Charities and qualifying non-profit organizations generally are eligible to recover rebates of 50% of GST paid and a varying percentage of the provincial portion of HST paid in the course of their activities. However, where such entities operate subsidized housing projects, that recovery can be increased to as much as 100%.
Organizations that own and operate subsidized housing projects for low-income tenants can apply to the Canada Revenue Agency (CRA) for a designation as a municipality, allowing them to access the rebate rates that are available to municipalities.
The designation applies only with respect to housing supplied to low-income tenants on a "rent-geared-to-income" basis. As a municipality, the organization can use the municipal rebate category for only this portion of its activities. GST collection and recoveries on other activities will be unaffected.
The municipal designation also allows an organization to recover a rebate of the provincial portion of the HST. The potential combined total GST/HST recovery is shown in the following table.
| Province | Regular Rebate | Designated Municipal Rate |
| Ontario | 69.6% | 86.46% |
| New Brunswick | 50% | 73.62% |
| Nova Scotia | 50% | 71.43% |
| British Columbia | 54.08% | 85.42% |
| Other Provinces | 50% | 100% |
Note that this tactic is not advantageous in Newfoundland and Labrador, which does not provide a provincial municipal rebate. Thus, the organization would find its overall rebate decreased.
Once granted, the designation applies to current and future projects that meet the eligibility criteria. The organization need not reapply for each new housing project. The initial application normally is approved from the date of first tenancy so that operating costs can be recovered in full. Capital costs, including construction or acquisition of the property, may be recoverable depending on the date of the CRA approval and of the GST/HST payments.
The eligibility requirements for this designation are:
- The organization must be a charity, co-operative housing corporation, not-for-profit organization or public institution (such as a school authority, university, hospital authority or local authority).
- The organization must supply residential accommodation on a long-term basis to persons or families with low to moderate income, and its rental policies must target these persons.
- More than 10% of the housing units in a project must be supplied on a rent-geared-to-income basis.
- The organization must receive funding from a level of government (municipal, provincial or federal) to assist in the provision of housing.
The organization must own the housing project or have a leasehold interest in the project that allows it to act as the landlord in providing the units on a long-term basis (at least one month) to individuals and families. The individual units must be private quarters each with a kitchen and a bathroom.
The accommodation provided must not include the provision of services such as meals, laundry, personal care, counselling, health care or housekeeping, although the CRA will permit these services to be provided for a separate charge.
The organization must be able to demonstrate that its tenant selection policy includes income testing. For example, rent could be limited to a percentage of the gross household income with a maximum income threshold, after which the tenant is no longer eligible for the subsidy. Alternatively, housing could be supplied only to those whose incomes fall below a maximum threshold stipulated by the government department that supplies the funding.
We understand from the CRA that many providers of subsidized housing are not taking advantage of this program. If you think you may be eligible, please contact us to discuss the program.
Margaret Tanaka, CGA, is a Senior Tax Manager in the Calgary office of Collins Barrow.
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