The CRA is on the Case
Even though Canada’s residential real estate market is making strong strides, the Canadian Revenue Agency is staying on top of the situation by observing real estate sales closely. With increased real estate audits and new rules for real estate transactions, the CRA is cracking down on potential tax dodgers, especially in the popular real estate markets of British Columbia and the Greater Toronto area. Specifically, the CRA is monitoring unreported GST/HST on new home sales, unreported capital gains, flipped properties, questionable sources of funds and claims for the new housing rebate.
To regain lost revenue from real estate tax evaders, the CRA reported the following statistics from their auditing efforts from April 2015 through September 2016.
1. In Ontario, the CRA completed 13,403 real estate audits with $210.4 million in recovered taxes.
2. In British Columbia, the CRA completed 2,366 real estate audits with $30.3 million in recovered taxes.
3. An additional 663 penalties were collected from taxpayers who knowingly made false statements on their tax returns for an extra $12.5 million in funds.
Moreover, the CRA recently reversed its policy stating that taxpayers did not have to report the sale of their principal residence, if they were eligible for the principal residence exemption, on their tax returns. Now, taxpayers can only claim the principal residence exemption if the sale and designation of the real estate transaction is placed on Schedule 3, the Capital Gains portion, of the tax returns.
On top of that, the CRA is actively pursuing tax evaders who attempt to take advantage of the new housing rebate by intentionally flipping properties. Instead, the new housing rebate is primarily for individuals who are buying or building a new house for their own primary residence or for a relative’s principal residence.
Overall, the CRA is taking a strong stand against real estate tax dodgers by observing questionable sales in Canada’s hottest real estate markets.