Section 257 - Rebate for Taxable Sale of Real Property by a GST/HST Non-Registrant
A person who carries on a business is normally required to register for GST/HST, charge and remit it to the Canada Revenue Agency (“CRA”). A difficulty arises, for example, where a person makes a taxable sale of real property while remaining unregistered for GST/HST. Because a non-registrant generally cannot claim Input Tax Credits (“ITC”), the GST/HST previously paid on the acquisition or improvement of the property may remain unrecovered.
Section 257 of Excise Tax Act, RSC 1985, c E-15 (“ETA”) addresses this issue by providing an eligible non-registrant with a GST/HST rebate. The provision is intended to place the non-registrant in a position broadly comparable to that of a registrant entitled to claim ITCs.
This, for example, may be useful for a person who makes a sale of real property as “an adventure or concern in the nature of trade” versus “carrying on” a business.
Fadali v. The King, 2026 TCC 86 (CanLII)
A stated in the decision of Fadali v. The King, 2026 TCC 86 (CanLII):
Parliament recognizes that a non-registrant may have incurred GST/HST in connection with a taxable supply of real property by way of sale and has provided relief in the form of a rebate under s. 257 for the basic tax content of the property. Parliament enacted s. 257(1) to ensure that a non-registrant was not put at a disadvantage compared to a registrant who can deduct ITCs in calculating the amount of net tax payable (see Villa Ste-Rose FCA at para. 68). It would make no sense to allow a non-registrant to double up through a claim for ITCs plus a rebate. In the circumstances, the appellant must look to the rebate provision in s. 257 for relief respecting the GST/HST he incurred.
Application for the Section 257 GST/HST Rebate
Requirements
Pursuant to subsection 257(1) of the ETA, a person can apply for a rebate if all of the following conditions are met:
a. The person is not a GST/HST registrant;
b. The person paid the GST/HST on real property such as land, a building, or an interest in real property when last acquired the property and/or when improvements were made to it; and
c. The person made a taxable sale of the property, including a deemed taxable sale.
Calculating the Rebate
As per subsection 257(1) of the ETA, the amount of rebate is equal to the lesser of:
a. The basic tax content of the real property (as defined in subsection 123(1) of the ETA) at the time of the sale, or the deemed sale; and
b. The GST/HST payable on the sale or deemed sale of the real property, or the GST/HST that would have been payable on the sale had the property not been part of the supply of a business where no tax was payable because the claimant and the purchaser made a joint election.
Application Time Limitation
The rebate is not granted automatically. Under subsection 257(2) of the ETA, a person must apply for the rebate within two years from the date the consideration for the supply became due or, if it was paid before becoming due, within two years from the date of payment.
Supporting Documents
For the type of supporting documents necessary to claim the rebate see the CRA’s General Application for GST/HST Rebates, RC4033(E), Rev 23 (Ottawa: Canada Revenue Agency, 2023), “Reason Code 7 – Taxable Sale of Real Property by a Non-Registrant.”
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