Tax & Trade Blog

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NEW BUDGET TWEAKS INDIRECT TAX RULES

BUDGET 2025 HARD TO CELEBRATE BUT PROPOSES SOME GOOD INDIRECT TAX CHANGES

Canada's Budget 2025 was launched on November 4^th with the energy of a lead balloon. Despite the doom and gloom focus on the continuing deficit financing by the Liberal Government – off-loading our current woes on the backs of our children and grandchildren – there were some (largely) positive changes from an Indirect Tax perspective.

The highlights, in our view, are as follows.

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NEW HOUSING REBATE FOR BUILDERS

TCC LOWERS THE BAR FOR "OCCUPATION AS A PLACE OF RESIDENCE"

As we have blogged here and here, homeowners who sell their newly built homes shortly after taking possession have long been a target of CRA audits.  When these homeowners also claim the GST/HST New Housing Rebate, the CRA reviews their claims closely.

A key issue in these New Housing Rebate claims is whether the homebuyers occupied the property as a place of residence after completion of construction.  In the past, courts have applied a stringent standard in interpreting what constitutes “occupation as a place of residence”.

In a recent decision, Sharma v. The King (2025 TCC 145), the Tax Court of Canada (“TCC”) lowered the bar for establishing “occupation as a place of residence”, signalling an attenuated interpretation that favours taxpayers.

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A NEW LOOK AT GST/HST HOUSING REBATES

"FRUSTRATION" IN CRA HOME REBATE ASSESSMENTS

Federal tax legislation in Canada encourages the construction and renovation of residential homes through a range of tax rebates.  However, eligibility for these rebates is not always clear-cut.

In the recent case at the Tax Court of Canada (“TCC”) – Osagie v. The King, 2025 TCC 114 – the Court concluded that a homeowner was eligible to claim a GST/HST “new housing rebate” without satisfying all legislated conditions.  This decision suggests that eligibility for GST/HST housing rebates may be broader than previously thought.

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NEW GST VOLUNTARY DISCLOSURE GUIDELINES!

UPDATED CRA VD PROGRAM GUIDELINES NOW IN EFFECT

On September 9, 2025, the Canada Revenue Agency (“CRA”) released GST/HST Memorandum 16-5-1 introducing major changes to its Voluntary Disclosure Program (“VDP”) in GST/HST matters (the “GST/HST VDP”), alongside IC00-1R7 – Voluntary Disclosure Programwhich outlines equally meaningful revisions to the income tax VDP.

This is the first update to the VDP since 2018 (which we wrote about back then here), and the changes appear aimed at encouraging more taxpayers to come forward and correct errors or omissions in their tax affairs (perhaps a result of less than anticipated take-up of the VDP program in recent years).  The new rules took effect Oct 1, 2025.

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LONG-ARM OF CRA COLLECTIONS

CRA FOLLOWS HUSBAND'S TAX DEBT TO WIFE

As we have blogged here and here, the CRA has “third-party” transfer powers that allow it to follow a taxpayer’s GST or income tax debts to relatives where it can demonstrate that money or assets have been diverted to those relatives, for less than fair market value. 

A better alternative would be dealing with one's tax debts during one's lifetime, and using the CRA’s newly revamped Voluntary Disclosure Program to help settle one’s tax affairs finally and effectively.

The Tax Court of Canada's (“TCC”) recent decision Ballantyne v. The King (2025 TCC 127) underscores the mess that can be created for a spouse or children if tax debts remain unaddressed.