April 4, 2015
Real estate is one of very few regulated professions in Ontario that cannot incorporate, but a recent bill introduced at Queen’s Park has been designed to change that.
The Ontario Real Estate Association (OREA) is working to promote a change to the legislation that would enable real estate salespeople across the province to take advantage of the business benefits of incorporation, such as lower tax rates.
The bill aims to bring fairness to the tax treatment of Ontario real estate professionals by allowing them to form personal real estate corporations. The association applauds the bill and is urging the provincial government to pass it into law. Currently, the law prohibits real estate salespeople from operating their business through a personal real estate corporation (PREC) under the Real Estate and Business Brokers Act, 2002 (REBBA).
Conservative MPP Todd Smith (Prince Edward-Hastings), introduced the Tax Fairness for Realtors Act, 2015, in February to the legislature. If passed into law, this bill would allow real estate salespeople to use personal corporations. The bill is being co-sponsored by Liberal MPP Mike Colle (Eglinton-Lawrence). The bill was previously introduced in the legislature by Smith last year, but the spring 2014 election stalled progress on the bill.
“We’re delighted that this issue is back in the spotlight,” says OREA president Patricia Verge. “Many professions already have the authority to form personal corporations, and this legislation is an important step on the road towards treating Ontario REALTORS® fairly. Many other provinces allow real estate salespeople to form personal corporations, and it’s time for Ontario to do the same.”
Other regulated professions in Ontario, including chartered accountants, lawyers, health professionals, social workers, mortgage brokers, insurance agents, architects and engineers, can form PRECs. We’re pleased to see members of both the governing and opposition parties supporting this legislation and we look forward to a debate on the bill.”
A recent study revealed that PRECs will produce a modest economic benefit rather than causing any significant revenue loss for the province. The Centre for Spatial Economics reported that PRECs would have a positive impact on provincial tax revenue and the economy. In its report, the centre concluded that PRECs would:
- Create between 33 and 89 net new jobs annually
- Increase provincial tax revenue by an annual average of between $800,000 and $2 million
- Contribute between $9 and $25 million per year to Ontario’s Gross Domestic Product.
“Personal real estate corporations will mean that Ontario can collect more provincial sales taxes,” adds Verge. “This means that PRECs will actually pay for themselves -- a benefit to everyone. We’re so pleased that members of two political parties are supporting the bill, and we urge the government to move forward and debate this important issue.”
Depending on their level of income, real estate salespeople who incorporate would be able to save money on their income tax bill by taking advantage of a lower corporate tax rate. Money saved on taxable income is typically reinvested in the corporation.
To read more about OREA’s advocacy issues, visit the Government Relations section of www.orea.com.
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