Developers are finding it harder to sell newly-built homes in the Greater Toronto Area this spring.
More than $43.7 million in penalties have been assessed by Canada Revenue Agency (CRA) during the last three years for evading taxes in real estate transactions.
The agency says that audits have identified $592.6 million in additional taxes related to the real estate sector during that time. CRA auditors reviewed more than 30,000 files in Ontario and B.C.
In 2017-2018, it 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 says it has a number of ways to detect taxpayers who avoid paying taxes related to real estate transactions, collaborating with provinces, territories and municipalities. It also uses “legal tools such as unnamed persons requirements to uncover unpaid income taxes and GST/HST on assignment sales of condominiums,” says the agency in a statement.
The CRA issues unnamed persons requirements to property developers and builders who have information about buyers involved in pre-construction assignment sales. This information is used to identify taxpayers who may not be reporting correctly for both income tax purposes and GST/HST purposes, says the agency.
“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 agency says.
“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.”