Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
May 29, 1995
XXXXXXXXXX
Dear XXXXXXXXXX:
I am replying to your letter of March 30, 1995, concerning the taxation of interest income earned by condominium corporations.
Information Circular 79-7, The Condominium Corporation and Its Members, dated July 30, 1979, discussed the taxation of condominium corporations created under Canadian provincial legislation. Paragraph 5 of the circular dealt with interest earned on such a corporation's operating or reserve funds and stated that, in typical cases, there are no income tax consequences for the corporation or its members. However, in 1992, the Auditor General questioned this position.
The Department recently completed a review of this circular. During our review, we analyzed current condominium legislation and consulted with interested parties. A key distinguishing feature of a condominium corporation is that unit owners are required by law to contribute to operating and reserve funds. However, individual unit owners cannot demand a refund of, or direct the use of, such funds. As a result of our review, it has been determined that most residential condominium corporations will qualify as non-profit organizations, although a factual determination will always have to be made in each case. Therefore, they are statutorily exempt from Part I tax on interest earned on their operating or reserve funds and other incidental income. As Information Circular 79-7 no longer reflects the Department's views, it was cancelled on February 20, 1995. Interpretation Bulletin IT-496, Non-Profit Organizations, is in the process of being revised and the revisions will include comments on residential condominium corporations.
I trust that I have explained the Department's position regarding this matter.
Yours sincerely,
David Anderson, P.C., M.P.
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