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Written by: Bryan Hubbell, CPA, CGA
What Are Your Federal Tax Compliance Obligations?
In case you haven’t heard, the real estate market in Canada is hot! In major cities like Vancouver and Toronto real estate prices are reaching new record highs almost daily.
To address questions being raised concerning the tax compliance obligations of buyers and sellers of Canadian real estate, the Canada Revenue Agency (CRA) recently released the following list of common myths concerning Canadian real estate transactions and the CRA’s role in administering the tax rules. (The original CRA posting can be found here.)
Canadian Real Estate Myths
Myth – The CRA has a role to play in reducing housing costs.
Fact – No, the CRA does not have any role to play concerning the affordability of real estate. The CRA has no influence over market-based or economic forces that influence the cost of housing, such as supply and demand, construction costs, and market speculation.
Rising real estate prices do, however, create an incentive for real estate flipping. The CRA has dedicated resources to ensure compliance with the tax rules for property sales and other real estate transactions. For more information on what the CRA is doing to ensure tax compliance rules are followed, go to, How does the CRA address non-compliance in the real estate sector.
Myth – Real estate flipping is illegal.
Fact – No, real estate flipping is not against the law. Flipping is a method of buying and selling real estate to earn income. Individuals may also use assignment clauses in real estate contracts to flip a property once or more before a final sale is made.
However, all profits from real estate flipping, including real estate commissions and appreciation in value (the difference between the purchase price and sale price), must be reported to the CRA.
Myth – The sale of a new or substantially-renovated home is GST/HST exempt if the home has remained vacant or has been occupied temporarily by the builder after it is completed.
Fact – No, they are not exempt. Generally, the GST/HST must be charged on sales of new or substantially-renovated homes that were built or substantially renovated for sale, even when the home has remained vacant or has been occupied temporarily by the builder after completion.
Builders may be surprised to learn that they are required to pay GST/HST on the fair market value of a new or substantially-renovated home that they occupy or rent out prior to sale. For more information on the GST/HST and housing, go to, GST/HST and housing.
Myth – Non-resident real estate investors do not have to pay Canadian income tax.
Fact – Yes, they do have to pay. A non-resident who sells any taxable Canadian property (including Canadian real estate) must notify the CRA of the sale no later than 10 days after the date of the sale and pay an amount to cover the estimated taxes on that sale. This is usually done by filing Form T2062 – Request by a Non-Resident of Canada for a Certificate of Compliance Related to the Disposition of Taxable Canadian Property.
A person who purchases Canadian real estate from a non-resident vendor needs to ensure that the vendor has fulfilled their CRA tax compliance obligations. If the non-resident vendor has not requested a certificate of compliance, the purchaser will be required to remit 25% of the purchase price of the real estate to the Receiver General, even if the vendor has been paid in full.
For more information on Canadian tax and non-residents, go to Non-residents of Canada.
Please contact Bryan Hubbell of the Manning Elliott Tax Team with any additional questions regarding tax compliance obligations and other complex tax rules.
Bryan Hubbell, CPA, CGA, is Senior Tax Manager, Manning Elliott LLP. To contact Bryan, please call him at 604-557-5759 or email him at firstname.lastname@example.org.
The above content is believed to be accurate as of the date of posting. Tax laws are complex and are subject to frequent changes. Professional advice should be sought before implementing any tax planning. Manning Elliott LLP cannot accept any liability for the tax consequences that may result from acting based on the information contained therein.