Question Period Note: REAL ESTATE TRANSACTIONS AND NON-COMPLIANCE – BC/ON

Can the Minister update the House on what the Canada Revenue Agency is doing to ensure compliance in the real estate markets?

• The Canada Revenue Agency has taken significant steps to address tax cheating in real estate. It recognizes the importance of ensuring a stable housing market for all Canadians, while also working to improve tax fairness.

• In recent years, as increased real estate speculation was observed, the Agency has increased its real estate audits in the Greater Vancouver and the Greater Toronto areas and monitors the real estate situation in other increasingly active markets, such as Montreal.

• The Agency continues to work with its partners, including the provinces, to address the real estate tax non-compliance issues.

• To ensure that only eligible homeowners receive tax benefits, starting with the 2016 tax year, Canadians are required to report the sale of any principal residence.

Supplementary: British Columbia (B.C.)
• Since October 2015:
o The Agency completed the review of almost 8,000 files.
o The Agency audits of real estate transactions in B.C. have resulted in more than $572 million in audit adjustments.
o In B.C., the second quarter results for this year are $39.9 million higher compared to the same quarter last year.

Supplementary: Ontario
• Since October 2015:
o The Agency completed the review of more than 39,000 files.
o The Agency audits of real estate transactions in Ontario have resulted in more than $733 million in audit adjustments.
o In Ontario, the second quarter results for this year are $19.3 million higher compared to the same quarter last year.

Since early 2015, there has been significant media attention regarding real estate transactions and non-compliance. For example, there has been media focus in the Vancouver and Toronto areas regarding the effects that foreign investments are having on the housing market.

The Agency has identified pockets of tax compliance risk with respect to the purchase and/or resale of real estate, condominiums and interests in condominiums, which include:
• property flipping;
• questionable sources of funds;
• unreported goods and services tax/harmonized sales tax (GST/HST) on the sale of a new or substantially-renovated property;
• unreported capital gains; and
• unreported worldwide income.

While the Agency has always had a presence in the real estate sector, it is increasing its level of effort to address the heightened concerns. Part of this effort is evaluating the degree and extent of non-compliance to allow us to develop compliance strategies to address the risk.

Canadian real estate values have risen steadily over the last several years, particularly in Toronto and Vancouver where, recently, there has been considerable media attention on the affordability of housing.

In both British Columbia and Ontario, as well as in other parts of the country, audits are being conducted that focus on real property transactions.

Starting with the 2016 tax year, anyone who sells their principal residence needs to report the disposition of the property to the Agency on their income tax and benefit return.

From April 2015 to September 2019, the CRA reviewed over 47,000 income tax and GST/HST files related to real estate in the Greater Vancouver and Greater Toronto areas. The CRA identified over $1.3 billion in audit assessments or overstated GST/HST credits. This includes over $136 million in penalties assessed.

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