Please comment on availability of the rebate for purpose-built housing rebates (PBHR) under 256.2(3.1)-(3.2) and the Real Property (GST/HST) Regulations in the following 2 scenarios:
- Assume a developer constructs a multi-unit residential complex (MURC) with an underground parking garage and surface-level parking. The MURC (Tower 1), which is not a condominium complex, is situated on top of half the garage. The other half of the land atop the parking garage is used as surface-level parking. The garage and Tower 1 are both built before September 13, 2023.
After September 13, 2023, the developer decides to build a new MURC (Tower 2) for residential rental purposes on the land currently used by the surface-level parking, atop the other half of the parking garage (i.e., the part that is not subjacent to Tower 1). When Tower 2 is complete, the garage forms part of the structure of both Tower 1 and Tower 2.
Assume Tower 2 will contain at least four self-contained residential units, will result in a self-assessment obligation under ss. 191(3) that is not an “excluded renovated housing supply,” and that all the units in Tower 2 are held for an “eligible purpose,” as those terms are defined under the Real Property (GST/HST) Regulations.
Will Tower 2 qualify for the PBHR? Specifically, will the construction of the new building be considered to begin after September 13, 2023 within the meaning of par. 256.2(3.1)(a)? Alternatively, would Tower 2 be considered an addition for purposes of ss. 191(4), and eligible for the PBHR on the basis that the construction of the addition begins after September 13, 2023? - Assume a developer applied for a permit to build two condominium towers atop the garage in Question (a). The developer completes the parking garage and completes the construction of the first tower (Tower 1) before September 13, 2023. Due to economic conditions, the developer does not begin construction of the second condominium tower. Instead, after September 13, 2013, the developer obtains a permit to build a MURC (Tower 2) in place of where the second tower would have been constructed.
Tower 2 will be used for long-term residential rental purposes. When Tower 2 is complete, the garage forms part of the structure of both Tower 1 and Tower 2.
Assume Tower 2 will contain at least four self-contained residential units, will result in a self-assessment obligation under ss. 191(3) that is not an “excluded renovated housing supply,” and that all the units in Tower 2 are held for an “eligible purpose,” as those terms are defined under the Real Property (GST/HST) Regulations.
Will Tower 2 qualify for the PBHR? Specifically, will the construction of the new building be considered to begin after September 13, 2023 within the meaning of par. 256.2(3.1)(a)?
CRA Comments
- 1) The PBRH rebate may be available for the GST or federal part of the HST payable in respect of a taxable supply of purpose-built rental housing, subject to certain conditions. One of those conditions requires that the construction of a multiple unit residential complex begins after September 13, 2023, but before 2031, and is substantially completed before 2036.
For purposes of the PBRH rebate, the CRA generally considers construction to begin at the time the excavation work related to a multiple unit residential complex begins. When construction begins is a question of fact and must be determined on a case-by-case basis.
In the situation presented, Tower 2 was not part of the initial development of Tower 1 and the underground parking garage. Where Tower 2 is constructed over the existing underground parking garage, excavation work may not be required. In general, construction of Tower 2 would be considered to begin at the time physical work begins on the existing underground parking garage in preparation for the development of Tower 2. It is a question of fact when this physical work begins. If further certainty is required, a request for a written GST/HST ruling may be submitted along with all relevant facts and supporting documents.
A PBRH rebate would generally be available in respect of each qualifying residential unit in Tower 2 where construction of Tower 2 begins after September 13, 2023, but before 2031 and is substantially completed before 2036, provided all other conditions for claiming the rebate are met.
- 2) As outlined in Question 8(a) of the 2022 CBA Questions and Answers, the CRA considers the construction of an addition to a multiple unit residential complex to be where the building envelope of the existing multiple unit residential complex is expanded. Whether Tower 2 is an addition to Tower 1 is a question of fact.
Factors to consider when determining if adjoining structures constitute one building or more than one building include the degree of structural connectivity, access between the two structures, whether there are separate municipal addresses with independent external exits/entrances, and whether each is functionally independent (for example, separate mechanical systems for heating, cooling, and electrical).
Where Tower 1 and Tower 2 are separate buildings, the builder would generally self supply for Tower 2 in accordance with subsection 191(3). If the degree of connectivity is significant such that Tower 2 is an addition that expands the building envelope of Tower 1, the self-assessment would generally be made in accordance with subsection 191(4).
A PBRH rebate would generally be available in respect of each qualifying residential unit in Tower 2 where construction of Tower 2 begins after September 13, 2023, but before 2031 and is substantially completed before 2036, provided all other conditions for claiming the rebate are met. - The PBRH rebate may be available for the GST or federal part of the HST payable in respect of a taxable supply of purpose-built rental housing, subject to certain conditions. One of those conditions requires that the construction of a multiple unit residential complex begins after September 13, 2023, but before 2031, and is substantially completed before 2036.
For purposes of the PBRH rebate, the CRA generally considers construction to begin at the time the excavation work related to a multiple unit residential complex begins. Obtaining or changing a building permit may indicate an intent to construct but is not the beginning of construction.
In the situation presented, we understand a developer applied for a permit to develop a property with two condominium complexes, Tower 1 and Tower 2, along with a new underground parking garage beneath both towers (initial development). The developer completed the underground parking garage and Tower 1 before September 13, 2023.
As Tower 2 was part of the planning for the initial development, we assume that the underground parking garage would have been designed and built to support the development of Tower 2. Based on this assumption, construction of Tower 2 would generally be considered to have begun at the time the site was first excavated for the underground parking garage, regardless of whether Tower 2 was developed as a condominium complex or as a multiple unit residential complex.
Therefore, where the excavation work related to the initial development began before September 14, 2023, a PBRH rebate would not be available for any residential unit within Tower 2 because the specific condition that the construction of a multiple unit residential complex must begin after September 13, 2023, would not be met.