The beginning of October saw new tax changes aimed at foreign investors to Canada’s real estate market, and have been imposed to ensure that these investors abide by existing tax rules.
These changes also affect many Canadians residing in Vancouver. These new tax rules are very complex, and many Canadians are feeling unsure of what rules apply to them, and what to report when they sell property.
According to a report by Globe and Mail (by: Tim Cestnick) “The tax rules around principal residences are so complex that many Canadians simply don’t recognize when they might owe tax when they sell a property. Many have assumed that every sale of a residence is always tax-free thanks to the principal-residence exemption (PRE). And the taxman has not required Canadians to report the sale of a principal residence if the PRE will shelter the full gain from tax. The result has been that many have sold residences, have not reported the sale, have paid no tax, even in situations where tax should have been owing. These dispositions have gone largely undetected by the taxman. That’s changing.”
So, what does this mean for our clients? Under these new rules, you are now required to report every sale of a principal residence on your 2016 tax return (even if you don’t owe tax). Understanding the principal residence rules can be quite complicated, and that it why it is very important to discuss any changes to property with your accountant come tax time. We’ve also had clients in Vancouver and North Vancouver contact us regarding concerns about what type of documents to keep regarding the sale of their property. We remind these clients that keeping all receipts and invoices, and any other documents related to the sale or transfer of property is helpful.
Our accountants have been following these developments closely, and are happy to answer any questions you might have.