At a glance
- New housing tax rebates for eligible homebuyers and rental housing projects.
- Expanded PST/RST rules for digital products, cloud services, and select services.
- Key tax changes include DST repeal, IPT updates, and luxury tax relief.
As Canada continues to face challenges in affordability, the federal and certain provincial governments have announced significant changes to indirect tax programs that impact home ownership, the rental housing market, and broader sectors including the digital economy. This article outlines recent changes of interest related to GST/HST housing rebates, provincial sales tax (PST) on digital products and services, insurance premium tax, and luxury tax.
Residential home ownership and rental market
Affordability and supply of housing have been a concern in Canada in the past few years, and the federal and various provincial governments have launched or enhanced programs to encourage new home building and to increase supply in the rental housing market through GST/HST rebate programs.
The following are new or enhanced programs that may be of interest:
First-time home buyers’ (FTHB) GST/HST rebate
In May 2025, the federal government introduced the FTHB GST/HST rebate program. This rebate program was passed into law in March 2026, which means that eligible first-time home buyers can now apply for relief.
This program rebates 100% of the GST (or federal portion of the HST) paid on a new home, up to a maximum of $50,000, where the new home is priced at $1 million. New homes priced between $1 million and $1.5 million will be eligible for a partial rebate under a linear phase-out, with no rebate for a home priced at $1.5 million or more. This program applies where the agreement to purchase the home or residential unit is entered into after March 19, 2025 and before 2031, and where the construction or substantial renovation of the residential complex begins before 2031 and is substantially completed before 2036. Depending on the agreement with the vendor, either the purchaser or the vendor applies for the rebate.
Note that a first-time home buyer is a Canadian citizen or permanent resident who is at least 18 years of age and who, in the current and preceding four calendar years, has not occupied a residential unit in or outside Canada owned by them, their spouse, or common-law partner.
This FTHB GST/HST rebate program is different from the existing GST/HST new housing rebate, which is not restricted to first-time home buyers but applies only to homes valued at less than $450,000. However, the new FTHB GST/HST rebate applies many of the same eligibility criteria and uses the same application form as the existing program. If a first-time home buyer qualifies for both rebates, the new FTHB GST/HST rebate provides an additional amount on top of the existing GST/HST new housing rebate.
Enhanced Ontario HST relief on new homes
For houses located in Ontario, purchasers of new homes can qualify for a rebate of 75% of the provincial portion of the HST, up to a maximum of $24,000. Note that purchasers may be eligible for the Ontario rebate even if they are not eligible to claim the existing federal GST/HST new housing rebate because of the fair market value of the home exceeding the threshold of $450,000 under the federal program.
In the 2026 Ontario budget, the government proposed a one-year enhancement of its existing program to allow a rebate of the full 8% provincial portion of the HST for purchase agreements entered between April 1, 2026 and March 31, 2027. Under this enhancement, the Ontario rebate would be capped at $80,000 for homes with a value up to $1.5 million. The rebate would be phased out on a linear basis for homes valued between $1.5 million and $1.85 million, after which the relief returns to a maximum of $24,000. When combined with existing federal rebates, purchasers may receive total relief of up to $130,000 for homes valued up to $1.5 million.
Note that for a new home purchased from a builder, construction of the home must begin before 2029, and the home must be substantially completed before 2032. For owner-built homes, construction must begin between April 1, 2026 and March 31, 2027, and the home must be substantially completed before 2030.
In addition to the above Ontario proposed enhancement, the government has also announced that the province will align the effective date of its provincial first-time home buyers’ rebate with the federal FTHB GST/HST rebate program.
Purpose-built rental housing (PBRH) GST/HST rebate
While not a recent change, the federal government provides an enhanced 100% rebate of the GST (or federal portion of the HST) on new PBRH, with no maximum, where construction begins after September 13, 2023, and before 2031, and is substantially completed before 2036. To qualify, new multiple-unit residential complexes must have four or more self-contained apartments, with private kitchens, bathrooms, and living areas, or 10 or more private rooms or suites, where all or substantially all the units in the complex will be used for long-term residential rental accommodation.
At the encouragement of the federal government, all five participating provinces, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario and Prince Edward Island, provide rebate programs for the provincial component of the HST on new rental properties with varying effective dates.
Underused housing tax (UHT)
Another recent federal change related to housing is the elimination of the UHT. The UHT was an annual 1% tax on the value of vacant and underused residential properties directly or indirectly owned by those who are not permanent residents or Canadian citizens. This tax was eliminated as of the 2025 calendar year. As such, UHT returns and payments will not be required for 2025 and subsequent years.
Note that the cancellation of this federal tax has no impact on various provincial or municipal housing taxes that are currently in force.
PST and digital products and services
In recent years, many provinces have amended their PST system to expand taxability to digital products and services. Impacted businesses can expect a continued focus on digital economy compliance and audit activity.
Most recently, the following provinces have announced changes:
Several changes were made to B.C.’s PST system to expand the taxability of goods and services, including:
- The definition of software was expanded, retroactive to 2013, to include cloud computing, software as a service, and some other digital products. Software is generally taxable under the PST system. This change is retroactive to 2013 and may result in an assessment exposure for businesses previously considered compliant.
- Online marketplace facilitators must file an annual PST information return by Aug. 31, 2026 (for the July 1, 2025 to June 30, 2026 period).
- The 2026 B.C. budget proposed that the following services will be subject to PST effective Oct. 1, 2026: accounting, bookkeeping, assurance, architectural, engineering & geoscience, certain non‑residential real estate services, and security/private investigation. If not already registered, businesses providing these services will be required to register prior to Oct. 1, 2026 to ensure that they are ready to begin collecting and remitting tax.
- Effective Feb. 18, 2026, vendors will be allowed to provide a point-of-sale PST exemption to businesses that are purchasing goods for commercial use outside of B.C., where the purchaser ships the goods outside of B.C. after purchase.
Effective Jan. 1, 2026, the Manitoba RST was expanded to include cloud computing services, such as subscriptions to software, data storage, and remote computer processing.
Related to the digital economy is the federal DST, which was introduced to require foreign and domestic large businesses to pay tax on certain revenue earned from engaging with online users in Canada where certain conditions were met. However, recent developments have resulted in the passage of legislation to officially repeal the DST. Impacted businesses should note that the Canada Revenue Agency (CRA) will refund any DST already paid with interest.
Provincial insurance premium tax (IPT)
There have also been changes to several provincial IPT obligations:
Ontario IPT election for funded benefit plans
Effective April 1, 2026, funded benefit plans may elect to be treated in the same manner as unfunded benefit plans for Ontario IPT purposes. This new election will allow plan holders of funded benefit plans to defer payment of the IPT until benefits are paid from the plan, rather than when the premiums are received. For more information, read our article, Ontario proposes CT-IP election for funded benefit plans.
Quebec IPT Increase
Finance Québec announced an increase in the tax rate on insurance premiums from 9% to 9.975%, effective Jan. 1, 2027, to harmonize with the QST rate. This applies to automobile, home, and most personal insurance premiums.
Luxury tax
Since September 2022, luxury tax has been imposed on the sale, lease, or importation of (and certain improvements to) subject vehicles and subject aircraft priced or valued above $100,000 and subject vessels priced or valued above $250,000.
Effective Nov. 5, 2025, the luxury tax is no longer payable on subject aircraft and vessels. Note that the luxury tax continues to apply to subject vehicles priced or valued above $100,000 unless an exemption applies.
Registrations in respect of subject aircraft and subject vessels will be automatically cancelled on Feb. 1, 2028, and any rebate claim must be made before this date.
How BDO helps
If you have questions about how these recent indirect tax changes may affect your business or personal finances, please contact your BDO tax advisor. Our clients are experiencing heightened CRA audit activity for income and indirect taxes, and in particular, businesses in certain industries, such as trucking due to changing compliance requirements. Our team is prepared to guide you through recent changes, helping you stay compliant and make the most of your tax situation.
Contact us today.
The information in this publication is current as of May 22, 2026.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.