In addition to managing strata assets and common areas, strata corporations (called “condominium corporations” elsewhere in Canada) sometimes generate income on the side. For example, strata corporations will often operate coin laundries, rent out party rooms or receive license fees for cell towers or solar panels.

Many strata corporations simply assume that they qualify as non-profit organizations (“NPOs”) under the Income Tax Act (the “ITA”) and thus do not need to pay tax on their income. However, NPO status is not automatic. Care must be taken that the activities of the strata corporation do not cause the corporation to lose this status.

The purpose of this update is to consider some of the requirements for a strata corporation to maintain its NPO status and discuss what sort of income-generating activity might either cause a strata corporation to no longer be tax exempt or result in tax for the strata lot holders themselves.

Basic Requirements

In order for a strata corporation to obtain tax exempt status as a NPO under the ITA it must meet certain requirements. These include, in paraphrase:

1.         the strata corporation must be organized and operated exclusively for any purpose except profit; and

2.         no part of the strata corporation’s income may be payable to any member of the strata corporation.

In addition, a strata corporation must file a T2 corporate tax return annually. If the assets of the strata corporation exceed $200,000 or meet certain other criteria, it must also file a Form T1044 with its T2. Many strata corporations do not file either of these forms, leaving them potentially open to penalties.


As noted above, strata corporations often earn income over and above strata fees (which are not considered income under the ITA). Some income generating activities which could put a strata corporation off-side the NPO requirements include operating a golf course or renting out a caretaker suite owned by the corporation to third parties. In these circumstances the Canada Revenue Agency (the “CRA”) has said that the strata corporation would no longer be organized and operated exclusively for any purpose except profit.

Importantly, under British Columbia’s Strata Property Act, the common areas in a strata are owned by the strata lot owners as tenants in common and not by the strata corporation itself. Thus, income from rentals of common property areas (such as rooves for cell towers or party rooms) might be considered income of the strata lot owners rather than the strata corporation. If so, the result of this would be that the rental or leasing activity would not jeopardize the NPO status of the strata corporation, but a proportionate share of this income would have to be reported by the strata lot owners in their personal tax returns.

Another risk comes from the use of the income. Often such income is used to reduce strata fees. If the income belongs to and is reported by the owners, this is not an issue. However, if the income belongs to the strata corporation, the result is that a portion of the strata corporation’s income is payable to members of the corporation, thus putting the corporation off-side the NPO requirements and potentially leaving the NPO open to revocation.

As one example, the CRA has said that income from a cell tower would either be income of the strata lot owners or, if not, might cause the strata corporation to no longer be tax exempt because the income is used to reduce strata fees.


Not all income-earning activity puts a strata corporation off-side the requirements above. Both the CRA and case law confirm that a NPO may earn a profit so long as this profit is incidental to and arising from activities directly connected to its non-profit objectives. As a result, unlike running the golf course, operating a coin laundry for owners and tenants would be incidental to its activities as a strata corporation and thus permissible under these rules.

The CRA has also stated that it is prepared to consider income from common areas owned by the strata lot owners to be tax-free income of the strata corporation where this income is “incidental” in the manner discussed above. This is a significant benefit, but care must be taken to determine whether the income-generating activity truly is incidental and whether it arises from activities directly connected to the non-profit objectives of the strata corporation.

Going Forward

First, it is important to seek professional advice before a strata corporation or other NPO begins activities which might put it off-side the NPO requirements. Often such issues can be resolved with careful tax planning.

In addition, these requirements are not straightforward and mistakes can happen, including neglecting to file a T2 or Form T1044.

In these circumstances, the good news is that the CRA has a “voluntary disclosures” program which, if the requirements are met, permits the CRA to waive any penalties owing if the entity comes forward voluntarily and outlines its errors or omissions. Even under this program, any tax owing must still be paid.

If you are interested in learning more about the voluntary disclosures program, or simply wish to receive advice on these or other tax matters, please do not hesitate to contact the author at

This article also appeared in the Vancouver Island Strata Owner's Association's November 2015 Bulletin. Read the full bulletin here .