Buying a pre-construction property? Here’s how the HST rebate and NRRP rebate work

If you’re looking to purchase a pre-construction condo, you can benefit from the HST rebate and get a portion of the tax back. 

But depending on why you’re purchasing a property will affect which HST rebate you can apply for. In this article, we’ll explain two different HST rebate options and identify which one applies to different kinds of buyers: end-users and investors. 

End-Users: Apply for the HST rebate

Introduced in 2010, the Harmonized Sales Tax (HST) raised the tax on new home purchases from 5% (GST) to 13% (including GST + PST). However, the Government launched a program — known as the HST rebate — to reimburse some of the new home tax to make real estate less costly for new homeowners. 

Who can apply?

If you’re purchasing a new construction property that will be used as your primary residence, you will need to apply for the HST rebate (also known as the GST/HST rebate) with Canada Revenue. Under this type of HST rebate, homeowners can recover some of the GST (or the federal part) of the HST. 

What are the requirements?

When applying for the HST rebate, homeowners must meet the following requirements:

 

• You purchased a newly built condo from a builder or a fully renovated home from a private seller
• You will live in the property for at least one year
• The house is being purchased by yourself (If a relative is helping you with the downpayment are listed as a partial owner, they must also use the property as their primary residence to be eligible for the HST rebate)

How much rebate do homeowners get?

In Ontario, you will only get a rebate on the first $400,000 of the price of the home — so the maximum amount of rebate you can receive is $24,000.

How to apply for the rebate:

You can apply for the HST rebate within the first two years of occupation of the new condo. Normally, you can file for the rebate as soon as the builder registers the project, but you may want to wait to file as you put together all necessary documentation.

You’ll need to fill out the GST190 form to claim your rebate. You can also use this calculation worksheet to figure out how much refund you’re eligible for before applying. 

*The rules to this rebate program change often, visit the Government of Canada website to learn more about the eligibility criteria. 

Investors: Apply for the NRRP rebate

The equivalent of HST rebate for investors is the New Residential Rental Property (NRRP) rebate. Whether you’re a seasoned investor or just getting started in the real estate market, you can only get a rebate by applying for the NRRP. 

What is the NRRP rebate? 

This rebate was specially designed for investors or those who buy real estate properties for the sole purpose of renting them out and earning an income, or selling it within a year for a profit. 

Here’s a quick breakdown of the rules and requirements:

Who can apply?

Investors — both Canadians and foreign — can apply for the NRRP rebate if they make one of the following investments:

• Purchase a newly constructed or substantially renovated condo or house from a builder
• Hire someone to build new housing or add housing to an existing property
• Convert a non-residential property into a residential property
• Made an exempt lease or sublease of land to another individual

What are the requirements?

To be eligible for the rebate, investors must meet two important requirements:

• They must provide at least a one-year lease (along with an agreement) to prove that the new condo will be rented to a tenant
• Not sell the property within one year of purchasing it

How much rebate do investors get?

The entire process is slightly different than end-users because purchasers must pay the tax upfront to the builder at the time of closing and then apply for a full HST rebate after they receive the property is handed over to them and they rent it out. 

Investors may get a portion of the GST tax amount back:

1. a) If they’re purchasing a property that has a fair market value of $450,000 or less, they’ll get $26,000 back
2. b) If the property they’re picking up is valued at over $450,000, they’ll get a refund of $24,000 back. 

How to apply for the rebate:

You can apply for the NRRP within the first two years of purchasing a condo for investment. Because you pay the HST in advance to the builder, you can apply as early as the building’s registration is complete.

You can fill out the form GST524 New Residential Rental Property Rebate to apply by yourself for the rebate. However, hiring a real estate lawyer to apply on your behalf is recommended as the process demands much documentation and a lot of attention to detail. 

Considering you meet the conditions, you’ll receive a refund within four to six weeks of applying with Canada Revenue. 

*The rules to this rebate program change often, visit the Government of Canada website to learn more about the eligibility criteria. 

Is the builder charging you HST?

To reduce the selling price of a new condo or house, builders often incorporate the rebate into a new build’s listed price. In this case, the rights to the new housing rebate proceeds are transferred to the developer upon signing the purchase agreement. In exchange, they subtract the HST/NRRP rebate amount from the purchase price. Technically, the builder is lending money to the buyer because they’ll eventually recover it by applying for the HST/NRRP rebate. 

If I’m helping my clients find a new investment property, I try to find out if the builder is willing to deduct the HST rebate in the listing price. In recent years, this has become common practice in new projects as it lowers new condo prices for buyers and relieves them from the trouble of having to file for a refund. 

Frequently Asked Questions about the HST rebate:

If I’m an investor, should I apply for the HST rebate or the NRRP rebate? 

You can only apply for the NRRP rebate if you’re investing in a new condo to use it as an income property or to sell it within a year of possession for profit. To qualify for the HST rebate, you must be using the new property as your primary residence for one year. 

How long do I have to apply for the rebate?

If you fail to file for a rebate within the first two years after closing, you may no longer be eligible to receive the money-back.

Is the application process the same for end-users and investors?

Yes, they both apply to CRA. However, an investor can only apply for the NRRP rebate and the end-user will apply for the HST rebate. They will have their application denied if they apply for the wrong one, so it’s important to know if you meet all requirements when applying for one or the other. 

How much is the HST rebate in Ontario?
You can get up to  $24,000 for any new condo or home purchase in Ontario, regardless if you’re the end-user or an investor. If you’re an end-user, you will also get a portion of the GST rebate back. 

How long does it take to get the HST rebate? 

It takes anywhere from four to six weeks for the application to get approved and for you to receive the refund by the CRA. 

When you work with me, my goal is to help you find a new construction project that is the perfect fit for your short and long-term investment needs. My network includes a number of highly-skilled professionals and real estate lawyers that can help you file for the HST or NRRP rebate, so you don’t have to go through the trouble of putting together an application package by yourself. Get in touch today, if you need help connecting with a real estate lawyer to apply for the HST or NRRP rebate.