Inducement is defined under Canadian tax law as valuable benefits such as grants, subsidies, tax-free loans, refunds, and reimbursements offered to individuals, corporations, partners, government agencies or public organizations for the purpose of gaining business benefits or financial profits. Canadian tax law requires individuals or corporations that receive these benefits to pay income tax.
As Canadian tax law has a broad definition of Inducement, taxpayers can face difficulties in reporting their taxes and can even incur heavy fines unintentionally. For example, in the real estate industry, real estate agents may offer to pay for the buyer's moving expenses, legal fees, gift household appliances or furniture or even cash subsidies in order to encourage them to sign a contract. In property leasing, landlords may offer incentives such as rent-free periods, rent discounts, upgrading the rental unit, or even subsidies in order to retain good tenants. These all fall within the scope of Inducement, and both the recipients and givers of Inducement need to make reasonable tax arrangements and properly handle transaction documents prior to signing an agreement. It is important to avoid any omissions and to comply with tax laws. If you have any concerns in this regard, please consult our accountant.
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