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Canada's 2019 Budget Focuses On Real Estate Tax Compliance

by Mike Godfrey,, Washington

26 March 2019

Canadian Finance Minister Bill Morneau has made tax non-compliance in the real-estate market a major focus of his 2019 Budget.

Morneau tabled the Budget on March 19. In his speech, Morneau said that the Government will "take action to crack down on the people who break the rules – who evade taxes or use real estate for money laundering – making housing less affordable for the people who need it."

The Government will provide the CRA with CAD50m (USD37.5m) over five years to create four new dedicated residential and commercial real estate audit teams in high-risk regions, focusing in particular on British Columbia and Ontario. These teams will focus on ensuring that:

  • taxpayers report all sales of their principal residence on their tax returns;
  • any capital gain derived from a real estate sale, where the principal residence tax exemption does not apply, is identified as taxable;
  • money made on real estate flipping is reported as income;
  • commissions earned are reported as taxable income; and
  • for goods and services tax/harmonized sales tax purposes, builders of new residential properties remit the appropriate amount of tax to the CRA.

The Government expects this initiative to raise CAD68m over the next five years.

To improve the monitoring of real estate purchases and ensure that information is shared in a timely management, the Government will provide Statistics Canada with up to CAD1m over two years to conduct a comprehensive federal data needs assessment. The aim will be to further streamline data sharing between federal and provincial governments, to inform enforcement efforts on tax compliance and anti-money laundering.

The Financial Transactions and Reports Analysis Centre of Canada will expand its outreach and examinations in the real estate sector, with a focus on British Columbia, to improve the detection of money laundering activities.

To help with the deposit and costs associated with the purchase of a first home, the Government will increase the amount first-time buyers can withdraw from their Registered Retirement Savings Plan to purchase or build a home without having to pay tax on the withdrawal. The amount will rise from CAD25,000 to CAD35,000.

TAGS: compliance | Finance | tax | sales tax | tax compliance | real-estate | goods and services tax (GST) | audit | enforcement | Canada | services | Retire | Retirement

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