What Is The NRRP Rebate?
NRRP: New Residential Rental Property Rebates In Alberta
The New Residential Rental Property Rebate NRRP is a federal rebate that is available across Canada to purchasers of new construction or substantially renovated residential rental properties such as houses, townhouses and condominiums to recover a portion of the GST paid.
In the province of Alberta, because there is no provincial sales tax or HST, the rebate applies only on the 5% federal GST. The rebate is available for eligible newly constructed or substantially renovated residential rental properties with a Fair Market Value of less than $450,000 and eligible applicants may recover up to 36% of the federal GST paid, subject to the applicable rebate limits. When we are talking about a substantially renovated property it generally means a property that has 90% or more of the interior of existing home that has been removed or replaced, and that excludes certain structural components.
Fair Market Value (FMV) is typically the value of the property at the time that the ownership is transferred. For newly build homes purchased from a home builder, this is usually the purchase price before GST.
Who Is Eligible For The NRRP Rebate?
To qualify, an individual must purchase a newly constructed or substantially renovated residential property with the intention to rent it out on a long-term basis. This will include buying a new house, condominium, townhouse or similar residential property from a builder, or constructing or substantially renovating a residential rental property and the GST must have paid (or self-assessed it, where applicable). The property must be rented to a tenant who will use the property as their primary place or residence and in addition must expect the tenancy terms to be at least on year. A signed one-year lease is the recommended way to demonstrate that this requirement has been met.
You will not qualify if you purchase the property for your own personal use or as your primary residence. If the tenant does not use the property as their primary residence, or if you use the property for short-term rentals such as VRBO or Airbnb. Short term rentals or accommodations generally do not qualify because the property is not being rented as the tenant’s primary residence.
The rebate is available to individuals, partnerships and corporations that meet CRA’s eligibility requirements.
Rebate Amount
Standard NRRP, provides a rebate of up to 36% of the GST paid, subject to the property value threshold and maximum rebate amounts. Under traditional rules, the rebate will gradually phase out as the property’s Fair Market Value (FMV) increases and is generally unavailable once the value reaches $450,000.
Required Documentation
When you are submitting an NRRP claim, you should provide the purchase and sale agreement, the statement of adjustments, signed residential lease agreement, closing documents and proof that the property is being used a long-term residential rental. It is recommended that you keep a copy of all of these documents for at least 6 years as CRA may audit rebate claims and if it is requested you will need to provide proof for your claim.
How Is The Rebate Calculated?
The amount of your rebate will depend on several factors. The amount of GST paid, the fair market value of the property, whether the property qualifies for the NRRP, the applicable maximum rebate limits that are established by the CRA.
Calculation Example
- Fair market Value (FMV): $325,000
- GST Paid (5%): $16,250.00 (325,000 x 5%)
- Rebate Calculation: $16,250.00 x 36% = $5,850.00
- Total refund: You will receive $5,850.00 back since the Fair Market Value is below the $350,000 threshold and under the $6,300 maximum
How Will I Receive My Rebate?
Applications are generally submitted using CRA form GST524 (New Residential Rental Property Rebate Application). Once the CRA reviews and approves your application, your rebate will typically be issued by the following: via Direct Deposit, if you are registered for direct deposit with CRA or the cheque mailed to your address with the CRA. CRA’s processing times will vary depending on the complexity of the application and whether or not they may require further documentation.
When Should I Apply?
As a rule of thumb, you should apply after the property has been rented to a long-term tenant. Applications can be submitted through the CRA’s website. There are certain reasons why your claim may get denied, if you rent the property as a short-term rental, or if you apply before securing an eligible long-term lease, if you miss providing any supporting documentation, if you are claiming the GST new housing rebate instead of the NRRP or if you calculate the rebate amount incorrectly. If your application is submitted after the filing deadline or the property does not meet the CRA’s eligibility requirements.
Applications typically must be filed within two years of the date ownership transfers (or another applicable CRA deadline depending on your unique circumstances).
How Our Lawyers Can Help
When you purchase a newly constructed rental property it involves more than simply closing the transaction. Our Lawyers at Kahane Law Office can assist with reviewing purchase agreements, ensuring the GST is properly handled on the closing date, advising whether you may qualify for the new Residential Rental Property Rebate. We work with purchasers to help identify potential issues before costly mistakes. Keep in mind that every situation is unique. This article is intended for general information only and should not be relied upon as legal or tax advice. Consult a lawyer or tax professional regarding your specific circumstances. The experienced real estate lawyers at Kahane Law Office are happy to assist you with your real estate transaction. You can reach us at 403-225-8810 or email us directly here.