front. How is this possible? The CRA guide has strict guidelines on when the HST tax is due (which is around closing time), hasn’t it?

  18. Andrew la Fleur

    @Tammy
    1) if you are buying for personal use and the developer says that hst is included in the purchase price, then you will never have to pay extra hst at closing
    2) developers build the rebates into their prices assuming the buyer is an end user. i’ve noticed just recently that some developers for the first time are including on their price sheets this statement, “prices include hst net of any purchaser rebates”. until now they have always just said, ‘prices include hst’ which is only true if the buyer is an end-user
    3) it’s probably not possible, but i’m simply saying that it would be more beneficial to the buyer to pay it up front because of how its calculated using FMV. FMV at closing is likely much higher than the price that was paid for the unit 3-5 years prior.

  19. Tammy

    Hi Andrew, thanks for the prompt reply. I am buying as an investor. So I am trying to figure out how much HST rebate should I expect to pay the builder at closing. In your case, did they just use the purchase price to calculate the rebate you owe to them?

    By the way, this rebate process for investor is really unfair. How come the process requires investors to use FMV but for end-users, they get to use purchase price? Do you know if it is a mistake the builders are making or does CRA actually specify different property values for different owner types?

  20. Angela

    Am going through this right now, very helpful to have your experience to help us through. However, I am a little curious how your received your entire tax paid back, when the form clearly stipulates you calculate 75% of the Prov, and 35% of the Fed amount, so that the claimant can never be getting it all back, regardless of FMV??

  21. Andrew la Fleur

    You only pay out a portion of the GST and PST in the first place, therefore when you go for the rebate you are getting a portion back too. FMV under $350K you get everything back that you paid is my understanding.

  22. Victor Vasquez

    Hi Andrew, I’m a bit confused. You are saying that you paid $12500 in HST and received back 100% of that amount?
    I also just closed on a new rental condo (already leased for 1yr) and am in the process of filing out the GST524 form.
    My scenario is $10K federal HST paid, $26K provincial HST paid. FMV is around $320K.
    However from this form I only get about $1400 (i’m assuming I fall into theType 6 calculation). Am i missing something?
    Thanks in advance for any feedback.

  23. Andrew la Fleur

    You must be doing something wrong with your math. Have you tried the online form that automatically calculates it?

  24. Victor Vasquez

    thanks for the response…no I have not.
    Do you have a link?

  25. Victor Vasquez

    I see I did some wrong math and did not fill in the Ontario provincial form. I get back almost $16K and I paid $26K in total HST(prov and fed). This number was confirmed by my real estate lawyer who files these for a lot of his clients (for a fee).
    Still not sure how you got 100% back. Federal only rebates 36% and Ontario 75%.

    Here’s my detailed process (using round numbers). Perhaps it will help others.

    1 br. condo unit for rent in the province of Ontario

    $204K purchase price (no HST)
    $10K (fed HST)
    $16K (prov HST)
    Total $26K HST paid (this info is in your Statement of Adjustments that your lawyer provides)

    GST524 form calculation for federal portion

    Type 6 application

    $26K x 5/13=$10K (line A)
    FMV = $310K (just used realtor.ca to find similar properties in the building currently for sale)
    $10K x 36%=$3600 (line D)

    Form RC7524-ON to calculate the Ontario rebate portion
    $26K x 8/13=$16K (line A)
    FMV=$310K
    $16K x 75%=$12K (line D —> put this value on form GST524 line G)

    Back to Form GST524 to input the Ontario rebate portion and calculate the total rebate
    Section D part II

    $3600 (line F)
    $12,000 (line G from form RC7524 calculation line D)
    Total of $3600 + $12,000=$15,600 (line H) (this is my expected total rebate)

  26. Andrew la Fleur

    @Victor,
    It seems like you paid way too much HST up front. You basically paid 13% on top of your purchase price. This is not right. You should probably only have paid around $16K and got back the full $16K. If your FMV is less than $350K, which it sounds like yours is, you should get back the full amount (assuming you meet all the rental criteria).

    My guess is that the developer screwed up the statement of adjustments and your lawyer who closed the deal never caught this mistake. I’d suggest you contact your lawyer and the developer to get this sorted out before applying for the rebate.

  27. Amir

    Andrew, thank you for sharing your experience.

    I’m quite new to the rebate topic but picking up bits and pieces in a hurry.

    We just got nailed by CRA asking us to refund the rebate with interest. Quite legitimate it seems since we rented it out right after the interim closing but illogical since now we have to give with one hand and take with the other. Hopefully we’ll take the same rebate amount as we paid.

    We had final closing in Feb 2011 and the builder applied for the rebate (guessing by the CRA letter) in May 2011. This was pre HST and the GST was 7%.

    The next steps for us are to refund the funds to CRA and apply for a New Residential Rental Property (NRRP) rebate.

    Some questions come to mind and any guidance would be immensely appreciated.

    Since we signed the rebate off to the builder, by declining the rebate, is CRA holding out on the builder? I’m assuming not since they’re asking us to refund. Right?

    Isn’t Victor’s figure (above) of $26K correct (almost)? 204,000 X .13 = $26,520. You commented that he may have paid more that he should have.

    With respect to Box B on GST524, is GST/HST payable on final closing? And is there a way to find the historical FMV of your unit?

    Can you apply for NRRP rebate right after remitting the due HST with the lease agreement, etc? Or is there a waiting period?

    Does the provincial component only come into play with HST? I only see the GST figure on our Statement of Adjustments. I presume it’s all federal.

    Going forward, we have another property where we’ve recently had interim closing and signed the HST rebate waiver. Should we ask the builder to rework the price (if possible) without HST, remit the HST ourselves and apply for the NRRP rebate?

    Thank you.

  28. Andrew la Fleur

    Hi Amir,
    because you have to pay the rebate back to the CRA after the fact, I’m not sure how you should proceed from here and whether or not you will qualify for the rebate at all. proceed with caution and consult a lawyer who is an expert in these matters. please come back here and let us know how it works out for you.

  29. Andrew la Fleur

    Victor,
    can you update us on what happened with your situation?

  30. Najeeb

    What is APS which is in the list of application include

  31. Rick

    Hi Andrew et all,

    First of all, I am new to NRRP so perhaps some of my questions are really basic. Please bear with me.

    I just completed an interim closing on a condo. Based on the contract, I am not allow to rent the property during interim occupancy however I requested builder to give me permission to lease. They said that I have to pay the HST rebate to them and then get it back from CRA. I have following questions:

    1. The value of the condo + parking + locker is 342K. They told me that I have to pay $25,300. Is this sound right? Should they include the cost of parking and locker in the calculation? What is the chances that FMV being over 350K and I don’t get the full rebate?
    2. Do I have to pay this money now or at the final closing?
    3. If I rent the property immediately, can I claim for the rebate now or I have to wait for final closing?
    4. I didn’t want to pay the occupancy fee from my pocket because I will not live there, is what I am trying to do and get permission to lease a right decision?
    5. Will renting the property during interim occupancy impact my chances of receiving full rebate from CRA?

    Sorry for many questions, I have a lot more in my mind but I guess based on the above I can answer the others myself.

    Thanks

  32. Andrew la Fleur

    @rick
    best to talk to a lawyer who is familiar with the rebates with these specific questions, or call CRA and talk to them directly.

  33. Figsdawg

    I’d also throughout that an accountant familiar with commodity taxes would be able to assist with filings as well.

    There are two basic types of rebates that both work out to the same rebate (36% of 5% federal portion + 75% of 8% provincial portion):
    1. new housing rebate (for yours or families own use)
    2. new rental property rebate
    For each i think that there are recapture clauses if the property is sold within 1 year where at least a portion of the rebate will be payable back to the CRA.

  34. Figsdawg

    throw out *

  35. Christine

    Hi Andrew,

    I am in the process of purchasing a new condo (like everyone else asking you questions) for rental purposes and wanted to ask if you could direct me to the link for calculating the fed and provincial rebate. My pruchase agreement states that I would be responsible for 6% tax untop of the purchase of $212,900, since the property is not for the purpose of the end user (being us). I have until Sept 20th to accept or waive the agreement and want to make sure that I am eligible for the rebate subject to meeting the CRA requirements. My manual calculations are all wrong.

  36. Bob

    My HST rental rebates took only 15 days:
    * Application with full support documents sent: Aug 29, 2012.
    * Rebates deposited directly to account: Sep 14, 2012.

    There was a long weekend (Sep 1- 3) in that period of time. If not, it would probably be even faster.

    Tips: make sure your application has all the support documents. And include the DIRECT DEPOSIT REQUEST form http://www.cra-arc.gc.ca/E/pbg/gf/gst469/gst469-10b.pdf if you want to have the rebates deposited directly to your bank account.

  37. Tan

    I bought the unit under my company name. If i rent it after closing can a corporation apply for HST rental rebate? from what I have read, only individuals can apply for this rebate.

  38. Stephen Pandelidis

    As I am about to close a condo I bought as an investment, and I read with great interest My Experience With the New Residential Rental Property Rebate (HST Rebate). However I would appreciate it if you clarified the following points: what is APS and what is the form designation for the NRRP Scedule for provincial rebate (Ontario). Also regarding the FMV, is this something that the CCRA scrutinizes closely?

  39. Andrew la Fleur

    Answer to a common question: does renting it out during occupancy affect whether you get the rebate or not? NO. this has no effect on the rebate process or eligibility. CRA doesn’t care when you rent it, the developer might, but the CRA doesn’t it seems.

  40. Don Wise

    Can Life Leases qualify for the rebate if they are rented out after being purchased?

  41. walter

    two people buy a condo , one is only allowed to claim new housing rebate which means that he must show proof that he will live there, but they are renting it out. I suppose that only one form either the new housing or the rental property can be used?

  42. kris

    Very useful information…the only difficult portion is FMV..
    My question is two fold—

    Is FMV include GST/HST portion?
    How to decide FMV of a new home – is document from land transfer is enough to justify FMV?

    Thanks,
    Kris


  43. Great insight. Thank you for sharing your experiences.

  44. polosock

    Good info Andrew. but calculations of 100% rebate back is not fully clear and unsure. I believe one does not get 100% rebate back and its only partial. I could not find online form on CRwebsite unless you are talking about commercial tax apps. GST524 clearly states the partila federal and ontario rebates back like Victor Vasquez did and think he has correct calculations. How cold one have paid way more HST.

  45. HOLDEN

    Hi, Andrew,

    I have seen lots of insights from you and the others – thanks!

    My question is regarding the designated usage of a new home/condo – if at the date of closing what we have in mind is to move in as end users but in a couple of weeks or months if we change our mind that we want to put up the home/condo unit for lease, how does CRA treat scenarios like this? Is there a minimum period for the end user?

  46. Ryan

    Hi, Andrew,

    I have seen lots of insights from you and the others – thanks!

    My question is regarding the designated usage of a new home/condo – if at the date of closing what we have in mind is to move in as end users but in a couple of weeks or months if we change our mind that we want to put up the home/condo unit for lease, how does CRA treat scenarios like this? Is there a minimum period for the end user?

    Comments are welcome. Thanks in advance.

  47. Ryan

    Andrew,

    One more question – when paying the HST upfront at the closing of a new home or condo, I am not understanding why isn’t it the full 13% (seen from the previous comments/cases) but rather it is something like 8%? It looks like calculated from the following: 6% x 5% + 75% x 8% = 7.8% (of course this applied to homes/condos’ FMV under $350k) – is this correct?

    Thanks again.

    Ryan

  48. Kuljeet

    Andrew, could you please point me in the direction of the ‘online rebate calculator”? Similar to some others here, the rental property i purchased was $462k and using the paper forms I calculate a federal portion of the rebate at $0; and a provincial return of $17k. I believe the later should be approximately 24k based on discussions above.

  49. Pat

    I just got the money after I sent in the application after 40 days.

  50. Bob

    To clarify NRRP rebate using Victor Vasquez’s example:

    Since FMV is under 350k I calculated that:
    204,000 (Purchase price without HST)
    230,520 (Purchase price with full 13% HST)
    214,608 is likely the advertised price from the builder which almost always has the HST rebate calculated ONLY for end user (all end users pay 5.02% of HST which again is already incl. in the advertised price)
    3672 – (Federal) – you get 36% back of 10200 (5% of total before HST)
    12240 – (Provincial) – you get 75% back of 16320 (8% of total before HST)
    15912 (Total return after adding fed+prov)
    So you’d basically pay 230,520 on closing and will get a cheque for 15912 which = 214608 (same as advertised price above)

    Hope that helps.

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