Feds scrutinize real estate deals for tax compliance

Monday, June 19, 2017

The federal government is stepping up its scrutiny of real estate deals in a crackdown on tax cheating, the Canada Revenue Agency (CRA) reported last Friday in a news release.

The enhanced enforcement focused on the Greater Toronto and Greater Vancouver real estate markets, where speculative activity appeared to be on the rise. Auditing that occurred between April, 2015, and March, 2017, saw the CRA review 21,000 files based on non-compliance risk. This uncovered unreported assessed income in excess of $329.4 million and resulted in more than $17 million in penalties that were largely concentrated in the Greater Toronto and Greater Vancouver real estate markets.

“Our Government has committed to protecting the fairness and integrity of the tax system for all Canadians, notably by cracking down on tax cheating in real estate transactions,” Minister of National Revenue Diane Lebouthillier said in the news release. “This means that, without exception, every taxpayer abides by the same tax laws.”

The federal government has taken other measures to curb tax cheating in real estate deals. In a change aimed at making sure only eligible home owners claim a principal residence exemption from paying taxes on capital gains, Canadians are now obligated to report the sale of principal residences to the CRA, as of the start of the 2016 tax year.

Builders and purchasers of new residences also face tax obligations. Builders must collect and remit GST/HST at the time of sale, while purchasers must respect the rules when claiming rebates.

The CRA indicated in the news release that its efforts to improve compliance in the real estate sector are ongoing, with plans to work closely with its municipal, provincial and territorial partners to fight tax evasion and avoidance through information gathering and sharing.

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