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Eligibility for the New Residential Rental Property Rebate

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Do you know if you’re eligible for the new Residential Rental Property Rebate? If you’re planning to invest in or rent your new property in Canada, then you may qualify for it – let’s find out.

In this article, we are going to answer all your questions regarding the NRRP rebate. So, read on!

New Residential Rental Property Rebate (NRRP)

The NRRP rebate applies to your new home or condo if it is bought, constructed or renovated as a rental property. The rental property must be bought or constructed for long-term residential use. Learn more about the new tax rebate when investing in a rental property in Ontario, Canada.

When purchasing a new apartment or rental house, the Ontario NRRP discount can only be applied for by the purchaser and not the seller. It adds an extra burden on those buying a new rental property because they must prepay the purchase amount, including HST, interest before the rebate.

Therefore, anyone buying a new house or apartment as a financial investment must apply for a rebate soon after signing the lease agreement with a tenant.

NRRP Eligibility

You need to pay GST/HST when you purchase a new or fully renovated residential property for rent from a builder. It is generally considered self-sufficient, and taxes are paid and levied based on the market value of the rented or attached property when renting out or living in the first residential unit.

The property’s fair market value must be less than $450,000 at the time of purchase to qualify for an NRRP debate. The fair market value must be less than $112,500 for land or a site in a residential trailer park.

An Ontario NRRP rebate may be available even if the property’s fair market value is $450,000 or more.

Yes, eligible

If you find yourself in any of the following categories, you may be eligible for GST/HST New Rental Housing Reimbursement (NRRP) rebate:

  • You’re the owner of a new build home fit for purpose as a rent property
  • As the landlord of a substantially renovated property for rent, you may qualify for the maximum rebate. A “Substantially Renovated House” means at least 90% of property interior is removed or replaced to qualify for the maximum rebate
  • You have bought a newly constructed rental property from a builder
  • You are a construction contractor. According to the self-sufficiency regulations, you are required to pay GST/HST because you sold the apartment to a person

No, not eligible

You may not be eligible for GST/HST New Rental Housing Reimbursement (NRRP) rebate if :

  • You purchased a residential property, and the GST/HST was not payable during the purchase. For example, you bought a property that tenants occupied at the time of purchase. So you did not pay GST/HST on it
  • You are a builder and have not made a taxable self-supply during the construction of a housing unit or addition to multiple units
  • You purchased or constructed a new house or made a substantial renovation to your existing home for use as your primary place of residence

What is Self-supply?

When a builder makes a taxable sale of a property and immediately repurchases that property, it is termed “Self-supply.” The Self-supply rules apply to builders irrespective of whether they are registered for GST/HST.

What is Fair Market Value?

The Fair Market Value(FMV) is the total value of a building, including the applicable land and all other construction used in the building. It is the highest price that you can get in the real estate market for your property. The FMV does not include GST/HST payable on FMV.

Applying for NRRP

After renting out the property, you have two years to apply for GST/HST rebates. If you build your own house, the application process can be confusing.

Therefore, it is best to consult an accountant or a lawyer or an HST tax rebate expert to assist you in completing the application process and tax refund calculation. You must understand how the NRRP rebate can impact the down payments, mortgages and payment options.

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Different NRRP rebate application types

You will fill one of the following NRRP rebate applications:

  • Type 6 for leasing of building and land
  • Type 7 for sale of building and lease of land
  • Type 8 for co-operative housing corporation units
  • Type 9A or 9B for the lease of land

Documents to include in the NRRP rebate application

You need to provide relevant documents when applying for an NRRP refund.

  • Purchase and sale agreement
  • Statement of adjustments for the purchase
  • Lease or rental agreement

Fill out the form, calculate your refund correctly, and submit the required documents with your claim. The Canada Revenue Agency(CRA) accepts copies of the required documents. The agency may delay the processing of your application or reject it if you furnish incorrect or missing information.

Don’t forget to keep a copy of the completed form. You must also keep all original receipts, invoices, written contracts, agreements, and other documents used to fill out the forms until six years after the end of the year to which they relate. The CRA may audit your claim and ask for your records.

The CRA may also ask you to refund your rebate if you claimed it at the time of purchase to rent out your property but fail to do so later. The NRRP rebate requirements state that investment property owners must sign a lease agreement to qualify for the rebate.

Conclusion

Real estate purchases are tricky and challenging, and buying a property for investment can be another complex task.

We recommend engaging with real estate experts, accountants, lawyers and a GST/HST expert to make your buying, selling, renting and rebate process smooth.

Preparing rebate applications and filling up the GST524 or the RC4231 forms can be overwhelming.

The rebate experts can make the application process easy and ensure that the necessary documents are submitted correctly and timely to claim your HST rebate on rental property.

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