Renting a property in Canada can come with unexpected responsibilities, especially when your landlord lives abroad. Many tenants are unaware that they might be on the hook for handling part of their landlord’s tax obligations.
A non-resident landlord is someone who owns property in Canada but lives in another country for more than six months of the year. While these landlords are required to pay income tax on rental income earned in Canada, the responsibility to withhold part of the rent and remit it to the Canada Revenue Agency (CRA) can fall on you, the tenant.
As a tenant, if your landlord is a non-resident, you are required to withhold 25% of the rent for tax purposes. This withheld amount must then be remitted to the CRA as a part of complying with the Non-Resident Taxation requirements. This ensures that the landlord pays their due tax on rental income. The most important factor in this equation is that the tenant is AWARE the landlord is a non-resident. Ensure you are working with professionals that will cover the important background information.
How to Comply:
- Obtain a clear statement from your landlord about their residency status.
- If they are a non-resident, withhold 25% of your monthly rent as well as the reasoning behind such in writing.
- Remit the withheld amount to the CRA monthly.
- Complete and submit the necessary NR4 form, which indicates the amount you’ve withheld and paid to the CRA.
Tips for Tenants: To protect yourself:
- Always have a written agreement that states the landlord’s residency status.
- Keep thorough records of all withheld amounts and remittances sent to the CRA.
- Consider consulting a tax professional to ensure you are fully compliant with all legal requirements.
Most recently, a situation arose in Montreal where a tenant was informed by the CRA that he was on the hook for 6 years of income tax the landlord had failed to pay. The tenant informed the CRA he had no idea the landlord was a non resident of Canada but apparently that is not a viable excuse. The Department of Finance’s solution to not being able to reach the landlord is to put the full financial burden on the Canadian resident- the tenant. See link below for the related article:
https://www.theglobeandmail.com/real-estate/vancouver/article-foreign-landlord-fails-to-pay-taxes-cra-goes-after-tenant/
As a tenant, it’s crucial to be aware of your tax responsibilities when your landlord is not a resident of Canada. Staying informed and proactive can save you from unexpected financial and legal issues.
Have you had experiences with renting from a non-resident landlord? Share your stories or questions with us in the contact form below.
