On May 27, 2025, the newly elected federal government tabled legislative proposals1 to amend the Excise Tax Act (Canada) (ETA) to introduce a new goods and services tax (GST) rebate for first-time home buyers (FTHB GST Rebate). The new measures propose a full 5% GST rebate on eligible new homes priced up to CA$1 million, with a linear phase-out of the rebate for homes priced between CA$1 million and CA$1.5 million. No rebate is available for homes priced above CA$1.5 million.
A first-time home buyer (First-Time Buyer) may be eligible to the FTHB GST Rebate, if they:
- Buy a new home from a builder;
- Built, or hire someone else to build, a home on land they own or lease; or
- Buy share of the capital stock of a cooperative housing corporation.
This edition of the Indirect Tax Talks outlines the key features of the new proposed rebate and highlights important considerations for key stakeholders, including real estate developers.
Who is eligible?
To qualify for the FTHB GST Rebate, the First-Time Buyer must:
- Be at least 18 years old;
- Be a Canadian citizen or permanent resident;
- Acquire the property for use as their primary place of residence;
- Be the first to occupy the property as a primary place of residence after the construction or substantial renovation;
- Not have occupied a residential unit, as their primary place of residence, whether in Canada or abroad, at any time during the current and previous four calendar years, while owning:
-
- The residential complex in which the residential unit is located;
- The building, or a part of the building, containing the residential unit;
- In Canada, shares in a cooperative housing corporation that confer possession rights to the residential unit; or
- Outside Canada, an interest in a similar cooperative housing entity.
IMPORTANT: This last restriction applies to both the First-Time Buyer and their spouse or common-law partner. The FTHB GST Rebate is not available if either party fails to meet this last condition.
What properties qualify?
The FTHB GST Rebate will mainly apply to:
- A single unit residential complex (e.g., detached or semi-detached homes);
- A residential condominium unit; or
- Share of the capital stock of a cooperative housing corporation (providing a right to possess a residential unit in a residential complex).
(hereinafter referred to as Qualifying Home)
The Qualifying Home must be:
- Purchased from a builder;
- Built by or for First-Time Buyer on land they already own or lease; or
- With respect to a share, acquired from a cooperative housing corporation.
How much is the rebate?
- 100% GST rebate (up to CA$50,000) for Qualifying Home priced at or below CA$1 million.
- Linear phase-out or Qualifying Home priced between CA$1 million and CA$1.5 million.
- No rebate available for Qualifying Home priced over CA$1.5 million.
Timing requirements
To qualify for the FTHB GST Rebate, the purchase or construction of Qualifying Home must meet specific timelines:
For Qualifying Home purch ased from a builder
- Purchase agreement is entered into on or after May 27, 2025, and before January 1, 2031;
- Construction begins before January 1, 2031, and is substantially completed before January 1, 2036; and
- Ownership is transferred to the First-Time Buyer before January 1, 2036.
For owner-built or contractor-built homes
- Construction agreement, as the case may be, is entered into on or after May 27, 2025, and before January 1, 2031;
- Construction or substantial renovation begins before January 1, 2031, and is substantially completed before January 1, 2036; and
- Possession is transferred to the First-Time Buyer before January 1, 2036.
Shares of the capital stock of a cooperative housing corporation
- Shares purchase agreement must be entered into on or after May 27, 2025, and before January 1, 2031;
- Construction or substantial renovation begins before January 1, 2031 and is substantially completed before January 1, 2036; and
- Ownership of the shares is transferred to the First-Time Buyer before January 1, 2036.
Limitations
- The FTHB GST Rebate is available only once per individual in a lifetime.
- No rebate is available if the First-Time Buyer's spouse or common-law partner has already claimed it.
- Assignment sales are ineligible if the original agreement was signed before May 27, 2025.
- Agreements that are entered into before May 27, 2025, and that are varied, altered or replaced after that date are deemed to have been entered into before May 27, 2025. Therefore, the Eligible Home covered by such Agreements is not eligible for the FTHB GST Rebate.
Key takeaways
- The FTHB GST Rebate mirrors many of the eligibility rules under the existing 36 % GST/HST New Housing Rebate, with specific modifications to ensure that the rebate is targeted at First-time Buyer only.
- As with the existing GST/HST New Housing Rebate, the FTHB GST Rebate may be assigned and obtained through the builder — builders should exercise due diligence in confirming the First-Time Buyer's eligibility as this practice may carry a significant financial risk;
- The FTHB GST Rebate may also be combined with provincial land transfer tax or property transfer tax in certain provinces, for eligible First-Time Buyer who meet the prescribed conditions.
- Participating provinces (e.g., Ontario) and the province of Québec have yet to confirm whether a rebate similar to the FTHB GST Rebate will apply to the provincial component of the HST and to the Québec sales tax (QST).
Final thoughts
On June 5, 2025, the federal government introduced Bill C-4, which amends the ETA to include the legislative proposals for the FTHB GST Rebate. Although Bill C-4 has not yet been enacted, the proposed legislation is intended to take effect as of May 27, 2025. Home buyers, and builders should carefully review the factual situation and their agreements to ensure compliance with the eligibility requirements under the proposed legislation.
Footnotes
1. Notice of Ways and Means Motion to introduce a bill respecting certain affordability measures for Canadians and another measure.
2. The authors would like to thank Arielle Dillonsmith, Emmanuel Fung, Sasha Vukovic and Jeff Wong for their valuable insights regarding the implications of the proposed legislation on real estate developers.
About Dentons
Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Specific Questions relating to this article should be addressed directly to the author.
