Personal Real Estate Corporations (PREC)

On November 19, 2019 the government introduced the Trust in Real Estate Services Act, 2019 in the Ontario legislature.  If passed by the legislature, it would update the Real Estate and Business Brokers Act, 2002, the legislation that sets out rules that govern Ontario’s real estate salespersons, brokers and brokerages.

The new provisions (if passed) would allow real estate agents to incorporate and to be paid through a corporation. Future regulations will outline the conditions and restrictions under which this might take place, but it is expected that the ownership of 100 percent or at a minimum a majority of shares be owned by the real estate professional.

The changes will not come into force for some time, which means that until the law is changed and brought into force, real estate brokerages will continue to have to pay remuneration to only individual brokers and salespeople. The new laws are not likely to come into effect until 2021.

If the law is passed, the biggest advantage that real estate professionals can expect from incorporation in Ontario is a tax deferral opportunity.  In Ontario, the corporate small business tax rate in 2019 is 12.5% (on the first $500,000).  When you compare this rate to the 50%+ rate for earners in the top personal tax bracket, there is a deferral of tax.

If you would like our assistance in deciding whether you would benefit from incorporating your real estate practice, be sure to contact us!

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