Regulations Amending the Real Property (GST/HST) Regulations: SOR/2025-76

Canada Gazette, Part II, Volume 159, Number 7

Registration
SOR/2025-76 March 6, 2025

EXCISE TAX ACT

P.C. 2025-279 March 6, 2025

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, makes the annexed Regulations Amending the Real Property (GST/HST) Regulations under sections 277^{footnote a} and 277.1^{footnote b} of the Excise Tax Act ^{footnote c}.

Regulations Amending the Real Property (GST/HST) Regulations

Amendment

1 Subsection 5(2) of the Real Property (GST/HST) Regulations ^{footnote 1} is replaced by the following:

Rebate of provincial component — New Brunswick

(1.1) Subject to subsections (6) and (7), if a person is entitled to claim a rebate under subsection 256.2(3) of the Act in respect of a taxable supply of a residential complex, an interest in a residential complex or an addition to a multiple unit residential complex, if the residential complex is situated in New Brunswick and if subsection 256.2(3.1) of the Act would apply in respect of the taxable supply of the residential complex, interest or addition if the references in paragraphs 256.2(3.1)(a) and (b) of the Act to “September 13, 2023”, “2031” and “2036” were read as references to “November 14, 2024”, “2028” and “2030”, respectively, the following rules apply for the purposes of subsection 256.21(1) of the Act:

• (a) section 47 of the New Harmonized Value-added Tax System Regulations, No. 2 does not apply in respect of the residential complex, interest or addition, as the case may be; and
• (b) the person is a prescribed person and the amount of the rebate under subsection 256.21(1) of the Act in respect of the residential complex, interest or addition, as the case may be, is equal to the total of all amounts each of which is an amount, in respect of each residential unit that forms part of the residential complex or addition and that is a qualifying residential unit of the person at the specified time — being the time at which the tax in respect of the residential complex, interest or addition, as the case may be, first becomes payable in respect of the purchase from the supplier (within the meaning of subparagraph 256.2(3)(a)(i) of the Act) or is deemed to have been paid by the person in respect of the deemed purchase (within the meaning of subparagraph 256.2(3)(a)(ii) of the Act) — equal to the amount determined by the formula

  A × B

  where

  A

  is the total tax under subsection 165(2) of the Act that, at the specified time, is payable in respect of the purchase from the supplier or is deemed to have been paid in respect of the deemed purchase, and

  B

  is the unit’s percentage of total floor space.

Application for rebate

(2) For the purposes of subsection 256.21(2) of the Act, an application for a rebate, the amount of which is determined under subsection (1) or (1.1), must be filed within two years after the end of the month in which tax first becomes payable by the person, or is deemed to have been paid by the person, in respect of the residential complex, interest or addition, as the case may be.

Coming into Force

2 These Regulations are deemed to have come into force on November 15, 2024.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

The Government of Canada has taken action to incentivize the construction of rental homes by removing the goods and services tax (GST) and the federal component of the harmonized sales tax (HST) from new rental housing, such as apartment buildings, built specifically for long-term rental accommodation. The policy has been implemented through a temporary 100% rebate of the GST, or the federal component of the HST, on new purpose-built rental housing (the Enhanced GST Rental Rebate).

On November 19, 2024, the Government of New Brunswick announced that the province would offer a temporary full rebate of the 10% New Brunswick component of the HST, which would generally mirror the Enhanced GST Rental Rebate. This commitment was reiterated in a December 9, 2024, provincial news release.

This provincial rebate, which New Brunswick is entitled to introduce under the terms of the HST agreement it had entered into with Canada (the bilateral Comprehensive Integrated Tax Coordination Agreement), would be federally administered. The Regulations are needed to implement this provincial decision.

Background

On September 14, 2023, the Prime Minister announced measures to incentivize the construction of rental homes by, among other things, removing the GST and the federal component of the HST on the construction of new apartment buildings for renters.

The Affordable Housing and Groceries Act, which received royal assent on December 15, 2023, amended Part IX of the Excise Tax Act (the Act) to enact framework legislation for a 100% rebate of the GST, or the federal component of the HST, for the taxable supply of purpose-built rental housing in respect of which construction begins after September 13, 2023, and before 2031, and in respect of which construction is substantially completed before 2036. Subsequently, the Real Property (GST/HST) Regulations, which were made on June 27, 2024, implemented the detailed rules needed to fully implement the Enhanced GST Rental Rebate.

The Canada-New Brunswick Comprehensive Integrated Tax Coordination Agreement (CITCA) is a separate federal-provincial agreement that sets out the parameters that govern the HST in New Brunswick. The HST is levied under federal legislation on the same tax base as the GST and is administered by the Canada Revenue Agency (CRA). Under the CITCA, New Brunswick is entitled to some elements of provincial tax policy flexibility, such as establishing the rate of their provincial component of the HST, limited point-of-sale rebates for their provincial component of the HST and the provincial rate of some targeted rebates (including rebates in respect of new housing and new rental housing).

With the passage of the Provincial Choice Tax Framework Act on December 15, 2009, Parliament approved the mechanisms to facilitate select changes in the operation of the provincial component of the HST by way of federal regulations. For example, the Provincial Choice Tax Framework Act puts in place a framework to accommodate any province’s decision to change the rate of the provincial component of the HST and the parameters of certain rebates that apply in that province. Federal regulations are therefore the appropriate means by which to implement New Brunswick’s tax policy flexibility in respect of rebates of the provincial component of the HST related to rental housing.

On November 19, 2024, and December 9, 2024, the Government of New Brunswick announced its intention to introduce a rebate of the 10% New Brunswick component of the HST on new purpose-built rental housing. To qualify for this federally administered rebate, a property must satisfy the conditions of the Enhanced GST Rental Rebate. The rebate would only be available, however, to qualifying purpose-built rental housing in respect of which construction begins on or after November 15, 2024, and before 2028, and in respect of which construction is substantially completed before 2030.

Objective

The objective of the Regulations is to implement the temporary rebate of the 10% New Brunswick component of the HST in respect of qualifying purpose-built rental housing. The Regulations are necessary for Canada to fulfill its obligations under the CITCA in respect of the application of the HST in the province of New Brunswick.

Description

The Regulations implement a rebate in respect of the provincial component of the HST for purpose-built rental housing situated in New Brunswick based on the criteria set by New Brunswick. The rebate would be available for purpose-built rental housing projects for which construction begins on or after November 15, 2024, and before 2028, and in respect of which construction is substantially completed before 2030. In general, the rebate must be claimed within two years from the date of purchase or substantial completion of construction.

Regulatory development

Consultation

The Regulations implement the decision of the province of New Brunswick to provide a rebate in respect of the New Brunswick component of the HST announced on November 19, 2024.

The Regulations are exempt from prepublication in the Canada Gazette, Part I, because the measures implement a matter of provincial tax policy, the detail of which was already announced by the Government of New Brunswick on December 9, 2024.

Modern treaty obligations and Indigenous engagement and consultation

No impacts have been identified in respect of the government’s obligations in relation to Indigenous rights protected by section 35 of the Constitution Act, 1982, modern treaties or international human rights obligations.

Instrument choice

Under the Act, the Governor in Council has the authority to make regulations related to the application of the GST/HST. The Regulations are a necessary and appropriate mechanism for Canada to fulfill its obligations under the CITCA to implement New Brunswick’s rebate. As such, no other instruments were considered.

Regulatory analysis

Benefits and costs

The Regulations formalize and give legal effect to the decision by New Brunswick to offer a rebate in respect of the New Brunswick component of the HST. As the proposal relates to an exercise of provincial tax policy flexibility under the Canada-New Brunswick CITCA, any cost is attributable to the Government of New Brunswick, and not the Government of Canada. The Regulations are necessary for Canada to fulfill its obligations under the CITCA.

The CRA will need to modify some forms and update guidance because of the Regulations. The incremental cost of this work is anticipated to be negligible and to be completed within the regular function of administering and enforcing the GST/HST system.

Applying for a GST/HST rebate is optional, with a goal of maximizing relief for eligible taxpayers in order to meet the intentions of the governments.

Small business lens

Analysis under the small business lens determined that the initiative would impact small businesses. Businesses wishing to obtain a rebate of the provincial component of HST paid must apply for the rebate. However, the Regulations implement a decision of the province of New Brunswick to provide a rebate in respect of the New Brunswick component of the HST and are necessary for Canada to fulfill its obligations under the CITCA with the Province of New Brunswick. This decision of the provincial government is outside the scope of the small business lens.

One-for-one rule

The one-for-one rule does not apply. The Regulations implement a decision of the province of New Brunswick to provide a rebate in respect of the New Brunswick component of the HST and are necessary for Canada to fulfill its obligations under the CITCA with the Province of New Brunswick.

Regulatory cooperation and alignment

The Provincial Choice Tax Framework Act puts in place a framework to accommodate any province’s decision to change the rate of the provincial component of the HST and the parameters of certain rebates that apply in that province.

The Regulations enable the implementation of the rebate in respect of the New Brunswick component of the HST in accordance with the CITCA between Canada and New Brunswick.

Effects on the environment

New Brunswick’s decision to provide a rebate in respect of the provincial component of the HST is a tax policy decision of the province and not the federal government. Any environmental impacts associated with this measure would be attributable solely to provincial policy decisions and not to changes made to the GST/HST regulations.

Gender-based analysis plus

New Brunswick’s decision to provide a rebate in respect of the provincial component of the HST is a tax policy decision of the province and not the federal government. Any gender-based analysis plus (GBA+) impacts associated with this measure would be attributable solely to provincial policy decisions and not to changes made to the GST/HST regulations.

Implementation, compliance and enforcement, and service standards

The Regulations will be administered and enforced by the CRA. This measure has a retroactive coming into force date of November 15, 2024, which is authorized under the Act.

Contact

Amanda Riddell
Sales Tax Division
Tax Policy Branch
Department of Finance Canada
90 Elgin Street
Ottawa, Ontario
K1A 0G5