Section Strata Corporations and the Canada Revenue Agency

As is well known in the strata management industry, long standing practices of managing Sectioned Strata Corporations have been turned on their head and we are in the throes of change. While technically permitted, the practice of a Strata Management Brokerage being engaged by more than one related entity (Strata or one or more Sections thereof) is fraught with risk. With the inevitable comprised representation for some parties in cases of conflict, (which the most growth-driven strata management brokerages will deny being an issue) the result is that Sections are expanding the industry with their need for individual management engagements.

Out of this, a conflict has arisen with the Federal Income Tax Act, which does not recognize a Section as a legal entity. In practice, it means that a Section is unable to obtain a unique Business Number from the Canada Revenue Agency or to file a Corporate Tax Return (T2) on its own behalf. (A Section is not prevented from obtaining a modified Business Number for GST or Payroll purposes; it can operate functionally as a separate entity in these regards, but their Business Number will be a subsidiary of that of the Strata Corporation, provided one was issued to the Strata.)

At the core of the question is whether a Strata Corporation Section can be established as a “Person” under the Income Tax Act, creating a three way analysis between that Act, The Strata Property Act, and the Excise Tax Act.

A local bright light at the GST Rulings and Interpretation Division of the Canada Revenue Agency recently opined that under the Strata Property Act, a Section met the requirement of being a Corporation and a Separate Legal Entity by virtue of Sections 192 and 193, upon the filing of the Bylaw that creates the Section. Before this was confirmed in writing, they elected to formally withdraw from the question and recommend referring it to the Advance Income Tax Ruling and Technical Interpretations Service.

What to know about this service:

• Considerable time is needed to go through the instructions on how to proceed

• Considerable documentation must be prepared to submit the request

• The Fee from CRA is $100 per hour (plus GST), $155 per hour after 10 hours,

• The application must include an undertaking to pay it when it is finally calculated, and regardless of outcome

This is beyond the scope of a strata management agreement.

Contributor: Neil Sideen

Neil Sideen is a CGA and Controller at C & C Property Group Ltd.

Reference Material

• “Filing Requirements of a Strata Corporation” by Gillian Godson, CRA ; February 8, 2012 External Interpretation Document 2011-0424091E5(E)