When CRA Denies The GST/HST New Housing Rebate: Lessons From Xian V The King, 2026 TCC 122 On Proving A Primary Residence

Overview – What This Case Means for New Home Buyers Claiming the GST/HST New Housing Rebate

Xian v The King, 2026 TCC 122, is a concise but useful Tax Court of Canada decision on the GST/HST New Housing Rebate. The case involved two Montreal condominium units purchased by the taxpayer, Mr. Xian: one downtown property and one Lachine Canal property.

Although this article refers to the GST/HST New Housing Rebate, Quebec does not impose HST. New homes in Quebec are generally subject to the federal Goods and Services Tax (“GST”) and the provincial Quebec Sales Tax (“QST”) as separate taxes. The expression “GST/HST New Housing Rebate” is used here as the nationally recognized umbrella term for the federal rebate program. More precisely, however, Xian concerned only the taxpayer’s entitlement to the federal GST rebate under the Excise Tax Act. Although QST was also payable on the purchases, the taxpayer’s entitlement to any corresponding QST rebate was not before the Tax Court.

In Xian, the taxpayer appealed two assessments under the Excise Tax Act that denied his claims for the federal GST new housing rebate, one relating to the downtown property and one relating to the Lachine Canal property. The Tax Court dismissed both appeals.

The case turned on a simple evidentiary problem. The taxpayer had to prove that, when he became liable under the purchase agreements, he acquired each property for use as the primary place of residence of himself or a relation. He also had to prove that the relevant property was actually occupied as a primary place of residence by the required person after substantial completion. The Court found that the evidence did not establish either requirement.

The decision is important because it shows that a taxpayer cannot prove primary residence merely by showing ownership, some utility bills, home insurance, occasional use, or family testimony about general living arrangements. The Court looked for evidence that the taxpayer had a clear and settled intention to centre his personal and family life around the property. That evidence was missing.

“Xian is a reminder that the GST/HST New Housing Rebate is not a rebate for simply buying a new condominium. It is a rebate for acquiring a qualifying property as a genuine primary place of residence. The taxpayer must be ready to prove intention, occupation, and the real living pattern with objective evidence.” David J. Rotfleisch, Certified Specialist in Taxation Law.

Background – The Property Purchases and Rebate Claims in Xian v The King

The taxpayer, Mr. Xian, came to Canada from China with his wife to be closer to their daughter, Ms. Zhu. According to Ms. Zhu’s testimony, the taxpayer initially lived with her after arriving in Canada, but later preferred to live separately because of family conflict. Ms. Zhu, a real estate agent, acted as both power of attorney and agent for her father in the relevant property purchases.

The downtown property was a divided co-ownership purchased under a preliminary contract for $143,000, excluding GST and Quebec Sales Tax. It was a very small studio apartment, approximately 20 square metres, and it contained a Murphy bed. Ms. Zhu testified that her father did not like the neighbourhood where she lived and that her parents did not need much space because they intended to return to China regularly.

The evidence relating to the downtown property included home insurance in the taxpayer’s name, an internet invoice, and Hydro-Québec invoices. The electricity bills were modest, ranging from $26.49 to $77.50 per month, with roughly half of the 16 monthly invoices being less than $40. Ms. Zhu testified that the downtown property was her father’s principal residence, but the Court noted that it was unclear whether she had considered any residence that the taxpayer may have had in China.

Roughly two years later, the taxpayer and his wife decided to move to a larger unit, and the taxpayer purchased the Lachine Canal property. The downtown property was then rented out. The lease showed that the downtown unit was rented with a Murphy bed, one table, and two chairs.

The Lachine Canal property was also a divided co-ownership. It was purchased for $184,865 and closed in early February 2022. It was another studio apartment, but larger than the one in the downtown property. Home insurance was obtained in the taxpayer’s name. Shortly after the purchase, the taxpayer underwent surgery for throat cancer, and he and his wife decided to return to China. There was no evidence showing that furniture or personal possessions were ever moved into the Lachine Canal property.

Most importantly, the taxpayer did not attend the Tax Court hearing. The Court was told that he had returned to China after his surgery in 2022 and might never return to Canada. His daughter testified on his behalf. The Court found Ms. Zhu to be credible and reliable, but it disregarded her testimony about her father’s intentions because that evidence was hearsay. This became a major problem for the appeal because intention was central to the rebate claim.

How the GST/HST New Housing Rebate Rules Apply to Primary Residence Claims

Subsection 254(2) of the Excise Tax Act provides the statutory framework for the GST/HST New Housing Rebate for certain purchases from a builder. For a qualifying single-unit residential complex or residential condominium unit, one requirement is that, at the time the purchaser becomes liable or assumes liability under the agreement of purchase and sale, the purchaser must be acquiring the property for use as the primary place of residence of the purchaser or a relation.

Another requirement is that the first individual to occupy the property as a place of residence after substantial completion must generally be the purchaser or a qualifying relation. The provision also contains requirements relating to price, tax paid, substantial completion, application deadlines, and rebate calculation.

In Xian, the CRA did not put every statutory requirement in issue. The dispute focused on paragraph 254(2)(b), which concerns the purchaser’s intention at the time of becoming liable under the agreement of purchase and sale, and paragraph 254(2)(g), which concerns first occupation as a place of residence after substantial completion.

This distinction matters. Paragraph 254(2)(b) asks what the taxpayer intended at the legally relevant time. It is not enough for a taxpayer to later decide that the property should be treated as a home. The taxpayer must prove that, when he or she assumed liability under the purchase agreement, the property was being acquired for use as a primary place of residence. Paragraph 254(2)(g), by contrast, looks at what happened after substantial completion. It asks whether the first qualifying occupation occurred in the required manner.

CRA Guide RC4028, GST/HST New Housing Rebate, is broadly consistent with the Court’s approach in Xian. The guide states that the purchaser must buy or build the home for use as the purchaser’s or a relation’s primary place of residence, and that this intention must be evident at the outset of the purchase, construction, or substantial renovation. It also states that a taxpayer may have more than one place of residence but only one primary place of residence, and that a Canadian home will not qualify if the taxpayer’s primary place of residence remains outside Canada.

The Court’s approach in Xian therefore reflects a practical two-stage inquiry. First, did Mr. Xian have a clear and settled intention, at the time of purchase, to use the property as a primary place of residence? Second, did Mr. Xian or his wife actually occupy the property as a primary place of residence? The Court answered both questions against the taxpayer.

What Counts as a “Primary Place of Residence” for GST/HST Rebate Purposes?

The Court’s discussion of primary residence was the core of the decision. The Court relied on prior GST/HST New Housing Rebate cases to distinguish genuine primary residence from temporary, occasional, transitory, or secondary use.

For the intention requirement, the Court relied on Kniazev v The Queen, 2019 TCC 58, for the principle that a taxpayer must have a clear and settled intention to occupy the property as a primary place of residence. A tentative, fleeting, or uncertain intention is not enough. The Court emphasized that the word “primary” suggests that the purchaser must intend to centre or arrange personal and family affairs around the property. The rebate is not intended for a secondary residence or pied-à-terre.

That reasoning was fatal to the downtown property. The Court found that the downtown unit was extraordinarily small, particularly for two people. In the absence of stronger evidence, that fact suggested that Mr. Xian did not intend to spend significant amounts of time there. The Court concluded that, at the date of purchase, the downtown property was intended to function as a pied-à-terre in Montreal rather than as Mr. Xian’s primary residence.

The Lachine Canal property was more favourable to Mr. Xian in one respect because it was larger. The Court accepted that its increased size suggested some possibility that Mr. Xian intended to make it his primary residence. But possibility was not proof. There was no evidence about why the Lachine Canal property was purchased, whether furniture was moved in, whether Mr. Xian’s lifestyle was expected to change, whether he intended to spend more time in Canada, or how his ties to that property compared with his ties to China. His return to China shortly after the purchase, and the fact that he had not returned to Canada, suggested that his real centre of living remained in China.

For the occupation requirement, the Court relied on Sozio v The Queen, 2018 TCC 258, which identified factors relevant to whether a property was occupied for purposes of paragraph 254(2)(g). These include change-of-address evidence, relocation of personal effects, frustration of occupancy, insurance coverage, delivery of possession of the previous residence to another person, and whether the rebate property was more frequently occupied and more suitable to the taxpayer’s needs.

The Court also referred to cases including Kandiah v The Queen, 2014 TCC 276, and Sindhi v The King, 2023 TCC 102, to reinforce the point that transitory use, minimal belongings, heat, insurance, internet access, or a sparse sleeping arrangement do not necessarily amount to occupation as a primary place of residence. The evidence must show real residence, not merely access to a livable space.

The downtown property failed this test. There was little evidence about its furnishings, personal contents, or day-to-day use. The lease later showed only a Murphy bed, one table, and two chairs. The Court also considered the very low hydro bills, which were inconsistent with regular occupation by two people.

The Lachine Canal property also failed. The Court accepted that Mr. Xian’s cancer diagnosis might have frustrated a planned occupation. But the taxpayer still needed evidence that, absent the diagnosis, he or his wife would have occupied the property as a primary residence. There was no such evidence. The Court therefore found that neither Mr. Xian nor his wife occupied the Lachine Canal property as a primary place of residence.

A particularly important point is that “primary place of residence” is not measured only against other Canadian homes. The Court stated that the relevant comparison includes any other potential residence worldwide. For internationally mobile taxpayers, this is critical. A Canadian condo may be the taxpayer’s only Canadian property, but it may still be a secondary residence if the taxpayer’s real centre of living remains outside Canada.

Practical Lessons for Home Buyers, Immigrant Families, and Cross-Border Taxpayers

Xian is a useful warning for new condominium purchasers, immigrant families, non-residents, and taxpayers with cross-border living arrangements. A taxpayer who claims the GST/HST New Housing Rebate must be ready to prove more than legal ownership. The evidence should show both the original intention and actual occupation.

The strongest evidence will usually be contemporaneous and objective. It may include address changes, tax filings, driver’s licence or health-card records, insurance reflecting owner occupation, utility usage consistent with real living, records showing delivery of possession of the prior home to another person, and evidence explaining any short or interrupted occupation.

Family testimony can help, but Xian shows its limits. Where the taxpayer’s own intention is in issue, the taxpayer should normally testify if possible. A relative may be credible and sincere, but testimony about what the taxpayer intended may still be inadmissible hearsay or may carry limited weight. This is especially important in informal procedure appeals, where taxpayers sometimes underestimate the evidentiary burden.

The case also shows that illness or another unforeseen event does not automatically defeat a rebate claim. But the taxpayer must prove the intended occupation before the frustrating event occurred. If a taxpayer intended to move in and later could not do so because of illness, family emergency, job relocation, or other circumstances beyond the taxpayer’s control, the record should show concrete pre-event steps toward occupation.

“CRA rebate disputes are often evidence disputes. The taxpayer may have a perfectly understandable family explanation, but the Tax Court needs admissible evidence that connects that explanation to the statutory requirements. In a new housing rebate case, intention should be documented before the CRA asks for it.” David J. Rotfleisch.

Pro Tax Tips: How to Protect Your GST/HST New Housing Rebate Claim

Taxpayers claiming the GST/HST New Housing Rebate should build an evidentiary record from the time the purchase agreement is signed, rather than waiting until the CRA asks questions. The evidence should show that the purchaser intended to make the property the centre of everyday life and, after completion, actually treated it as the primary place of residence.

Courts assess primary residence by examining the taxpayer’s overall pattern of living. One important consideration is where the individual actually spent most of his or her time. A purchaser who continued to live mainly at another home, whether in Canada or abroad, may have difficulty establishing that the rebate property was truly primary. Taxpayers should therefore preserve records showing the timing and regularity of occupation, including travel records, employment documents, school records, medical correspondence, deliveries, and other evidence of day-to-day presence.

Address changes are particularly important because they show whether the taxpayer consistently represented the new property as home. After moving, the purchaser should update the address recorded with the CRA, provincial driver’s-licence and health-card authorities, financial institutions, employers, schools, insurers, and other government or commercial bodies. If those records continue to identify another residence for an extended period, the Court may view the inconsistency as evidence that the rebate property was secondary, temporary, or used only occasionally.

Documents relating to the physical use and upkeep of the property are equally significant. Taxpayers should retain electricity, gas, water, internet, landline telephone, television, condominium, and home-insurance records, together with invoices for repairs, maintenance, furnishings, appliances, and ordinary household purchases. Moving-company invoices, storage records, photographs of the furnished home, mail addressed to the purchaser, and evidence that personal belongings were transferred can further support genuine occupation.

Conversely, an inability to produce ordinary household or maintenance expenses may undermine the claim, especially where utility consumption is unusually low, or the property appears sparsely furnished.

No single factor is decisive. The CRA and the courts will consider whether the evidence, viewed as a whole, provides a consistent and credible picture of the property as the taxpayer’s main home.

Internationally mobile purchasers face particular scrutiny because the comparison extends to other possible residences worldwide. Before filing a claim, a taxpayer with cross-border, temporary, delayed, or interrupted occupancy should obtain advice from an experienced Canadian tax lawyer and identify evidentiary gaps while supporting records are still available.

“The best time to protect a GST/HST New Housing Rebate claim is before the rebate is claimed. Once CRA challenges the file, the taxpayer may be trying to reconstruct intention from incomplete records, and that is a much weaker litigation position.” David J. Rotfleisch.

FAQ: GST/HST New Housing Rebate, Primary Residence, and Evidence Requirements

What was the main issue in Xian v The King?

The main issue was whether the taxpayer, Mr. Xian, was entitled to the GST/HST New Housing Rebate for two Montreal condominium units. The Court focused on whether he acquired the properties for use as a primary place of residence and whether he or his wife occupied them as a primary place of residence.

Why did the taxpayer lose?

The taxpayer lost because the evidence did not prove a clear and settled intention to use either property as a primary place of residence. The Court also found insufficient evidence of actual occupation as a primary residence. The taxpayer did not testify, and his daughter’s testimony about his intentions was treated as hearsay.

Does a small condominium qualify for the GST/HST New Housing Rebate?

A small condominium can qualify if all statutory requirements are met. But in Xian, the downtown studio was approximately 20 square metres and was considered by the Court as evidence that the property was more likely a pied-à-terre than a true primary residence for Mr. Xian and his wife.

Who must be the first person to occupy the property after substantial completion?

Under paragraph 254(2)(g) of the Excise Tax Act, the first person to occupy the unit as a place of residence after substantial completion must generally be the purchaser or a qualifying relation. If the first real occupant is an unrelated tenant, or if the evidence shows only brief or token use by the purchaser, the rebate claim may fail.

Can illness excuse a failure to occupy the property?

Illness may help explain why a planned occupation did not occur, but the taxpayer must still prove that there was a genuine plan to occupy the property as a primary residence before the illness intervened. In Xian, the Court accepted that Mr. Xian’s cancer diagnosis may have frustrated a planned move, but found insufficient evidence that he or his wife would otherwise have occupied the Lachine Canal property as a primary residence.

What documents should taxpayers keep for a GST/HST New Housing Rebate claim?

Taxpayers should keep records showing intention and actual occupation, including address-change documents, moving records, insurance, utility bills showing normal use, furniture and appliance receipts, photos of the occupied home, tax filings using the address, and evidence explaining any delayed or interrupted occupation. The goal is to show that the property was genuinely used, or intended to be used, as the taxpayer’s primary place of residence.

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.