The Canada Revenue Agency (CRA) is taking more developers to court for information identifying pre-sale condo buyers who assigned their purchase contracts before completion. The move comes after the CRA successfully obtained court orders in July against the companies behind Marine Gateway and the Residences at West.
The latest federal court applications take aim at pre-sale buyers of units in Westbank’s Telus Garden development on Richards Street and Concord Pacific’s One Pacific building on Smithe. The applications come on the heels of the federal minister of national revenue getting court orders to compel the release of information from PCI Developments and the Executive Group this summer.
Federal court documents reveal that the CRA’s Business Intelligence and Quality Assurance (BIQA) division has put assignment agreements under a microscope after identifying “a potential area of non-compliance” over failing to declare financial windfalls from flipping units to other buyers before a condo’s construction has been completed.
“BIQA has identified developments in Vancouver, such as Marine Gateway, in respect of which it is likely that assignments have occurred,” the CRA’s Amandeep Sandhu stated in an affidavit.
The CRA based its determination on reviews of developers’ disclosure statements that provide for contract assignments, copies of assignment agreements obtained during audits, and the “existence of websites such as www.vancouverpresales.com, which provide online advertising services for these assignments.”
“Assignment listings can also be found on online classified websites such as www.craigslist.ca,” Sandhu’s affidavit states. “Once the CRA has obtained the identities of the Assignors and related documents, BIQA will conduct a risk assessment... Where the CRA determines that an Assignor has not complied with their duties and obligations under the [Income Tax Act] and/or [Excise Tax Act], CRA will take appropriate action which may include making a (re)assessment of the Assignor’s Income Tax and/or GST/HST returns.”
CRA letters sent to developers ask companies to voluntarily comply with the request for information without the need to go to court, but a developer can also “take the position that it neither consents nor opposes the application for an order authorizing the issuance of the requirement, or the Developer can oppose the application.”
Meanwhile, according to BC Assessment, units in Concord’s One Pacific development range from $551,000 (38 Smith Street, Unit 351) up to $2,767,000 (68 Smithe Street, Unit 2012). In the Telus Garden building, units range widely as well: from $747,000 for 777 Richards Street, Unit 601, up to $2,149,000 for 777 Richards Street, Unit 4901.
In an emailed statement, Concord’s senior vice-president of planning, Matt Meehan, told Business in Vancouver that “Concord is very supportive of CRA’s work. The CRA’s request for information is related to our customers. We understand that a number of projects have received a request-for-information letter from CRA. To protect our customers’ information and ensure any release will be compliant with the law, we have asked CRA to obtain a court order which we will adhere to.”
Jill Killeen, a public relations consultant with Westbank, also told BIV in an email that the company would comply with the CRA’s request.
For the CRA’s part, spokesman Bradley Alvarez told BIV in an email that the agency “reviews all real estate transactions that have been identified as high risk of tax non-compliance. One of the tools that the agency uses is the unnamed persons requirement referred to in the court documents. Other tools may also be used by the agency to obtain information in the course of its audits. This is not the first time the agency has sought information from a developer through court proceedings.
“The CRA has increased its efforts in the real estate sector, especially in British Columbia. The government recognizes the importance of ensuring a healthy, competitive and stable housing market for all Canadians, while also working to improve tax fairness.”