GST/HST Obligations and Rebates for Canadian Builders
This article provides a general overview of who qualifies as a “builder” under the Excise Tax Act
(Canada), R.S.C., 1985, c. E-15 (“ETA”), and outlines the GST/HST obligations that apply to
builders. It additionally highlights available rebates that may help reduce the associated tax
burden.
Who is a “Builder” Pursuant to the ETA?
The term “builder” is defined under subsection 123(1) of the ETA. The definition generally
includes anyone engaged in the business of constructing or substantially renovating a residential complex primarily for sale. In certain cases, the definition covers even those homes held for lease. The above examples presume that the construction or renovation is done in the course of a business or an adventure in the nature of trade. This broad definition can extend beyond traditional home builders to include casual or small-scale residential property renovators.
GST/HST Collection Obligations for Builders
The Canada Revenue Agency (“CRA”) imposes several obligations on someone who is
classified as a “builder.”
Builders are generally required to register for GST/HST and file periodic tax returns that report
the tax collected and paid. As part of these obligations, they must also ensure timely filing. They must also
properly collect and remit the appropriate GST/HST, and maintain accurate supporting documentation. However, small suppliers are generally exempt from these registration obligations pursuant to subsections 148(1) and 240(1) of the ETA.
A builder must charge, collect, and remit GST/HST on all taxable sales of new or substantially
renovated housing. In practical terms, when a newly built (or substantially renovated) home is
sold to a buyer, the seller is expected to add GST/HST to the sale price and later remit that tax to the Canada Revenue Agency. The builder must also maintain proper records and invoices to substantiate input tax credits, for GST/HST paid on construction costs, and to support any rebates claimed.
Self-Assessment
Further, there are rules in the ETA that require a builder to “self assess” GST/HST. Generally,
this self-assessment must be done on the later of (i) substantial completion of the property and
(ii) its occupancy by the builder. Should these self-assessment rules be triggered, the builder is
expected to determine the fair market value of the property at the triggering date and remit the
GST/HST owing. The subsequent sale of the property would generally be GST/HST exempt
pursuant to Part I of Schedule V of the ETA.
A builder who fails to charge GST/HST on a taxable home sale can later be assessed by the CRA
for the unpaid tax. This includes penalties and interest. The CRA can hold builders accountable for any uncollected tax. The average Canadian should be aware of these rules to avoid unintentionally making a taxable sale of their home. On many occasions, Canadian courts have upheld this concept. The idea is that taxpayers who repeatedly build or substantially renovate homes with an intention to sell are in fact builders who must charge GST/HST on those sales.
GST/HST Rebates for New Housing and Renovations
One silver lining for builders is the availability of GST/HST rebates on new or renovated
housing. Builders may also utilize “builder-processed” mechanisms, which generally allow a
builder to credit purchaser rebates directly to the buyer. These rebates can help offset GST/HST
obligations. Some key GST/HST rebate programs include:
- New Housing Rebate for Houses Purchased from a Builder (Form GST190; can be
- “builder-processed”)
- New Housing Rebate for Owner-Built Houses (Form GST191)
- New Residential Rental Property Rebate (Form GST524)
Taxpayers may find their housing rebate denied not only due to subtle factual disputes, but also
because of errors in legal interpretation, failure to satisfy statutory conditions, or procedural non-compliance. Successfully challenging a denial typically requires persuasive legal argumentation. It also requires careful interpretation of nuanced provisions in the ETA and strict adherence to deadlines for filing objections or appeals.
Get Professional Help with GST/HST
Navigating GST/HST rules in the construction and real estate industry can be complex. Taxpayer
Law is here to help. We have the expertise to assist taxpayers in responding to CRA audits and
appealing CRA assessments. Contact Taxpayer Law today for a consultation.
