GST exemption for new residential rental buildings

As of September 14, 2023, owners of new residential rental buildings will benefit from a complete exemption from the Goods and Services Tax (GST). Indeed, the Government of Canada has announced that it is enhancing GST measures for residential rental properties, including not only apartment buildings, but also student housing and seniors’ residences built for long-term rental. Under this new measure, landlords will benefit from a GST rebate rising from 36% to 100%, and will see the GST rebate phase-out thresholds abolished.

Coming into force of the measure

This new legislation came into force as soon as it was announced, on September 14, 2023.

Eligible new buildings

To qualify for the full exemption, however, the apartment building must meet certain criteria. The bonus applies to residential units:

  1. Are already eligible for the GST rebate in question;
  2. Located in buildings:
    • 90% for long-term rental;
      and
    • Contain at least four private apartments or at least ten private rooms or suites;

and

  1. Construction of which began between September 14, 2023 and December 31, 2030 and ends no later than December 31, 2035.

Work start and finish dates are still unclear, but we’ll keep you informed of any new developments in this area.

Permissible transformations

This bonus applies to buildings built specifically for long-term rental, but also includes buildings with other uses that are converted into residential rental properties. For example, if an owner converts an office building into an apartment building, he or she will be able to take advantage of this new legislative measure, provided all the above conditions are met. Conversely, buildings that are already used for rental purposes cannot benefit from this measure. This exclusion is intended to discourage “renovations”.

Conclusion

This recent measure will of course be clarified over the coming months. We’ll be happy to support you and help you with any questions you may have about this new incentive. Finally, we welcome the federal government’s efforts to ease the financial burden on developers as a first step towards revitalizing the construction industry and increasing the supply of housing in the province.

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