OREA continues pushing for the ability of Ontario REALTORS® to form personal corporations.
What is the issue
Registered salespeople are prevented from incorporating by two facets of the Real Estate and Business Brokers Act (REBBA), 2002.
First, REBBA, 2002 does not provide for the licensing of personal corporations as salespersons under the Act (Section 1.1). In addition, REBBA, 2002 does not permit a broker to pay commission to an “unregistered” entity (Section 30 c.).
In combination these sections prevent an individual salesperson from conducting business through a corporation and taking advantage of lower tax rates.
I’m a REALTOR®. What does this mean to me?
A Personal Real Estate Corporation (PREC) can be advantageous from an income tax perspective for high income salespeople. The corporate marginal tax rate for the $300,000 of active business income is approximately 25% lower than the top marginal rate on employment income. Therefore, the ability to incorporate would allow a real estate salesperson, dependant on their level of business income, to save money on their income tax.
It should however be noted that the costs associated with becoming incorporated are significant. For example, the paperwork required to meet regulations can be onerous, tax rules can be complex and corporations can be expensive and complicated to set up and maintain.
OREA is working with the Ministry of Consumer Services to implement changes to REBBA, 2002 that would allow REALTOR® salespeople to incorporate.
OREA believes that there are sound public policy reasons for permitting personal real estate corporations including: aligning the rights of real estate salespeople with other regulated professions, lowering taxes on Ontario businesses and helping members of the real estate profession cope with the introduction of the HST.
In addition, permitting personal real estate corporations will not affect consumer protection, have limited implications for provincial revenue and it will not require significant legislative resources.