Blog | 17 Jan 2022

Important updates for investors in real estate properties.

By Kristine Del Rosario, Senior Tax Specialist | Tax

Based on a recent mandate letter issued by the government on December 16, 2021, real estate investors could be hit with various types of additional taxes.

Below are the key items to watch out for:

  1. Excessive rent surplus – Landlords required to disclose on their income tax returns the rent they receive pre and post renovation. If determined that the rent increase is excessive based on the renovations completed, the landlord may be required to pay a surtax.
  2. Anti-flipping tax – Not only will the income on the sale of the property be 100% taxable as regular income, rather than as a capital gain which is only 50% taxable, an anti-flipping tax will apply if the flipped property is held for less than 12 months.
  3. Review of the tax treatment for Real Estate Investment Trusts (REITs) – REIT holders pay taxes only when there are disbursements made from the REIT, and not on the rent generated within the REIT. In addition, REITs can be held within registered accounts (such as an RRSP), in which causes the taxes to be deferred. A review of the tax treatment of REITs may change the various tax incentives of these types of investments. 

The Prime Minister also included the following additional measures on the mandate letter:

  1. Development of policies to curb excessive profits from investment properties.
  2. Review of the down payment requirements for investment properties.
  3. Prevention of “renovictions” to protect tenants – “renovictions” is a term used to refer to an eviction that is carried out to renovate/repair a rental unit. 
  4. Temporary ban on foreign buyers. 

It is still uncertain as to whether the government will act upon these measures. However, it is important for real estate investors to be on the lookout and brace themselves for what could come.

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