Dear Tony: Our management company is charging us $800 for each of our trust accounts to file the new tax returns required for bare trusts. If a strata corporation is self managed or has a management company, is a strata corporation operating account, contingency or special levy a bare trust? Are we required to file this return?
Jenna M. Richmond
Great news on this front. CRA has cancelled the filing requirements for bare trusts for the year ending 2023. I suspect we will have to address this in the future however, so it’s worth looking at the implications. CHOA will monitor this closely as we anticipate changes to the legislation for the year ending 2024.
The first determining factor is whether or not a strata corporation is a trust and under the tax legislation, it appears they are not — they are a not-for-profit corporation and no entity or corporate trust has been created. This is not an express trust. The funds are held in the name of the strata corporation and they do not have a joint owner who becomes the beneficiary in the event the corporation ceases. The Real Estate Services Act, Rules and Regulations, requires a brokerage to manage each strata account separately in trust for that client. Whether it is operating, reserve or special levy, each account is held on behalf of that client with the legal name of the client identifying each account. “in trust for the owners, strata plan ABC1234”.
As such, they are not captured by the Trust rules as there is also no formal trust that has been established for the funds held. The held funds are only identified in trust for the client and the corporation to protect their identity and insulate them from third-party claims and to prevent pooled accounts.
All strata corporations, yes that includes even a duplex, are required to file an annual T2-short return along with a 1044 Information Certificate and to provide a copy of the annual financial report and attach and T5 interest statements of earnings for operating, special levies and reserves. This essentially captures the reporting for your funds held in trust.
In ÎÚÑ»´«Ã½, strata corporations with mixed use that includes commercial property, may also be required to collect GST on commercial use/rental pool strata fees. This is determined by the value of the annual strata fees paid by the commercial units. Mixed-use strata corporations are advised to contact ÎÚÑ»´«Ã½ Revenue Agency to determine if they are required to collect and remit GST on commercial unit strata fees, or where a rental pool is administered by the strata corporation.
As there are so many variations of strata corporations across ÎÚÑ»´«Ã½, such as a strata corporation that operates a marina, golf course, hotel, or other commercial activities, they create differing tax reporting obligations. Always refer your questions to a Chartered Professional Accountant and the CRA.
Tony Gioventu is executive director of the Condominium Home Owners Association.
