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Filing Your Investment Property HST Rebate

What Is the New Construction Investment Property HST Rebate?

 
Are you an investor who has recently closed on a brand new built income property? Closing an investment property brings many significant costs, some of which can be recovered by filing for a rebate. One of these costs that may qualify for a rebate is the HST that was paid upon final closing and title transfer of the property.
 
Purchasers of newly built income properties are responsible for paying the full amount of HST due for the property.  To make matters even more complicated, some of the HST is built into the purchase price that the builder advertises and a portion of it is left to be paid on final closing and registration of the newly built property. The amount of the HST due typically amounts to be between $16,000 and $29,000. The income property HST rebate program, called the New Residential Rental Rebate Program by Canada Reveny Agency (CRA), is available for new build properties to allow investors to recover up to $29,000 of the HST paid for the final closing.
 
The HST New Housing Rebate program was developed by the provincial and federal governments. CRA is responsible for processing the applications and issuing rebates for the program. The forms for claiming the HST Rebate are complex and based on weighted calculations. It is often beneficial to enlist professional HST Rebate services to simplify the entire process.
 

Qualifying for the Income Property HST Rebate

 
The rules governing the HST can be confusing for first time income property investors. This confusion can lead to misunderstandings over the following:
  • Which purchasers of new construction real estate are required to pay the HST Rebate amount on final closing?
  • How does an investor qualify for the HST rebate from CRA?
  • When can investors apply for the HST rebate?
  • How long does it take to receive the HST rebate?
In order to qualify for the HST New Housing Rebate, investors must purchase a new build residential home or condominium from a builder in Canada and must be using it for long-term lease. An investment property that qualifies is a property that will be non-owner occupied and is being rented out with a 1 year lease to a tenant. Investors of properties that meet these criteria will be eligible to submit an HST New Residential Rental Rebate application to the CRA. Investors have up to two years from the date that the title is transferred to submit an application for the HST rebate.
 

Professional HST Rebate Services

 
There are HST consultant companies available that provide professional and reliable HST-related services for real estate investors. These services provide extensive verification of information, filing of paperwork, collection of the rebate and issuing of specific loans to cover the HST due on closing.
 
One of the most basic HST services available is the coordination and filing of the HST Rebate application. For a set fee (as low as $495) or alternatively, a percentage (as low as 10%) of the HST rebate claimed, investors can have the process of filing the HST New Housing Rebate completed by an experienced professional. The complex forms are not something the untrained want to tie their time up navigating.  CRA has issued a 74-page manual with instructions on filing the HST Rebate and the required supporting documentation.  If certain information provided does not meet CRA's guidelines, the HST Rebate could be denied or even trigger an audit of the property and the gain associated with the investment.  For these reasons, we highly recommend that you use a professional when submitting the filing for the HST Rebate.
 
Investors who are surprised by the HST due on final closing can take advantage of the loan services offered by HST Relief: Rebates & Loans. Investors who qualify for the HST Rebate with an acceptable credit rating can secure a short-term loan for the HST amount due. The HST Rebate Loan is typically in the form of an unsecured line of credit or as a second mortgage on the investment property. The investor pays a fee for the loan and filing services (as low as $1495). This service provides peace of mind for being able to afford the HST final closing costs, ensuring eligibility requirements are met for the rebate, and also the convenience of having the HST Rebate application filed by a professional.  It works as sort of a short-term bridge financing to close the property until CRA re-issues the HST Rebate back to the investor.
 
Take advantage of the professional HST Relief: Rebates & Loans services offered to receive your income property HST rebate and ensure a smooth final closing today. 

Able to apply HST Rental rebate

Is the below statement true?
 

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For your better understanding, it was recently brought to our attention through reliable sources that Canada Revenue Agency [CRA] has taken a different approach in handling applications on GST/HST New Residential Rental Property Rebate from Purchasers whose property is ‘leased back’ to their Builder.

 

Quote:

“CRA considers the landlord as a Builder where the purchaser/landlord deemed to have sold and repurchase the property (self-supply rules) at the fair market value at the time the property was rented out. In other words, CRA would expect to collect the HST on the full fair market value rather than the HST that the actual builder charged at the time of closing. In other words, CRA would expect from the purchaser the additional 13% on the difference between the purchase price and he fair market value. The purchasers would still be entitled to the HST rebate; however, that rebate would be applied towards the amount the purchasers would owe to CRA under the self-supply rules. If the increase in the fair market value is higher than the HST rebate, the purchaser would end up owing money to CRA and if the rebate amount is higher than the increase in the fair market value, the purchasers would get a refund.

 

Such rules are not intended to penalize investors since the primary purpose for most or all investors to invest in those condos is to lease the condo to individuals. The leaseback option was just an incentive from the builder to attract investors and it was just a temporary arrangement. The actual intent of the self-supply rules is to target Builders and other businesses trying to take advantage of changing the nature of the property and increase its fair market value, where they claim all the Input Tax Credits/HST paid on purchases on the related expenses but not remit the HST on the fair market value and that doesn’t apply to the investors in this case. Neither the builder nor the investor is engaging in any scheme to avoid remitting the right amount of HST to CRA. CRA auditors tend to be currently applying that policy of self-supply rules to all the investors and not willing to consider the actual intent of the self-supply rules and the intent of the investors in the given circumstances. Therefore, this issue would need to be brought up to the appeals by filing a Notice of Objection, once a Notice of Assessment is issued by the CRA. If the CRA appeals division doesn’t agree with the appellants, the issue would need to be dealt with at the Tax Court of Canada.  

It is important for purchasers to apply for the HST rental rebate otherwise they could lose the HST rental rebate amount yet still be liable for the HST amount owing under the self-supply rules if they are ever reassessed based on the self-supply rules. They may not be able to recover the HST rebate amount if the rebate application is not filed between 2 years from the date of closing. In addition to that, you cannot file a Notice of Objection if the Notice of Assessment was never issued. Investors would get the Notice of Assessment once they file the HST rental rebate application. Therefore, it is important to apply for the HST rental rebate so that the investors don’t lose their right to appeal.”

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Answers

By HST Relief (Admin)
Hello Edward,
 
You are correct, CRA does not look favorably on lease back program.  In order to qualify for the rental rebate the renter must be an individual an not a corperation.  This is grounds for a declined application. 
 
Please feel free to call me to discuss further.
 
Best,
 
Jeffrey Lemos
416-879-2181

Federal HSt rebate protion

By Nova
Inaddition to getting Provincial HST back, I wondering how much HST you get back for federal HST rebate.
I purchased a preconstruction house in 2014 Dec for $405,000.   I closed house in June 2016.  Now someone told me that if my house appreciated to greator that $450,000, say $470,000 (fair market value) at time of filing say example August 2016 for GST rebate, I will get $0 dollars rebate from the federal government is this true or not?  Would I get Federal rebate on my closing value I paid for ie $4005,000 (preconstruction cost)?

Answers

By HST Relief (Admin)
Good question.  Yes, we have a work around for this that we use for our clients. 
 
Both the Fed and Provincial portions of the rebate ask about the Fair Market Value.  It is true that if you had large appreciation on your condo or house, that CRA may use this to reduce your rebate.  Like I said, for the most part, we can avoid this for our clients.
 
If you'd like to use our services for your HST Rebate filing, give us a shout: 1.866.832.1990
 
Best wishes,
 
HST Relief Admin Team

How to pay for HST on an investment property?

I have read a bit about how I should expect to pay HST on my new investment property?  How and when is this HST due for an income property?  Do I pay it to CRA along with my annual income taxes?

Answers

By HST Relief (Admin)
Good questions.  The HST on your new construction investment income property is due at the time of final closing and registration of the property.  Part of the HST amount is build into the purchase price you signed for in your Purchase Agreement and part of it is due on closing (the exact proportions and amounts depend on the purchase price).  Your real estate lawyer will collect this HST at the time of signing.  It cannot be lent to you from a major bank, but our company HST Relief: Rebates & Loans can provide you an HST loan to close your investment property.  The process works such that we release the funds to cover your HST and then file for your HST Rebate.  The loan is then paid in full when you receive your HST rebate.  Call us for more information: 1.866.832.1990  or email us at info@hstrelief.ca
 
 

How is HST applied to the purchase price of new construction?

There are a few units that I am thinking of buying.  How does the amount of HST that I have to pay differ if I buy a place in the range of $280,000 versus $450,000?

Answers

By HST Relief (Admin)
Hi there,
 
It's not a simple equation to figure out how much HST you will owe depending on the purchase price of your new condo, but it is generally weighted based on the purchase price.  First, if you will be using this property as your primary residence, then you will not owe any additional HST on closing (as the HST New Housing Rebate will be applied directly to your Statement of Adjustments) .  If you are purchasing the condo or new build property as an investment or for any other purpose, you will owe a portion of the HST on closing.  I'l give you a few examples of this case:
 
 - For a new build, non-primary residence purchase price: $300,000
  - Total HST is 13% - $39,000.  Your Purchase Agreement outlines that $16,756.65 is included in the purchase price and an additional $22,243.35 is due on closing. 
 
- For a new build, non-primary residence purchase price: $400,000
  - Total HST is 13% - $52,000.  Your Purchase Agreement outlines that $24,784 is included in the purchase price and an additional $27,215.80 is due on closing.
 
- For a new build, non-primary residence purchase price: $450,000 - * note that after the 450k price point, the rebate-able portion of HST maxes out at 24k
  - Total HST is 13% - 58,500.  Your Purchase Agreement outlines that $34,500 is included in the purchase price and an additional $24,000 is due on closing. 
 
Please call us to file your HST Rebate or if you have additional questions or concerns - with a 1 year lease in place with a renter, you may be eligible for the New Residential Rental Rebate to get your money back!  Cal us at 1.866.832.1990  or email me directly at brooke@hstrelief.ca
 
 

HST on my condo in Toronto

Hi there - I closed on a condo 8 months ago and recently sold it.  I got my HST rebate back a few months ago, but I am wondering what will happen now that I have sold it?  Thanks   

Answers

By HST Relief (Admin)
If you sell your condo within one year after closing, the CRA will likely consider this a gain that should be taxed as inventory.  The CRA will also likely claw back the HST rebate and have you pay it back since you sold the property within one year of it closing. 
 
Please keep in mind that having to pay HST on closing and file for the HST rebate only applies to new construction investment properties.    

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