The Canada Revenue Agency updates audit results relating to the real estate sector in British Columbia and Ontario
May 17, 2018 Ottawa Canada Revenue Agency
The Canada Revenue Agency (CRA) is committed to maintaining the fairness of Canada’s tax system by addressing non-compliance in real estate transactions. The CRA knows that most Canadians pay their fair share of taxes. Nevertheless, there continue to be tax compliance risks in the real estate sector, particularly in the Vancouver and Toronto markets. In response to these risks, the CRA is continuing to take concrete action to crack down on those who fail to follow the law.
Over the past three years, CRA audits have identified $592.6 million in additional taxes related to the real estate sector. During this same period, CRA auditors reviewed over 30,000 files in Ontario and British Columbia, resulting in over $43.7 million in penalties.
Specifically in 2017-2018, the CRA assessed $102.6 million more in additional taxes than in 2016-2017. Penalties increased by $19.2 million from one year to the next.
The CRA has a number of ways to detect taxpayers who avoid paying taxes related to real estate transactions. In collaboration with provinces, territories and municipalities, the CRA continues to improve its tools and methods of obtaining more specific and useful information to enhance its ability to combat tax avoidance. The CRA also uses legal tools such as unnamed persons requirements to uncover unpaid income taxes and GST/HST on assignment sales of condominiums.
"For many hard-working middle class Canadians, buying a first home represents a great accomplishment. Most taxpayers follow the rules and it is essential that those who choose to ignore the laws face the consequences. The results we announce today demonstrate our government’s commitment to taking concrete action against those who break the rules.”
-The Honourable Diane Lebouthillier, Minister of National Revenue
Builders of new and substantially renovated residences or rental properties are required to collect and remit the GST/HST to the CRA when they sell, rent out for the first time, or appropriate the property for personal use. Additionally, purchasers of new residences must ensure they abide by the rules when applying for new housing rebates.
The CRA issues unnamed persons requirements to property developers and builders who have information about buyers involved in a pre-construction assignment sale. This information is used to identify taxpayers who may not be reporting correctly for both income tax purposes and GST/HST purposes.
Property flipping is not illegal; Canadians have the right to purchase and sell property for a profit. However, the income resulting from these transactions is considered business income and must be reported to the CRA.
The Canadian housing market is becoming more complex through pre-construction assignment sales and the real estate sharing economy (vacation rentals) and the CRA is committed to ensuring that tax obligations are met in these cases.
Office of the Minister of National Revenue
Canada Revenue Agency
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