The tax on agent fees will be calculated with HST if the close date of the trade is on or after July 1. We have consulted with CRA and they specifically told us not to automatically calculate taxes on the commission, and have not indicated that any changes are required to the tax applicable on agent’s fees, for fees paid to the office after July 1.

We know that sellers are going to be charged GST on their closings, therefore we provided the ability to override the tax rate on the Key Info screen. The onus is on the agent to prove the rate calculation to the office, and the office to enter the override once that proof has been provided. Please be aware that this will likely be a major issue for future audits from the Canada Revenue Agency and you must have documentation to prove why you charged less than the HST. This could be in the form of a checklist showing the various steps involved in the process or some other document to illustrate the 90% of the work that was done. Please do not rely on the word of the agent as the tax auditor in two years probably won’t accept this and you will be liable for the difference.

The brokerage enters into a transaction with a seller and is paid a commission for that. At the same time that a brokerage is completing the transaction with the seller, you are also entering into a simultaneous but distinct transaction with your agent, an independent contractor.

The Realty Management System does not provide the ability to change the tax rate on the agent fees based on the Tax Rate field on the Key Info screen, the fee taxes are charged based on E.1.3 settings. We appreciate the fact that this makes for some strange looking math on some deals straddling this date but to state that your office is providing a service where 90% of that service was provided before July 1, would require you to provide proof of the service and tax rate on each fee for each deal charged to your agents. Changing the fee to only be charged 5% GST greatly exposes you to an audit risk and you could be liable for the difference if the auditor determines taxes on fees have been miscalculated.

There is no overall financial impact on the realtor since if they are charged HST on their fees; they will get 100% of it back as an ITC when they submit their HST remittances to CRA.