Tax time is here, and your strata is not exempt.
Do strata corporations need to file income tax returns?
Yes. All strata corporations must file an income tax return each year, whether they pay taxes or not.
What are the filing requirements of the Canada Revenue Agency (CRA) for strata corporations?
A strata corporation must file a T2 Short Return for every tax year, even if there is no tax payable. Strata corporations may also need to file a T1044 Non-Profit Organization (NPO) Information Return with their T2 tax return. In addition, a strata corporation’s annual budget and financial statements must be attached to the T2 tax return.
Does a strata corporation need to obtain a business number?
In order to file a T2 return, a strata corporation will need to apply for a business number.
What is a business number?
The CRA uses a business number for identification purposes. To register for a business number go to the CRA’s website www.cra-arc.gc.ca.
When must a strata corporation file its tax return?
T2 returns are due 6 months after the fiscal year end.
Do strata corporations need to file a provincial income tax return in addition to the T2 Short Return?
No. The T2 Short Return also serves as a provincial income tax return.
How do we know if we are exempt from paying taxes?
Generally, a strata corporation is considered a non-profit organization that is exempt from paying taxes on its earnings.
Do strata corporations need to pay income tax on interest paid by financial institutions?
No. A budget surplus or interest earned on the operating or reserve funds is not a taxable income.
Are there some circumstances where residential strata corporations are both taxable and subject to GST?
Yes. If your strata corporation is earning income from activities that do not relate to the administration of the strata corporation, the strata corporation’s non-profit status could be challenged by the CRA.
For more information about the status of strata corporations as non-profit organizations, please see “Income of Strata corporations: How Not to Lose Tax-exempt Status” by tax lawyer Jonathan Wright as published by VISOA in the November 2015 Bulletin or click on the link provided below.
Do we need to keep copies of our income tax returns?
Yes. Strata corporations must retain copies of the T2 return and the T1044 return and attachments for a period of six years.
Do we need to provide copies of our income tax returns on request?
Yes. An owner, a tenant who has been assigned a landlord’s right or a person authorized in writing may request the strata corporation to make the tax returns available for inspection or provide copies as requested.
We have never filed income tax returns in the past. If we start filing now, will we have to pay a penalty?
Penalties and interest are assessed on taxes payable. For strata corporations that are exempt from income taxes, there is no penalty for failing to file income tax returns in the past.
For more information please contact the Canada Revenue Agency (CRA) at 1-800-959-2803 or www.cra-arc.gc.ca.