Strata’s guest-suite income triggers various taxes
Dear Tony: Our strata council is getting mixed information from our owners, our accountant and our property manager. The accountant said we have to file a tax return, the property manager said it is not necessary because we don’t pay taxes, and our owners don’t want us to file anything to avoid being on the tax radar screen. We have a resort strata in the Okanagan with an 18-hole golf course for members and the public and we manage eight guest suites in the clubhouse that are accessible for resident use only, not the public. We have a business number and company name for the golf course, so we separate all of the commercial service from the strata under strata lot 1, and the guest house is part of our residential area. No one wants to pay taxes, but I am concerned that if we are not reporting our revenues correctly, we may be paying back taxes and get penalized.
Gillian, council president
It is true that strata corporations (condominium corporations in other provinces) are non-taxable corporations. However, strata corporations may and do pay taxes in a variety of ways, including income tax if the revenues are for commercial purposes and beyond the definitions set out under the Tax Act. There are also taxes that may be imposed for other activities and through other jurisdictions. For example, if your strata has mixed residential and commercial strata lots, depending on the value, the strata might be required to collect and remit GST on the commercial strata lot fees. Likewise, if there is a rental pool, those strata lots, even though they are residential units, may trigger GST on their strata fees. Provincial sales tax and hotel tax may also apply if a strata corporation is operating a specific number of accommodations.
A residential strata operating a single guest suite is not the concern. Your strata corporation operates eight guest suites and charges $75 a night for the suites. That triggers GST, PST and likely a hotel tax. Even though the strata is operating the suites only for residents and their guests, they are still operating a commercial enterprise.
Your strata should also be aware of the risks associated with operating the guest suites and confirm your liability insurance covers these activities, and your ratified rules or bylaws authorize the user rates that are being charged. The other side of taxation is strata corporations that generate significant revenues from commercial enterprises. These include items such as billboards or building advertising, public parking garages, communications leases, and activities such as your golf course owned by the strata and operating on strata lot 1.
Even though you have attempted to separate it from the strata, it is still a commercial entity of the strata corporation and subject to all federal and provincial tax legislation, labour relations legislation and safety legislation including WorkSafe and the B.C. Safety Authority. For information on taxation, go to: cra-arc.gc.ca or 2.gov.bc.ca/gov/content/taxes
Tony Gioventu is executive director of the Condominium Home Owners’ Association.