Principal Issues: Whether a corporation can claim the HRTC for expenditures incurred in constructing fifty new condominium units and get a refund of $1350.00 on each unit.
Position: No.
Reasons: The HRTC can only be claimed by individuals for qualifying expenditures incurred for qualifying renovations made in respect of their eligible dwellings. Furthermore, the condominium units, which are currently under construction, do not qualify as eligible dwellings during the eligible period because they are not owned by an individual and not ordinarily inhabited by the individual, common-law partner, or their children during that period.
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Dear XXXXXXXXXX :
The office of the Honourable James M. Flaherty, Minister of Finance, forwarded to me a copy of your correspondence, which I received on January 18, 2010, concerning the new home renovation tax credit (HRTC).
You want to know whether you can claim the HRTC for expenditures incurred in constructing 50 new condominium units and receive a refund of $1,350 on each unit.
The legislation regarding the new HRTC has been enacted and is contained in section 118.04 of the Income Tax Act. The HRTC, only available for the 2009 tax year, provides individuals with a 15% non-refundable income tax credit on eligible home renovation expenditures for services received or goods acquired after January 27, 2009, and before February 1, 2010. However, expenditures for services received or goods acquired under agreements entered into before January 28, 2009, do not qualify for the HRTC. Taxpayers can claim this credit for the 2009 tax year on eligible expenditures exceeding $1,000, but not more than $10,000, which will result in a non-refundable tax credit of up to $1,350.
Under section 118.04, expenditures qualify for the HRTC if they are directly attributable to a renovation or an alteration of an eligible dwelling, including land that forms part of the eligible dwelling, and if the renovation or alteration is of an enduring nature and is integral to the eligible dwelling. Such expenditures include the cost of labour and professional services, building materials, fixtures, equipment rentals, and permits.
An eligible dwelling is a housing unit located in Canada that is owned by the individual at the time of the renovation, and ordinarily inhabited by the individual, his or her current or former spouse or common-law partner, or his or her children at any time after January 27, 2009, and before February 1, 2010. Therefore, any housing unit that an individual owns and uses personally, including a home and a cottage, qualifies for the HRTC.
As mentioned above, the HRTC is a non-refundable tax credit available only to individuals. Generally, for the purposes of the Act, the definition of "individual" does not include a corporation. Therefore, your corporation is not entitled to claim the HRTC. Based on the limited information you provided, the condominium units you are currently building would not qualify as eligible dwellings during the eligible period because they are not owned by an individual and are not ordinarily inhabited by the individual, his or her current or former spouse or current or former common-law partner, or their children during that period.
Furthermore, the HRTC is not a rebate but a non-refundable income tax credit. Similar to the other non-refundable income tax credits, the HRTC will reduce an individual's federal income tax payable, but will not result in a refund if the individual's total non-refundable tax credits, including the HRTC, are greater than his or her income tax payable.
You can find more information on the HRTC, including examples of eligible and ineligible expenses, on the Canada Revenue Agency Web site at www.cra.gc.ca/hrtc and in the Government of Canada brochure available at www.actionplan.gc.ca/grfx/docs/hrtc_eng.pdf.
I trust that the information I have provided is helpful.
Yours sincerely,
Keith Ashfield
Ananthy Mahendran
(905) 721-5204
2010-035496