Not exactly. This makes 0 difference.oasis100 wrote: ↑ The best way is actually for agents to have their own brokerage pay out the rebate to the client. The agent will only pay the taxes on what they received in their pockets. So there isn't any complications during tax time with deducting.
Mind you, not all brokerages do this for agents.
Hypothetical Scenario: $1M Property, 95/5 Broker/Agent split., 50-50 Cash Back split
Buyers Brokerage Charges Sellers Brokerage - 2.5% + HST = $28,250 (incl. HST) -- This is the total charged to the seller buy the buyers brokerage regardless.
Brokerage's cut - 5% - they keep: $1,250 + HST = $1,412.50
Remaining - $1,000,000*0.025 * 0.95 = $23,750.
50% Agents Split = $11,875 + HST = $13,418.75
50% CB Split = $11,875 Total.
Now you're probably wondering...what happened to the HST on the cashback split? Well it works like this.
Buyers Broker receives $3,250 worth of HST they have to remit in total.
Buyers Broker pays out 13% HST on Agents pay out = $1,543.75. This $1,543.75 is now a Input Tax Credit for the Broker, and is now due to the CRA by the Agent
Buyers Broker retains the HST on $1,250 = So has to remit the $162.50 as they normally would, net of credits.
But...because the buyer receiving cash back doesn't in theory have an HST number to charge the broker, there is no HST remitted to them, and at the same time no HST Credit. As such the portion that would go to the buyer is simply remitted directly by the Buyer's Broker.
In total essentially all you're doing is making the buyers broker pay out the HST to the government rather than the agent. This has no impact on the total amount charged to the Sellers.
Realtor (Investment Properties) - CPA, CA