The strata management industry is undergoing significant changes, particularly regarding the management of Sectioned Strata Corporations. While it is technically permissible for a Strata Management Brokerage to represent multiple related entities (the Strata Corporation or individual Sections), this practice poses considerable risks. Conflicts of interest may arise, leading to compromised representation, though some growth-focused strata management firms deny this issue. As a result, Sections are increasingly seeking individual management services.

This situation creates a conflict with the Federal Income Tax Act, which does not recognize a Section as a separate legal entity. As a result, Sections cannot obtain a unique Business Number from the Canada Revenue Agency (CRA) or file a Corporate Tax Return (T2 and T1044) independently. However, a Section can obtain a modified Business Number for purposes like GST or payroll, but it remains a subsidiary under the Strata Corporation’s Business Number, if one has been issued.

At the heart of this issue is whether a Strata Corporation Section can be considered a “Person” under the Income Tax Act. This involves a complex analysis of the Income Tax Act, the Strata Property Act, and the Excise Tax Act.

A recent ruling by a CRA expert from the GST Rulings and Interpretation Division concluded that a Section could be considered a separate legal entity under the Strata Property Act, referencing Sections 192 and 193. However, before this was officially confirmed, they decided to withdraw and suggested referring the matter to the Advance Income Tax Ruling and Technical Interpretations Service.

The issue is that a strata corporation must file T2 and T1044 with CRA; however, a strata section is not required to file these.