Commission Rebates May Have Tax Implications

October 6, 2025

A real estate commission rebate is a portion of the real estate agent’s commission that is legally returned to the buyer after closing. This is a legitimate practice in Ontario, overseen by the Real Estate Council of Ontario (RECO), and must be put in writing, often in a Buyer Representation Agreement (BRA), and should be reviewed by the brokerage. It’s crucial to clarify the terms of the rebate, such as the exact amount and how it is calculated, before agreeing to work with an agent who offers one.

Under the Trust in Real Estate Services Act, 2002 (TRESA 2002), REALTORS® cannot provide any form of compensation to an unregistered third-party for activities that would be considered to be in furtherance of a trade. This restriction is explained in the Registrar’s Bulletin entitled Referral fees. However, a rebate or similar compensation may be provided to a brokerage’s client (i.e., buyer or seller) that is a party to the trade in question.

It is essential that REALTORS® comply with TRESA 2002 and its regulations no matter what marketing strategy they employ. If a REALTOR® rebates part or all of a commission, they must comply with TRESA 2002. Here are some important issues that clients/customers and REALTORS® should be aware of:

Commission Arrangements Binding On The Brokerage

Commission arrangements negotiated by brokers and salespersons are binding on the brokerage. If commission rebates are being offered, the details should be reviewed and approved by the broker of record as all trades are in the name of the brokerage.

Commission Rebate Agreement

A commission agreement with a client must comply with the requirements of the Code of Ethics and General provisions of the Trust In Real Estate Services Act 2002. Keeping written records of all aspects of the transaction, including the rebate, will help protect all parties if a dispute arises. Changing or confirming the commission after the original agreement requires appropriate documentation, presented to the client for signature.

Advertising Commission Rebates

When advertising a commission rebate, the terms of the rebate must be clearly stated. For example, the advertisement must include the amount of the rebate and when it is to be paid. If there are any restrictions, conditions or limitations on the rebate, they must be clearly specified. As with any advertisement, it cannot be false, misleading, or deceptive.

Providing Rebates May Have Tax Implications

Rebates to customers and clients may be issued in different ways, including:

    • the brokerage issuing a payment directly to the customer or client; and
    • the salesperson or broker issuing a payment directly to the customer or client.

No matter which method is used, there may be income tax or HST implications. If REALTORS® are considering offering rebates they should contact the Canada Revenue Agency to determine the tax implications for you and your clients. REALTORS® should advise your clients that there may be tax implications and to seek professional advice.

Commission rebates are a legitimate marketing tool and a way for REALTORS® to differentiate themselves in the marketplace. However, REALTORS® have a duty to ensure that the promotion, documentation and delivery of the rebate complies with TRESA 2002.  Failure to do so often results in disciplinary action. In addition, brokerages may establish their own policies and rules regarding rebates over and above TRESA 2002 requirements.

For information on commission reduction agreements, see my blog Commission Reduction Agreements.

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