Draft Rules Published For Tax "Crackdown" On Non-Compliant Short-Term Rentals

Canada's Department of Finance has released draft legislation and explanatory notes with the details of the government's plan to crack down, through the Income Tax Act, on non-compliant short-term rental properties.

In a previous blog post, we discussed the potential GST consequences that may arise from changing the use of a short-term rental property to long-term residential purposes. In this blog post, we will focus on the draft rules intended to crack down on short-term rental properties through the Income Tax Act. The draft legislation answers some questions but leaves other questions unanswered.

Background

Short-term rentals have exploded in Canada in recent years. It is estimated that there are almost 19,000 short-term rental properties in Toronto, Montreal, and Vancouver alone. Municipalities and provinces across Canada have imposed limits on short-term rentals in an effort to keep properties in the long-term residential market. For example, in Toronto,