In New Brunswick, Condominium Corporations are not registered as a business under the Business Corporations Act. And under the Canada Income Tax Act, a residential condominium corporation will generally qualify as a tax exempt non-profit organization (NPO). Condo corporations are still required to file a tax return, even though no taxes are payable. This applies to all condo corporations, regardless of the number of units. Generally the professional who completes the corporation’s audit or review of the financial statements will complete the return on the corporation’s behalf. The tax return will be filed using the condo corporation’s legal name (YCCC No. 99 or CC No. 699876), along with a copy of the Declaration.
CRA’s interpretation for non-profit status comes from the recognition that most residential condo corporations generate just enough income to offset their expenses. It is not usually the case for a condo corporation to generate excess revenue. So as long as revenue supports the operations of the condo corporation and does not significantly impact the condo’s budget, the tax-exempt status is upheld. Examples of acceptable revenue include: interest on investments; sale of Estoppel Certificates; re-sale of furniture and equipment; rental revenue from on-site rental suites, storage lockers, or parking spaces; and fines and interest charges on arrears.
However, there are some circumstances where a condominium corporation may lose their tax-exempt status. This can happen when a condo corporation creates an add-on business that generates profitable income and benefits for condo owners. For example, a residential condo corporation opens a restaurant in the building. If the restaurant provides profit to the condo corporation and subsidized meals to condo owners, the CRA’s view is that tax must be paid. In other words, a condo corporation cannot operate a for-profit business under the non-profit shelter of the corporation. Further examples are shown in the attached articles; Recent CRA Views on Condo Corporations as Non-Profit Organizations and Safeguarding a Non-Profit Condo’s Status.
Several interpretation bulletins have been published by the CRA to demonstrate what types of activities could put a condo’s tax-exempt status in jeopardy and what may not pose a risk. These bulletins have not been put to any legal tests. So, for now they are simply CRA’s view on what activities are permissible to maintain tax-exemption. And Provincial legislation could hold varying views.
For more information on condo issues or to learn more about managing your condo corporation, contact Condo-Link Services – 506-455-9207 or email firstname.lastname@example.org
Income Tax Act – condominiums
Income Tax Act – Non-Profit Organizations