HST Housing Rebate
The Harmonized Sales Tax Rebate (HST Rebate), offers a maximum allowable rebate of $24,000.00 to first time homebuyers as an incentive to purchase a newly built home.
When claiming the HST Rebate, the purchaser is usually given a purchase price that includes the total HST that is exigible (able to be charged) on the purchase, less the amount that the Canadian Revenue Agency (CRA) will allow as a rebate under the new housing HST Rebate Program. The total rebate is then assigned by the purchaser to the new home builder who will make the necessary arrangements to collect the HST Rebate from the CRA after having provided the builder a credit for the amount of the rebate.
How do you qualify for the HST Housing Rebate Program?
In order to qualify as a first-time homebuyer and be eligible for the rebate, the buyer must meet the following requirements:
- The buyer is not a non-resident of Canada as defined in the Income Tax Act (Canada).
- The new housing will be the primary residence of the buyer, or a relation of the buyer.
What constitutes a ‘primary residence’?
Primary residence implies a level of permanence and an individual can only have one primary residence.
Some of the factors the CRA will consider when determining an individual’s or family’s primary residence includes:
- the amount of time an individual stays at the residence;
- whether the residence is being used for mailing purposes;
- whether the occupier votes in the residence’s jurisdiction;
- whether the occupier’s children go to school in the area; and
- whether the occupier owns other residences.
The builder typically provides a personal undertaking to fulfil the HST obligations with CRA. However, issues have been arising where new homebuyers are claiming to be entitled to receive the HST Rebate but fail to meet the required CRA’s primary residence test and the HST Rebate refunds are denied to the home builder who has already given the credit for same to the new homeowner.
Can the HST Rebate be reassessed by the CRA?
Yes. The CRA has been provided with broad reassessment powers.
The amount of time that the CRA has to reassess an HST return is six years.
According to the Income Tax Act, the CRA has three years to send a notice of assessment once the HST return has been filed, followed by an extra three years if fraud is claimed. However, the CRA may, at any time, make an assessment if fraud, negligence, misrepresentation, or deceit has taken place. According to the Act, the CRA will likely have the power to investigate and assess tax if fraud has been found.
The limitation period to collect amounts owing is 10 years from the notice of assessment, which can subsequently be extended for multiple 10 year periods. There is no limit mentioned as to the length of time that the CRA can extend their collection period.
The CRA has taken the position to file claims against builders, who provide an undertaking for the HST Rebate, and purchasers who claim to be first time homebuyers but do not qualify for the HST Rebate.
There is no easy solution to this problem. Builders hope to provide a lower purchase price in an attempt to attract more customers, while buyers hope to purchase a new family home and not have to deal with filing for the HST Rebate. However, because of the increasing level of non-qualifying purchasers, builder may require that each purchaser files on their own for the HST Rebate, leading to an initial higher purchase price.
For more information about the HST Rebate Program, or any other home buying legal questions, contact the experts at Brown Beattie O’Donovan. We’ll be happy to help you.