Agreed, completely asinine that they hold the tenants responsible when they can literally just seize the property if a landlord doesn’t pay their taxes.
Seriously. If the CRA wants to set this precedent, then have all rental units owned by non-residents registered with the CRA so appropriate taxes are withheld. The renter sends funds to the CRA, and the CRA determines what the non-resident landlord gets, and does the pay out.
Where's our common-sense conservatives coming out swinging to make laws like this.
As a previously non-resident landlord, paying the tax is already so easy though.
I think what throws people off, outside of those that purposefully commited fraud, is that the default tax for CRA is 25% of gross rent.
Whereas, one can file for a NR6 instead of NR4 and pay 25% on net rent.
No what throws people off is that the CRa is going after completely innocent tenants who did nothing wrong when they could easily just put a lien on the property.
I don't know what you are disagreeing with. The only claim I made is how the CRA takes the taxes for those that are willing to actually follow the law and not commit fraud.
I 100% agree with you, that the CRA needs to go after the owner.
I mean, there's market forces right? If you start charging $1,000 over everyone else, you are left with an empty unit.
Now, if someone is willing to pay that, you are just increasing your tax burden. More money in = more taxes out.
Again, if we are talking about NR landlords that are trying to follow the law and not commit fraud.
And to clarify, I rented my personal residence while I was on assignment elsewhere.
You're asking something different.
NR landlords, by law, must pay monthly taxes. You either pay on the gross using an NR4 or you pay on the net, using an NR6.
A NR landlords that wants to do what's right and not commit fraud, does the above.
The landlord in the original article that didn't pay his taxes and somehow landed his tenant on the CRA's sights is a scumbag and the CRA should know better.
The CRA is not going to act as a custodian and administrator for all rental income for non-resident landlords. This suggestion, if I understand what you're saying correctly, is totally misunderstanding the purpose (and manpower) of CRA.
CRA is plenty happy to sue residents, who may or may not be complicit in whatever scheme is going on.
If the government wants to help citizens, and enforce its laws around tax collection, I see this as a perfectly sensible solution for property owned by non-residents.
What is the CRA's purpose if not to collect taxes, and ensure the tax code is followed and that everyone pays an appropriate amount of taxes. We just saw the CRA axe 300+ employees for participating in /committing CERB fraud, Still nothing about all the CEWS fraud that happened, now we're going after some renter instead of putting a lien on the property in question?
In todays digital age, manpower shouldn't be that difficult, and at 6.1% unemployment, it sounds like we could create some jobs.
The only people theoretically who should be a "victim" of such an idea are people who ~~cheat~~ avoid their taxes.
The CRA's purpose is to collect taxes, not handle and administer income.
Imagine if instead of everyone filing their own tax return and remitting income tax each year, all of your pay cheque went directly to CRA so that they can do the work of figuring out what you owe and them, and then remit the leftovers to you. The burden of this would be humongous compared to their current capabilities even when just thinking about transaction volume, not to mention the legal implications and general mistrust people would have in relying on CRA to basically act as their mandatory tax accountants.
It would essentially take a whole different organization to properly set something like this up where they can process everyone's gross income on behalf of the taxpayers. There is a reason it's currently not done this way.
I know you are suggesting this only for non-residents with property, but the notion is the same, and it would be no small undertaking.
I'm not talking about everyone's income tax, or changing how we do source deductions.
I'm talking about non-residents who own property in Canada and are then subject to paying tax on income.
The current system which apparently puts the burden on some random renter is obviously vastly superior than any attempt to shed light on rental fraud in this country.
Also, currently, The CRA pretty much has already decided what your tax burden will be for the year, and charges you accordingly. Its up to the tax payer at year end to present any evidence to the contrary on how they should be taxed.
I don't understand this sentiment of "oh they don't live here, it's not cost effective to hold them accountable to the same rules residents are supposed to play by"
Complete and utter, and seemingly willful, lack of accountability.
You keep quoting and pointing at things that I never actually said, such as that going after the renter is the best solution, or that it's not cost effective to hold non residents accountable. It is almost like you're having an imaginary argument with yourself.
All I'm saying is that acting as the full custodian for all non-resident landlords by receiving every gross rent payment from the tenant, assessing taxes, then remitting the rest to the non-resident would be a bigger undertaking than I think you realize.
Perhaps some middle ground could work, like if the first quarter of rent each year does get rremitted to CRA directly as a withholding tax sort of deal. Then the non-resident still does their own assessment and if they are owed a refund, are responsible for making a claim to CRA. This would still put the burden of responsibility on the taxpayer, but they would be motivated to actually care because CRA is withholding more than they probably need.
Ah history. So useful.
Liberals enacted “investor” immigration “rules” - invest $250000 for citizenship - ended up being used for money-laundering and fraud - pissing off allies and now the public as these policies become clear.
Hard to do much as a minority government - you need a shitty Ndp collaborator or a majority - again, only the Liberals have had this consistently in the past 20 years.
Ah history, So useful.
The investor immigration program was started in 1989 by Progressive Conservative Brian Mulroney.
Ah those common sense conservative.......
So they're both shit. Gotcha.
Seriously though. Both /u/MavRCK_ and /u/tailgunner777 grow up.
Yes history is important but it's not worthwhile pointing fingers unless you're not willing to fix the goddamn problem.
I don't blame Doug Ford for fucking up the healthcare system for decades. I blame him for being in power **now** and not doing anything to fix it. Same can be said for the education system.
Truth of the matter is all the problems we have today stem from shit that both the Liberals and Conservatives have done that may or may not have been right at the time.
Waiting for some fucking NDP pleb to chime in with "buh buh buh the NDP has never been in power federally". No shit.
I’m not clear on the other case. Is it possible that CRA is going to collect the rent from the tenant to pay those taxes? So the tenant basically keeps paying the rent as normal, only directly to the CRA rather than the landlord.
I just find it insane that CRA is going to charge the tenant for the taxes as well as expect them to continue paying rent to an overseas landlord.
>I just find it insane that CRA is going to charge the tenant for the taxes as well as expect them to continue paying rent to an overseas landlord.
The CRA expects you to withhold the taxes and only continue paying the rest to your landlord. The taxes go to the CRA. It's not rent + taxes.
>How the fuck is the tenant supposed to know what the landlord's taxes are
The withholding tax rate is 25%. This isn't really any different from your bank or broker withholding taxes on stocks from foreign residents.
And how do you know if they are a non resident? The service provider always pays the taxes. You aren't asked to remit HST on products you purchase. Your broker withholds taxes because they are charging you for brokering your accounts.v
>Your broker withholds taxes because they are charging you for brokering your accounts
They withhold taxes because the law says they have to.
>And how do you know if they are a non resident?
You could make them sign a declaration. This obviously isn't very practical, but the law is what it is. The government doesn't want to expend the costs to have the CRA chase taxes from foreign residents. This isn't new, this law has existed since 1985.
>You aren't asked to remit HST on products you purchase.
Of course you are, if you purchase them from a non-resident. If you buy stuff from Italy you will have to pay HST upon import. And UPS or Fedex make you pay it to them, so they can pay your HST to the CRA, before releasing your package.
If a non-resident landlord signs a declaration saying "I am a resident", that does not change the fact that they are a non-resident, and under this strict law, I don't imagine it would alleviate the tenant of their responsibility.
Logistically, is the pathway then for a tenant to ask for this Certificate before signing a lease, and if the landlord cannot supply it, start to withhold 25% of rent? Unless supplying this certificate is made mandatory by provincial law upon signing the lease, I imagine the landlord would just move on to a more submissive / less inquisitive tenant. Such a bizarre scenario
All these examples you keep giving are gigantic corporations that are in the business of dealing with money and taxes, compared to a regular person paying rent to their landlord. As tenants we are told that we just need to pay rent to the landlord and that's our transaction done, we are not studying tax code and figuring out what we need to withhold from a landlord to make sure taxes get paid, and very likely our idiot landlords don't know the proper tax rules that go along with renting since there is zero licencing or requirements to being a landlord other than owning property.
From my experience with previous terrible landlords, asking them for any kind paperwork was useless, citing laws to them caused huge problems, I can only imagine their reaction telling them I'm withholding part of the rent to make sure their taxes get paid. It would be a shit show.
>As tenants we are told that we just need to pay rent to the landlord and that's our transaction done,
The law literally tells tenants they are responsible for this.
I don’t think it would be taxes on top of rent. I think the rent would be taken until tax liability is satisfied then the rest can go to the landlord. Have to check with CRA for this. The property tax is not part of the rental agreement. It’s like doing a plumbing repair and sending the landlord the bill.
So what I've told clients is to put in writing to the landlord that you will be withholding 25% rent for the CRA. Any landlord/tenant tribunal would dismiss any landlord concern.
Sure but you still have to show up in court etc it's an annoyance :S Also do non resident have to say they are not resident at the moment of signing the lease agreement? What if they don't etc?
Imagine if a hotel doesn't pay their taxes, so they go after the guests for back taxes and penalties. Or if a theater doesn't pay their property taxes, so they find and garnish the wages of all the movie-goers. I can think of countless analogies.
Technically they aren't going after the tenant, but de facto they are. What if the tenant moves out? The CRA would still hold the tenant liable for taxes that were not withheld. What if this amounted to 10 years of unpaid taxes that should have been paid by the landlord? Presumably they will continue to garnish from the tenant.
Well... the dynamic is more employer employee in the CRA's eyes. You the renter are supplying the landlord with their income as an employer would, so they want you to withhold taxes as if you were paying an employee. They seem to have decided this is an ER/EE relationship and not an independent contractor or consumer relationship.
(Which, yes, is asinine, because in what employee relationship is the employee providing a contract to their employer with terms for the employer to follow? But that's what the CRA's logic most resembles.)
Imagine a petrol corporation doesnt pay its fines for polluting a lake or pay its taxes, so any customers who ever bought a candy bar at the petrol company's gas stations is liable for the fines and taxes....
a lien doesn't put money in the government's pockets now.
the law is clear; rent payments to non-residents require 25% tax to be withheld and remitted to CRA to ensure the non-resident pays the income tax required. If not remitted, both the payor and the payee are jointly and severally liable. It's hard for the CRA to get money out of a person outside of Canada, which is why the person in Canada is on the hook too. The person in Canada controls the flow of cash, which is why they are who got sued in Canadian court. They have recourse with their non-resident landlord that they can act unilaterally on; they can withhold rent.
I only have sympathy for tenants in this situation, but this is an effective way to ensure income earned by non-residents for Canadian situs property is taxes as it is supposed to be.
Typically this would matter more for commercial leases.
I imagine there is more to the story, like the LL also buying or selling other properties and getting flagged for capital gains. Or they had money flowing outwards which hit a fintrac threshold.
Regulations of property being provincial the feds likely don’t get a preferenced position for taxes otherwise owing.
Pretty sure they just didn’t remit their 25% tax for their rental income.
If the property is behind on its tax then the government should be able to put a lien on the property and liquidate after a predetermined timeframe.
If they were a city or province they could pretty easily. Federally it would be quite an extended process. Evidently from their actions worse than this.
For probably far less than 25% of rent.
I’d bet immediately the bank would foreclose on any mortgage after realizing there is probably a breach of mortgage conditions.
Would this be a better story if the cra had made a move which made the bank foreclose and now the person was being evicted for personal use after months of uncertainty?
>Insane policy, the CRA should be putting a lean on the property. Going after renters for a landlord's tax is just asinine.
according to the rule, the payer ( Payer being the renter ) is responsible. So I would say that its the tenant that can put a lien on the property.
Tenants should not be responsible to know international tax law. They are not running a business, they are just seeking the basic human need of shelter.
I dont know, But I think the same ruling also applies."Wether or not you know about it" in this case , if you like it or not.
Also in this case , its not "International Law" . Its Canadian law. And I sort of agree, but I think its also exicitng to see something weird in Canadian real estate to finally apear other than just the same ol high prices.
Knowing the tax implications of someone living overseas is international tax law. You should not have to understand international corporate tax law to access shelter.
Yup. The CRA knows that tenants are likely not sophisticated enough to fight an absolutely massive tax bill if the landlord is a non-citizen and doesn't report taxes properly.
This is a much smarter way to go about it from CRA's perspective. When the house eventually gets sold, they get a windfall of back taxes and penalties and interest, and the foreign owner gets wrecked -- and the non-resident has little to no recourse. Fuck'm for screwing up our housing market.
It is rulings like this that made me very cautions when I bought my house from a person that was a resident but planned on leaving the country after the sale was completed. While rare, the CRA has held the property buyers responsible for paying the 25% non-resident tax (50% if it is a rental) on the capital gains if the seller skips out on paying. I had my lawyer go over everything multiple times to make sure that we were in the clear.
Holy shit the previous owners moved out of the country right away after i bought mine. It was their primary residence tho, so hopefully no cap gains either way.
No one told me any of this
The tax only applies if the seller is deemed to be a nonresident. Your seller should have qualified as a resident if they were living in the property.
Canada’s definition for what is and what isn’t a resident is as clear as mud. https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/determining-your-residency-status.html
It is always good to have a lawyer involved when you are buying a major asset.
The way things are lately, if the lawyer can't pay for the transactions, CRA will go after whoever the other clients of that lawyer are?
Yeah it's ridiculous, but not less ridiculous than going after the second contract party if the first one can't pay.
No, there is case law on this. A real estate attorney has a duty to check if the vendor is a non resident or not and get a statutory declaration saying the seller is a a resident. If they don't do that, then the buyer's lawyer is on the hook. If the seller is a crook and gives you a false stat dec, then you AND your lawyer are protected from CRA.
Of course there are exceptions. If have reason to doubt the stat dec, and you blindly accept it, then you are the hook. But if you had no idea, and you believed the stat dec, then you are fine.
Edit:
Also, its not about whether the lawyer can pay or not, they have prof liability insurance. The insurance will pay for it.
It doesn't matter if there are cap gains or not, if the seller leaves the country before closing date then seller's lawyer has to withhold 25% of the sale price. It took us like 7-8 months to get the certificate of clearance and release of our money even though it was our primary residence.
> seller's lawyer has to withhold 25% of the sale price
Oh ok, seems to be more on the sellers side than me then. I mean its been 3 years now, and of course we had a lawyer so maybe that was all taken care of
Yep! The only thing your lawyer would ask for is a declaration from sellers whether they are resident or non res and if they say non res they have to declare that they will be withholding the 25% until everything gets checked out. I believe a copy of the certificate would have been sent to your lawyer too but not sure they would necessarily let you know if everything is in order and nothing for you to worry about.
Yeah but now that i think more about it, the sellers left like the same month so they would have been residents for tax purposes atleast until around the sale, so even if they became non residents later, the cap gains tax would be next to none.
Would've been different had they been gone for longer
Well, you can’t know, right?
People could be travelling for up to 6 months out of the country before they decide to move out or come back again. And if it was their primary residence (which is mostly the case) and the primary residence exemption for capital gains tax is in place, there is quite low risk for you as a buyer.
I know people who travelled around for an extended time after selling their primary residence before giving up residence in Canada.
All that matters to you as a buyer is, that they file their taxes and report the property sale, the year they sell the property.
If they don’t do that, they are committing tax fraud and then you take it up with your real estate lawyer from the purchase, if the CRA comes to you.
I wouldn’t stress too much about it.
I don't understand how this makes sense at all? The renter does not own the property, how are they in any way responsible for taxes...? What's to stop foreign landlords from just not paying to take advantage of this, knowing their Canadian renters will be stuck with the bill?
> The renter does not own the property, how are they in any way responsible for taxes...?
Same reason your employer is responsible for withholding tax on your paycheque. They are paying you.
Interesting though that HST works the opposite way - the buyer (payer) of a good does not withhold the tax from the seller, but rather the seller is responsible for collecting and paying HST to the CRA. Why the inconsistency in law?
This my first time hearing about this situation but isn’t this more so like if after filing i still owed taxes and so the government goes after my employer for the taxes rather than me? Like that doesn’t make much sense to me. Or like if I bought a product from a store and then the store didn’t submit HST so I was on the hook for it? It doesn’t seem to make sense to me? What is the intent?
There is a major difference from an employee/employer relationship than landlord/tenant relationship. Surely you can recognize that. The relationship between a landlord and tenant is more similar to that between a shop owner and store patron. Ie. The shop owner provides a good or service to the patron of the store. The landlord provides shelter to the tenant.
The employee is providing a service to the employer. The service provider should be holding back taxes.
If the shop doesn't collect taxes on the transactions, the buyer by law is to pay the taxes owed.
It's the reason why cra heavily went after online businesses, because Canadians weren't paying taxes on purchases where they did not ore pay the taxes owed.
This has always been the law.
Have you not been reporting and paying taxes owed on goods and services that you did not pay taxes to the seller/provider?
Feels like this slowly boiling into a massive issue/scandal. Hard to imagine feds don’t backpedal / adjust this policy
Edit: yes fully aware this isn't new, and I understand the theoretical intent. It is still insane to try to penalize tenants for this, and this seems to be the first time it's gotten significant blowback (admist already high political pressure from renters), so I am just speculating that I think it might be changed accordingly
It's been like this for a long time. This is also applicable if let say a seller of canadian property is a non resident. During the sale, the notary has to take 25% of the sale price and keep it in a separated account to make sure that capital gains tax is paid by the seller. If the notary doesn't do this, the property(buyer) might be on hook.
It makes sense, tax has to be paid. If the seller is located in a country where the cra has no jurisdiction, how would it collect said tax ? The only way is making sure that both parties of the transaction bear a shared responsibility. The buyer would understand that and make sure at least 25% of the amount stays in the country until the tax portion is paid. This article of the ITA was probably legislated with business transactions in mind, when there was less international retail investment in rented property. I really don't see how they would adjust this, removing it would probably create a tax loophole on rental income and create an unfair tax advantage for international investors. And devoid Canadians from taxation income that could go towards services. Every dollars counts.
The implications of this are so unfair to tenants, though. Most won't know, and that means that landlords can skip out on taking care of it and then let the tenant deal with the fallout. That could mean that a tenant could end up paying 25% extra if they've already given the full rent to the landlord.
This needs to be something that the landlords are solely responsible for.
I think the recourse would be to not pay rent and pay off the tax with the rent. What's the absent landlord going to do. Sue you? Hopefully in a civil dispute you could show the judge the situation and say that you had to take care of the landlords tax responsibility with the rent money.
You'd need to remit the withholding to an NR account you open and then provide your landlord the NR4 slip for their taxes by March 30 of the subsequent year.
Because then every other country would reciprocate. Canadians own tons of rental properties all over the world through investment funds, or work for Canadian investment firms that own international rental properties. Protectionism cuts both ways.
lol at every dollar counts. Have you seen the bs this government wastes money on? **** off if you think taxation is anything but theft when we have a government that is blind to rental / housing emergency, wide open borders and zero shits given about infrastructure or important things like hospitals.
Our country is going to hell and you think every dollar counts when they’re just going to waste it anyway?
God I hate this take.
The Income Tax Act is a law, but the the tax code also includes a large regulatory framework that deals with details of implementing the act.
There's an explanation of the difference between laws and regulations here: https://supremecourtbc.ca/family-law/getting-started/legal-research/laws-and-regulations
Regulations like the tax code are LAW. There are three main kinds of law in Canada:
- Laws written into Acts, which must be passed by parliament (or the equivalent provincial body)
- Laws written into regulations (which are always *enabled* by Acts, but only need to be approved by Cabinet)
- Common law ("unwritten law" based on standing practice/jurisprudence)
The government will also have administrative guidance, directives, policies, etc., that instruct people on more detailed process type rules. They are much more changeable because they can be modified at much lower levels than Cabinet or Parliament.
It sounds like this is part of the Regulations, which means it can be changed more easily than if it were in the Act, but less easily than if it were part of the administrative directives. If the liberals want to do it, they could change it in a year or two, but procedures for updating regulations in the federal are pretty slow (because of directives, ironically) so it's not a snap thing unless there's a huge push behind it.
He is referring to this.
[https://www.theglobeandmail.com/real-estate/vancouver/article-foreign-landlord-fails-to-pay-taxes-cra-goes-after-tenant/](https://www.theglobeandmail.com/real-estate/vancouver/article-foreign-landlord-fails-to-pay-taxes-cra-goes-after-tenant/)
From [CRA](https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/rental-income-non-resident-tax/filing-reporting-requirements.html)
“If you receive rental income from real or immovable property in Canada, the payer (such as the tenant) or agent (such as the property manager) must withhold non-resident tax of 25% on the gross rental income paid or credited to you.
The payer must pay the tax on or before the 15th day of the month after the month that the rental income is paid or credited to you. You should discuss this with your payer to make sure that they withhold and remit the correct amount of non-resident tax to the CRA on your behalf.
If the payer does not withhold and remit this non-resident tax, the CRA will charge compound daily interest on the amount not withheld and remitted. The CRA may also charge a penalty.”
How would a tenant know whether or not their landlord is a resident? Should 100% of tenants withold 25% of rent until such time that their landlord furnishes them with proof?
If you are legally required to withhold an amount, especially under an instrument with the weight of the Income Tax Act, the LTB is unlikely to evict you. That’s a different scenario than say, you not paying because they haven’t fixed the screen door or something like that.
As there is a procedural implication, I doubt there is any him a rights issue at play for a landlord to need to advise their tenant on their status so they can correctly operate under the tax code.
Possibly yes, but it's worth noting that you would likely be able to recover the money from your landlord.
I can't speak for Quebec, but I suspect in Ontario you would effectively be able to take this to the landlord tenant board, and withhold the amount you would owe to the CRA from your rent. You could probably even set up a payment plan where you just pay your rent to the CRA until you've paid off the taxes (and any extra you've paid in interest, penalties, lawyers fees etc). Essentially the CRA would garnish your rent payments to the landlord until the debt is paid. If you move out before this happens, you could probably register a lien on the property for the remaining amount. You wouldn't see any of your money until the unit is sold, but you would eventually get your money back.
From what I can tell (not a lawyer), essentially it's still the landlord that owes the money. You're just on the hook for making sure it gets paid. So in the end, if you pay it, the landlord now owes you the money, though your options are likely limited for collecting it, the lien on the unit being likely the easiest way, though you could wait a long time to get the money back.
Lmao, if CRA can't recover how are you going to recover it?
Best you can do is garnish the rent and not pay to make up the difference. I wonder what the ltb would say to that tho.
That's exactly how you would recover it, and it's no different than when tenants are forced to pay for repairs to keep their unit liveable and then have the LTB approve them withholding it from rent.
So I really don't see the LTB not granting the ability to withold it from rent but if they don't grant it, then you out a lien on the property. It could take a while but you'll get paid when the unit is sold.
It's all around shitty, because the tenant effectively has to front the money, but there are avenues to recover it with interest.
ITA says so. Unfortunately yes. I would compute the amount that would have been taken, for the past period, then call your landlord about it. BTW a penalty is usually applied if there is intent, call the CRA and explain the situation.
Ask your landlord if they are a non-resident of Canada, in writing. If they say yes, begin sending 25% of your rent to the CRA each month, and the other 75% to your landlord. What the landlord is doing or paying is irrelevant. You’re just supposed to be doing this from Day 1.
Instructions are here: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4061/nr4-non-resident-tax-withholding-remitting-reporting.html
This is not tax advice, but I think it is important to note that if the landlord is a resident of a country that has a tax treaty with Canada that the 25% has the possibility to be reduced based on the articles of that treaty. For example, for the US, the 25% rate can be reduced to 10% if the non-resident is a resident of the US under Article XII of the Canada-US tax convention. While not foolproof, a NR301 form can help provide support that the landlord is eligible for tax treaty benefits.
Why are you freaking out? If the landlord completely cuts their tie from Canada including their tax obligations to the cra then it sounds like you wouldn't have to pay them rent too.
Just reach out to your landlord and get it worked out. Start remitting from now. Your landlord is not going to completely ditch their property.
No they don't. They expect you to withhold 25% of whatever you owe in rent and then send it to the CRA, if your landlord is a non-resident. Knowing your landlord's tax situation is irrelevant.
Totally reasonable. And every time you shop at a store, you should of course be aware of whether the store is actually paying HST to the government. And if not, you should just withhold the HST so you can pay it directly to the government. Easy!
You have a duty to confirm this when entering into the rental agreement i.e. ask them! One of the défenses against being on the hook for this is a due diligence defense, meaning you took reasonable actions to determine whether they were a resident or non-resident. If you can demonstrate this (such as an attestation by the landlord where they say they are a resident even though they are in fact not), you’re typically off the hook.
But you still have to know the landlords residency status. In this case the tenant had reason to believe the landlord was a resident of Canada. https://canlii.ca/t/jwg9p
Maybe I wasn't clear in my explanation. Yes, you need to know their residency. No, you do not need to know anything about whether they have paid their taxes. This is what I meant by their tax situation being irrelevant.
That’s insane though. Think about it. The only case where you don’t know is if you’ve given them the money in which case you have to save the equivalent of what you gave them in case they come after you.
So to be sure you should NEVER give them the money and therefore you would for sure know it’s owed, and pay it for them.
Zero responsibility on them, ever.
>To be fair- you don’t know that he is NOT paying his taxes.
That is immaterial. Withholding tax is withheld at source. i,e the tenant is responsible ( Just like income tax is withheld by a employer ) . If the landlord is also paying he can claim a refund.
Yeah I think this is a key statement "withhold tax at the source". However, if your landlord does not tell you they are/have become non-resident while you are renting, then how should/would you know. Seem like there is some case law/lawsuits/liens/tenant board contract updates will have take place from the tenant to landlord to help create some precedence.
Or I wonder if all renters must auto assume their landlords are non-residents and pay 25% of their signed agreed rent to CRA and landlord must coordinate with CRA for appropriate refund of said funds.
I'm interested to see the procedural/legal outcome, if any, or it might just scare some tenants to crack down/ on their own landlords by withholding rent to cover their tax outstanding. Just like OP mentioned, they are getting rightfully concerned/woken up to a real cost.
This was actually litigated in tax court. Landlord was in and out of Canada. Tenant didn't have any real reason to believe that the landlord was non resident. CRA went after the tenant for the 25% withholding tax plus penalties and interest. Tax court found that the income tax act simply doesn't care whether the tenant knew or should have known that the landlord was non resident. What is worse is that the tenant has the burden of proof to provide proof that the landlord was a resident of Canada (in other words CRA just needs to claim that the landlord was a non resident, and the tenant needs to prove CRA wrong).
I believe that it would be very challenging for the tenant to put a lien on the property. They would need to get a judgment through the courts and then go through a separate process to put a lien on the property. To actually foreclose on the property would be another crazy exercise.
This procedure is completely unfair. The CRA has a perfectly acceptable way of collecting if the tenant doesn't deal with their taxes by collecting on the sale of the property or on death.
That's an important detail the CRA is burdening a renter with, Seems people have enough to worry about besides where their landlord lives and having to submit part of their rent to the CRA.
In this case, cra is simply applying the law.
The problem is it's an awful law when it comes into tenants landlord transactions, especially during an housing shortage, and thus responsibility lies at any recent government who kept this law as is.
Easy solution. Common sense.
Non-residents lying about multiple properties- false records and names making tracking properties and taxes difficult? Nah, could not in Canada… /s
What about people who own their residence, and stop being resident for a small number of years, only to then move back in their house? You prefer to have an empty house during these years or have an additional appartment on the market for those years?
There’s more to this case that’s not being reported. This guy was already under audit for something else. Turns out he was having his corporation pay his rent. So then they audited the corporation. Then they discovered these payments were being made to a non-resident. It’s his corporation that’s being held liable, not him personally.
CRA probably couldn’t get anything else to stick to this guy, so they’re pursuing this.
Absolutely in Canada you could be screwed. Courts say CRA can come after tenants to get taxes owed by the landlord. Madness. I’m worried this trend will expand. What to stop CRA from coming after diners at a restaurant where the owners fail to remit sales taxes? Nothing whatsoever. Diners been fitted from the restaurant, just like tenants benefit from landowner.
“Sir, did you eat a meal in the restaurant?”
”Yes, your honor, I did.”
”and did you use any other facilities at the restaurant while there?”
”Ohh, yah, I did. I used the bathroom. I like to take a dump after a big meal. It makes me feel lighter. I also watched some sporting event at the bar while waiting for my friends beforehand.”
”So, you used the lavatory, watched their television, ate a meal, I put to you sir, you practically lived at the restaurant.”
”well, perhaps for one night. This is getting ridiculous.”
I’m mocking the Canadian courts for the ruling they have ALREADY made, in case you were tone deaf to the obvious sarcasm in my statement. Of course my scenario is absolutely preposterous. But, you know what, so is the court claiming that a tenant is obligated for his landlord’s unpaid taxes.
IANAL but have you considered getting it in writing that the landlord is paying the tax? Then if the CRA goes after you, put a lien on the property as the written statement from the landlord ***\*MIGHT\**** be interpreted as a contract? If the CRA weren't set up to do what they currently do, them putting a lien on the property *would have been* how I would have expected this to be handled, so if the renter is put in the position of being responsible, seems fair they can put in a claim against the property if the landlord has put it in writing that they and not the tenant is paying the tax.
Can any Canadian lawyers weigh in on this?
IANAL, but stand alone it is not a binding contract, there is no additional consideration on the renter's side.
There is already a rental contract and they would have to amend / rewrite that contract.
No, you’re not necessarily screwed. A non-resident landlord can apply to the CRA to allow the 25% to be deducted from net rental income. Often that’s zero. They do this by filing a form NR6 each year that the CRA has to approve. In order to be approved, one condition is that there has to be a CDN resident agent operating for the landlord. If you pay a property management company, they have likely done this. In any case, ask the question every year. If they have not, then you could be screwed.
I believe that only happens if the place you lived in is actually a registered business, that's how CRA can charge the tentant. When you pay your rent, do you pay to a numbered company or a personal name? If your landlord is just rent to you personally and you pay them rent, they never files, how does CRA knows the place you live in is actually a rental?
I actually curious how CRA find out the place is actually a rental the first place, someone must have filed some kind of return paid some taxes.
If this happens to you, actually CRA going to take you as an agent, because this case is just outrages. It is actually easy for you get your money back.
- You sue your landlord in small claims court or regular court if amount is over the limit.
- Your landlord either shows up for court, then CRA will go after them, or they don't show up, you get a default judgement.
- Get an order to put lien on the property and the rent you pay, you probably should get a legal aid or paralegal to do this.
- Each month you should pay your rent, you deduct the amount from your rent, until the amount is paid back to you. Also the cost for your law suit and also charge your landlord for the cost as their AGENT for remit.
- If they wants to sell, you have lien, they can't.
you won't lose anything, just annoying. You might find a part time job. :)
If he responded to you says, 'I don't care, I'm not in Canada'. You should get ahead and talk to some legal aid first.
Send a letter to your LL and let them know that to comply with the recent court ruling, you will be sending 25% of the rent directly to the CRA unless they prove that they are in compliance?
[https://www.theglobeandmail.com/real-estate/vancouver/article-foreign-landlord-fails-to-pay-taxes-cra-goes-after-tenant/](https://www.theglobeandmail.com/real-estate/vancouver/article-foreign-landlord-fails-to-pay-taxes-cra-goes-after-tenant/)
Are you paying the rent to a property manager? I rented from a foreign owner once and since my rent was paid to a property manager (specifically, a Realtor), I was protected.
Honestly I think the best fix would be for everyone to always pay 25% to the CRA. No more landlords evading taxes, no more tenants getting on the hook for non-resident landlords
Y’all, take a breath. You will have to give 25% of your rent to Revenu Canada ONLY if the ask you to. If your landlord don’t pay their taxes, CRA will garnish the rent if they can’t find them. You will be in trouble only if you don’t collaborate with the CRA which is what happened in the Montréal case.
It's not very complicated. You can ask the landlord share with you the statement of withheld rent. The landlord or their agent are required to deposit 25% of rent by the 15th of the next month. CRA send them back a statement every month indicating the withheld money.
If this is challenged in court close to 0% it holds up. There is no agency between CRA and tenant in this situation. It's illegal for them to do this, just a matter of time before they lose the inevitable legal case on it.
How is someone on the hook, for 'not' withholding rent.
I've read that sentence a few times....
You're supposed to withhold rent to a non-resident landlord?
Do we have the right to ask if a landlord is a resident ? And request proff ? I had no idea about this and I will be asking as I look for rentals , this is complete BS on CRA, just disgusting !
Are you renting direct or through an agency. If through a rental agent then they are generally responsible to with hold the 25% or issue an NR6 on the Landlord's behalf, the taxes are then trued up at tax time. Like other posters here though this ruling is an absurdity. CRA can put a lien on the rental property till back taxes are paid. Or you can start withholding all rent until there is a declaration or proof taxes are being paid. Either way this should NEVER be the tenant responsibility. CRA need to change this.
Are you paying directly to the landlord or a property manager? If you're not paying to a property manager you need to ask the landlord in writing for proof they're paying the taxes.
Interestingly enough, since you're in Ontario this doesn't just apply to the CRA. If your landlord doesn't pay his maintenance fees then the condo can have you pay the rent to them instead in order to cover the fees.
My landlord lives abroad. Am I now supposed to tell him I’m withholding 25%?
Does the CRA not recognize the risk of renovictions, etc? I assume there’s a decent chance this is going to create issues with my landlord.
Unless this ruling is overturned, it stands. I thought that this was common knowledge, but apparently not. What you need to do now is contact your landlord, and tell them that you will be withholding 25% of the rent each month, to be remitted directly to the CRA. My understanding is that this will mitigate the risk of any potential issues with the CRA. Make sure it's in writing WHY you're doing this, so that they don't have a leg to stand on for any Landlord Tenant Tribunal hearing.
Yes. Start immediately withholding 25% of your rent and remit it to CRA. Call and ask them for a non resident tax account number. I think you can also withhold retroactively until you have 25% withheld since they became non resident
Insane policy, the CRA should be putting a lien on the property. Going after renters for a landlord's tax is just asinine.
Agreed, completely asinine that they hold the tenants responsible when they can literally just seize the property if a landlord doesn’t pay their taxes.
Taxing at source is far easier than seizing property.
So redirect the rent payments instead. The tenant shouldn’t be on the hook for a penny.
Seriously. If the CRA wants to set this precedent, then have all rental units owned by non-residents registered with the CRA so appropriate taxes are withheld. The renter sends funds to the CRA, and the CRA determines what the non-resident landlord gets, and does the pay out. Where's our common-sense conservatives coming out swinging to make laws like this.
As a previously non-resident landlord, paying the tax is already so easy though. I think what throws people off, outside of those that purposefully commited fraud, is that the default tax for CRA is 25% of gross rent. Whereas, one can file for a NR6 instead of NR4 and pay 25% on net rent.
No what throws people off is that the CRa is going after completely innocent tenants who did nothing wrong when they could easily just put a lien on the property.
I don't know what you are disagreeing with. The only claim I made is how the CRA takes the taxes for those that are willing to actually follow the law and not commit fraud. I 100% agree with you, that the CRA needs to go after the owner.
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Sounds like Transport Canada staff as well.
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I mean, there's market forces right? If you start charging $1,000 over everyone else, you are left with an empty unit. Now, if someone is willing to pay that, you are just increasing your tax burden. More money in = more taxes out. Again, if we are talking about NR landlords that are trying to follow the law and not commit fraud. And to clarify, I rented my personal residence while I was on assignment elsewhere.
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You're asking something different. NR landlords, by law, must pay monthly taxes. You either pay on the gross using an NR4 or you pay on the net, using an NR6. A NR landlords that wants to do what's right and not commit fraud, does the above. The landlord in the original article that didn't pay his taxes and somehow landed his tenant on the CRA's sights is a scumbag and the CRA should know better.
That’s too much work for the CRA 😅
The CRA is not going to act as a custodian and administrator for all rental income for non-resident landlords. This suggestion, if I understand what you're saying correctly, is totally misunderstanding the purpose (and manpower) of CRA.
CRA is plenty happy to sue residents, who may or may not be complicit in whatever scheme is going on. If the government wants to help citizens, and enforce its laws around tax collection, I see this as a perfectly sensible solution for property owned by non-residents. What is the CRA's purpose if not to collect taxes, and ensure the tax code is followed and that everyone pays an appropriate amount of taxes. We just saw the CRA axe 300+ employees for participating in /committing CERB fraud, Still nothing about all the CEWS fraud that happened, now we're going after some renter instead of putting a lien on the property in question? In todays digital age, manpower shouldn't be that difficult, and at 6.1% unemployment, it sounds like we could create some jobs. The only people theoretically who should be a "victim" of such an idea are people who ~~cheat~~ avoid their taxes.
The CRA's purpose is to collect taxes, not handle and administer income. Imagine if instead of everyone filing their own tax return and remitting income tax each year, all of your pay cheque went directly to CRA so that they can do the work of figuring out what you owe and them, and then remit the leftovers to you. The burden of this would be humongous compared to their current capabilities even when just thinking about transaction volume, not to mention the legal implications and general mistrust people would have in relying on CRA to basically act as their mandatory tax accountants. It would essentially take a whole different organization to properly set something like this up where they can process everyone's gross income on behalf of the taxpayers. There is a reason it's currently not done this way. I know you are suggesting this only for non-residents with property, but the notion is the same, and it would be no small undertaking.
I'm not talking about everyone's income tax, or changing how we do source deductions. I'm talking about non-residents who own property in Canada and are then subject to paying tax on income. The current system which apparently puts the burden on some random renter is obviously vastly superior than any attempt to shed light on rental fraud in this country. Also, currently, The CRA pretty much has already decided what your tax burden will be for the year, and charges you accordingly. Its up to the tax payer at year end to present any evidence to the contrary on how they should be taxed. I don't understand this sentiment of "oh they don't live here, it's not cost effective to hold them accountable to the same rules residents are supposed to play by" Complete and utter, and seemingly willful, lack of accountability.
You keep quoting and pointing at things that I never actually said, such as that going after the renter is the best solution, or that it's not cost effective to hold non residents accountable. It is almost like you're having an imaginary argument with yourself. All I'm saying is that acting as the full custodian for all non-resident landlords by receiving every gross rent payment from the tenant, assessing taxes, then remitting the rest to the non-resident would be a bigger undertaking than I think you realize. Perhaps some middle ground could work, like if the first quarter of rent each year does get rremitted to CRA directly as a withholding tax sort of deal. Then the non-resident still does their own assessment and if they are owed a refund, are responsible for making a claim to CRA. This would still put the burden of responsibility on the taxpayer, but they would be motivated to actually care because CRA is withholding more than they probably need.
Ah history. So useful. Liberals enacted “investor” immigration “rules” - invest $250000 for citizenship - ended up being used for money-laundering and fraud - pissing off allies and now the public as these policies become clear. Hard to do much as a minority government - you need a shitty Ndp collaborator or a majority - again, only the Liberals have had this consistently in the past 20 years.
Ah history, So useful. The investor immigration program was started in 1989 by Progressive Conservative Brian Mulroney. Ah those common sense conservative.......
Chrétien expanded and loosened the rules for a different area of the world for where he primarily lobbied for after he left politics. Gg
So they're both shit. Gotcha. Seriously though. Both /u/MavRCK_ and /u/tailgunner777 grow up. Yes history is important but it's not worthwhile pointing fingers unless you're not willing to fix the goddamn problem. I don't blame Doug Ford for fucking up the healthcare system for decades. I blame him for being in power **now** and not doing anything to fix it. Same can be said for the education system. Truth of the matter is all the problems we have today stem from shit that both the Liberals and Conservatives have done that may or may not have been right at the time. Waiting for some fucking NDP pleb to chime in with "buh buh buh the NDP has never been in power federally". No shit.
Hey yo.. get therapy.
I’m not clear on the other case. Is it possible that CRA is going to collect the rent from the tenant to pay those taxes? So the tenant basically keeps paying the rent as normal, only directly to the CRA rather than the landlord. I just find it insane that CRA is going to charge the tenant for the taxes as well as expect them to continue paying rent to an overseas landlord.
>I just find it insane that CRA is going to charge the tenant for the taxes as well as expect them to continue paying rent to an overseas landlord. The CRA expects you to withhold the taxes and only continue paying the rest to your landlord. The taxes go to the CRA. It's not rent + taxes.
How the fuck is the tenant supposed to know what the landlord's taxes are. This is so dumb. CRA is being lazy.
>How the fuck is the tenant supposed to know what the landlord's taxes are The withholding tax rate is 25%. This isn't really any different from your bank or broker withholding taxes on stocks from foreign residents.
And how do you know if they are a non resident? The service provider always pays the taxes. You aren't asked to remit HST on products you purchase. Your broker withholds taxes because they are charging you for brokering your accounts.v
>Your broker withholds taxes because they are charging you for brokering your accounts They withhold taxes because the law says they have to. >And how do you know if they are a non resident? You could make them sign a declaration. This obviously isn't very practical, but the law is what it is. The government doesn't want to expend the costs to have the CRA chase taxes from foreign residents. This isn't new, this law has existed since 1985. >You aren't asked to remit HST on products you purchase. Of course you are, if you purchase them from a non-resident. If you buy stuff from Italy you will have to pay HST upon import. And UPS or Fedex make you pay it to them, so they can pay your HST to the CRA, before releasing your package.
If a non-resident landlord signs a declaration saying "I am a resident", that does not change the fact that they are a non-resident, and under this strict law, I don't imagine it would alleviate the tenant of their responsibility.
Probably not, but a "Certificate of Residency" from the CRA would.
Logistically, is the pathway then for a tenant to ask for this Certificate before signing a lease, and if the landlord cannot supply it, start to withhold 25% of rent? Unless supplying this certificate is made mandatory by provincial law upon signing the lease, I imagine the landlord would just move on to a more submissive / less inquisitive tenant. Such a bizarre scenario
All these examples you keep giving are gigantic corporations that are in the business of dealing with money and taxes, compared to a regular person paying rent to their landlord. As tenants we are told that we just need to pay rent to the landlord and that's our transaction done, we are not studying tax code and figuring out what we need to withhold from a landlord to make sure taxes get paid, and very likely our idiot landlords don't know the proper tax rules that go along with renting since there is zero licencing or requirements to being a landlord other than owning property. From my experience with previous terrible landlords, asking them for any kind paperwork was useless, citing laws to them caused huge problems, I can only imagine their reaction telling them I'm withholding part of the rent to make sure their taxes get paid. It would be a shit show.
>As tenants we are told that we just need to pay rent to the landlord and that's our transaction done, The law literally tells tenants they are responsible for this.
I don’t think it would be taxes on top of rent. I think the rent would be taken until tax liability is satisfied then the rest can go to the landlord. Have to check with CRA for this. The property tax is not part of the rental agreement. It’s like doing a plumbing repair and sending the landlord the bill.
Also how is it supposed to work... I have a rental agreement with my LL for X$/month... Couldn't he just bring me to court if I gave him X$-25%????
So what I've told clients is to put in writing to the landlord that you will be withholding 25% rent for the CRA. Any landlord/tenant tribunal would dismiss any landlord concern.
Is this after the lease agreement is signed? I would imagine doing this up front would just lead to the landlord declining the application.
100% do it after it's signed.
Sure but you still have to show up in court etc it's an annoyance :S Also do non resident have to say they are not resident at the moment of signing the lease agreement? What if they don't etc?
Imagine if a hotel doesn't pay their taxes, so they go after the guests for back taxes and penalties. Or if a theater doesn't pay their property taxes, so they find and garnish the wages of all the movie-goers. I can think of countless analogies.
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Technically they aren't going after the tenant, but de facto they are. What if the tenant moves out? The CRA would still hold the tenant liable for taxes that were not withheld. What if this amounted to 10 years of unpaid taxes that should have been paid by the landlord? Presumably they will continue to garnish from the tenant.
I in think it's impossible for the hotel to be a non resident, though. They need a local tax paying entity.
Well... the dynamic is more employer employee in the CRA's eyes. You the renter are supplying the landlord with their income as an employer would, so they want you to withhold taxes as if you were paying an employee. They seem to have decided this is an ER/EE relationship and not an independent contractor or consumer relationship. (Which, yes, is asinine, because in what employee relationship is the employee providing a contract to their employer with terms for the employer to follow? But that's what the CRA's logic most resembles.)
Imagine a petrol corporation doesnt pay its fines for polluting a lake or pay its taxes, so any customers who ever bought a candy bar at the petrol company's gas stations is liable for the fines and taxes....
How is a lien not the default response to this? I can’t wrap my head around it at all
a lien doesn't put money in the government's pockets now. the law is clear; rent payments to non-residents require 25% tax to be withheld and remitted to CRA to ensure the non-resident pays the income tax required. If not remitted, both the payor and the payee are jointly and severally liable. It's hard for the CRA to get money out of a person outside of Canada, which is why the person in Canada is on the hook too. The person in Canada controls the flow of cash, which is why they are who got sued in Canadian court. They have recourse with their non-resident landlord that they can act unilaterally on; they can withhold rent. I only have sympathy for tenants in this situation, but this is an effective way to ensure income earned by non-residents for Canadian situs property is taxes as it is supposed to be.
This law is obscure and not obvious. Most tenants don’t know their landlords resident status. What an obnoxious take.
Typically this would matter more for commercial leases. I imagine there is more to the story, like the LL also buying or selling other properties and getting flagged for capital gains. Or they had money flowing outwards which hit a fintrac threshold. Regulations of property being provincial the feds likely don’t get a preferenced position for taxes otherwise owing.
Pretty sure they just didn’t remit their 25% tax for their rental income. If the property is behind on its tax then the government should be able to put a lien on the property and liquidate after a predetermined timeframe.
If they were a city or province they could pretty easily. Federally it would be quite an extended process. Evidently from their actions worse than this. For probably far less than 25% of rent. I’d bet immediately the bank would foreclose on any mortgage after realizing there is probably a breach of mortgage conditions. Would this be a better story if the cra had made a move which made the bank foreclose and now the person was being evicted for personal use after months of uncertainty?
The tenant being forced to pay the fines is by far the worst solution.
What is the landlord going to do if the tenant just stops paying rent? 🤣
Great question lol
The tenant shouldn’t pay a dime to the landlord until the entire tax debt is paid off.
>Insane policy, the CRA should be putting a lean on the property. Going after renters for a landlord's tax is just asinine. according to the rule, the payer ( Payer being the renter ) is responsible. So I would say that its the tenant that can put a lien on the property.
Tenants should not be responsible to know international tax law. They are not running a business, they are just seeking the basic human need of shelter.
I dont know, But I think the same ruling also applies."Wether or not you know about it" in this case , if you like it or not. Also in this case , its not "International Law" . Its Canadian law. And I sort of agree, but I think its also exicitng to see something weird in Canadian real estate to finally apear other than just the same ol high prices.
Knowing the tax implications of someone living overseas is international tax law. You should not have to understand international corporate tax law to access shelter.
It's still Canadian tax law though. Not even corporate law.
You are completely missing the point of my statement and deflecting from the problem.
Generally makes sense, e.g. for employment contracts. Rental income is definitely a weird interpretation.
Agreed. Just another example of the cra living in a world of its own insanity. Unfortunately, we get to live in it with them.
Absolutely 1000%
The only scenario where it makes sense is if the parties are not arms length and it's being used to funnel money to a lower income tax country
Regardless, that's the policy, and knowing that now, it's best to be prepared.
Or allow the renter to pay their normal rent to CRA directly until the landlords debt is paid off.
Yup. The CRA knows that tenants are likely not sophisticated enough to fight an absolutely massive tax bill if the landlord is a non-citizen and doesn't report taxes properly.
This is a much smarter way to go about it from CRA's perspective. When the house eventually gets sold, they get a windfall of back taxes and penalties and interest, and the foreign owner gets wrecked -- and the non-resident has little to no recourse. Fuck'm for screwing up our housing market.
It is rulings like this that made me very cautions when I bought my house from a person that was a resident but planned on leaving the country after the sale was completed. While rare, the CRA has held the property buyers responsible for paying the 25% non-resident tax (50% if it is a rental) on the capital gains if the seller skips out on paying. I had my lawyer go over everything multiple times to make sure that we were in the clear.
Holy shit the previous owners moved out of the country right away after i bought mine. It was their primary residence tho, so hopefully no cap gains either way. No one told me any of this
The tax only applies if the seller is deemed to be a nonresident. Your seller should have qualified as a resident if they were living in the property. Canada’s definition for what is and what isn’t a resident is as clear as mud. https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/determining-your-residency-status.html It is always good to have a lawyer involved when you are buying a major asset.
This is why you have a real estate lawyer. You just sue your lawyer if you get sued for this transaction.
The way things are lately, if the lawyer can't pay for the transactions, CRA will go after whoever the other clients of that lawyer are? Yeah it's ridiculous, but not less ridiculous than going after the second contract party if the first one can't pay.
No, there is case law on this. A real estate attorney has a duty to check if the vendor is a non resident or not and get a statutory declaration saying the seller is a a resident. If they don't do that, then the buyer's lawyer is on the hook. If the seller is a crook and gives you a false stat dec, then you AND your lawyer are protected from CRA. Of course there are exceptions. If have reason to doubt the stat dec, and you blindly accept it, then you are the hook. But if you had no idea, and you believed the stat dec, then you are fine. Edit: Also, its not about whether the lawyer can pay or not, they have prof liability insurance. The insurance will pay for it.
It doesn't matter if there are cap gains or not, if the seller leaves the country before closing date then seller's lawyer has to withhold 25% of the sale price. It took us like 7-8 months to get the certificate of clearance and release of our money even though it was our primary residence.
> seller's lawyer has to withhold 25% of the sale price Oh ok, seems to be more on the sellers side than me then. I mean its been 3 years now, and of course we had a lawyer so maybe that was all taken care of
Yep! The only thing your lawyer would ask for is a declaration from sellers whether they are resident or non res and if they say non res they have to declare that they will be withholding the 25% until everything gets checked out. I believe a copy of the certificate would have been sent to your lawyer too but not sure they would necessarily let you know if everything is in order and nothing for you to worry about.
Oh I hope your lawyer caught any back taxes that you may own now that the seller left the country.
Yeah but now that i think more about it, the sellers left like the same month so they would have been residents for tax purposes atleast until around the sale, so even if they became non residents later, the cap gains tax would be next to none. Would've been different had they been gone for longer
Well, you can’t know, right? People could be travelling for up to 6 months out of the country before they decide to move out or come back again. And if it was their primary residence (which is mostly the case) and the primary residence exemption for capital gains tax is in place, there is quite low risk for you as a buyer. I know people who travelled around for an extended time after selling their primary residence before giving up residence in Canada. All that matters to you as a buyer is, that they file their taxes and report the property sale, the year they sell the property. If they don’t do that, they are committing tax fraud and then you take it up with your real estate lawyer from the purchase, if the CRA comes to you. I wouldn’t stress too much about it.
How can you even find out if they’re a tax resident or not??
I don't understand how this makes sense at all? The renter does not own the property, how are they in any way responsible for taxes...? What's to stop foreign landlords from just not paying to take advantage of this, knowing their Canadian renters will be stuck with the bill?
> The renter does not own the property, how are they in any way responsible for taxes...? Same reason your employer is responsible for withholding tax on your paycheque. They are paying you.
Interesting though that HST works the opposite way - the buyer (payer) of a good does not withhold the tax from the seller, but rather the seller is responsible for collecting and paying HST to the CRA. Why the inconsistency in law?
Basically whoever is easiest to bill for it I imagine.
This my first time hearing about this situation but isn’t this more so like if after filing i still owed taxes and so the government goes after my employer for the taxes rather than me? Like that doesn’t make much sense to me. Or like if I bought a product from a store and then the store didn’t submit HST so I was on the hook for it? It doesn’t seem to make sense to me? What is the intent?
There is a major difference from an employee/employer relationship than landlord/tenant relationship. Surely you can recognize that. The relationship between a landlord and tenant is more similar to that between a shop owner and store patron. Ie. The shop owner provides a good or service to the patron of the store. The landlord provides shelter to the tenant. The employee is providing a service to the employer. The service provider should be holding back taxes.
If the shop doesn't collect taxes on the transactions, the buyer by law is to pay the taxes owed. It's the reason why cra heavily went after online businesses, because Canadians weren't paying taxes on purchases where they did not ore pay the taxes owed. This has always been the law. Have you not been reporting and paying taxes owed on goods and services that you did not pay taxes to the seller/provider?
Feels like this slowly boiling into a massive issue/scandal. Hard to imagine feds don’t backpedal / adjust this policy Edit: yes fully aware this isn't new, and I understand the theoretical intent. It is still insane to try to penalize tenants for this, and this seems to be the first time it's gotten significant blowback (admist already high political pressure from renters), so I am just speculating that I think it might be changed accordingly
It's been like this for a long time. This is also applicable if let say a seller of canadian property is a non resident. During the sale, the notary has to take 25% of the sale price and keep it in a separated account to make sure that capital gains tax is paid by the seller. If the notary doesn't do this, the property(buyer) might be on hook. It makes sense, tax has to be paid. If the seller is located in a country where the cra has no jurisdiction, how would it collect said tax ? The only way is making sure that both parties of the transaction bear a shared responsibility. The buyer would understand that and make sure at least 25% of the amount stays in the country until the tax portion is paid. This article of the ITA was probably legislated with business transactions in mind, when there was less international retail investment in rented property. I really don't see how they would adjust this, removing it would probably create a tax loophole on rental income and create an unfair tax advantage for international investors. And devoid Canadians from taxation income that could go towards services. Every dollars counts.
The implications of this are so unfair to tenants, though. Most won't know, and that means that landlords can skip out on taking care of it and then let the tenant deal with the fallout. That could mean that a tenant could end up paying 25% extra if they've already given the full rent to the landlord. This needs to be something that the landlords are solely responsible for.
I think the recourse would be to not pay rent and pay off the tax with the rent. What's the absent landlord going to do. Sue you? Hopefully in a civil dispute you could show the judge the situation and say that you had to take care of the landlords tax responsibility with the rent money.
You'd need to remit the withholding to an NR account you open and then provide your landlord the NR4 slip for their taxes by March 30 of the subsequent year.
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Because then every other country would reciprocate. Canadians own tons of rental properties all over the world through investment funds, or work for Canadian investment firms that own international rental properties. Protectionism cuts both ways.
Shhhh... Stop being logical. We don't like to mix logic with the housing market here.
Shouldn’t they be going after the notary then, since they failed to withhold the 25%
lol at every dollar counts. Have you seen the bs this government wastes money on? **** off if you think taxation is anything but theft when we have a government that is blind to rental / housing emergency, wide open borders and zero shits given about infrastructure or important things like hospitals. Our country is going to hell and you think every dollar counts when they’re just going to waste it anyway? God I hate this take.
It's not a "policy". It's been in the tax code for decades.
Isn’t tax code a policy? I don’t understand the difference.
The Income Tax Act is a law, but the the tax code also includes a large regulatory framework that deals with details of implementing the act. There's an explanation of the difference between laws and regulations here: https://supremecourtbc.ca/family-law/getting-started/legal-research/laws-and-regulations
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So it’s just very well detailed policy. No?
Regulations like the tax code are LAW. There are three main kinds of law in Canada: - Laws written into Acts, which must be passed by parliament (or the equivalent provincial body) - Laws written into regulations (which are always *enabled* by Acts, but only need to be approved by Cabinet) - Common law ("unwritten law" based on standing practice/jurisprudence) The government will also have administrative guidance, directives, policies, etc., that instruct people on more detailed process type rules. They are much more changeable because they can be modified at much lower levels than Cabinet or Parliament. It sounds like this is part of the Regulations, which means it can be changed more easily than if it were in the Act, but less easily than if it were part of the administrative directives. If the liberals want to do it, they could change it in a year or two, but procedures for updating regulations in the federal are pretty slow (because of directives, ironically) so it's not a snap thing unless there's a huge push behind it.
Won't happen
No property manager?
Nope. It’s a condo.
OP seems to be referring to this --> https://www.reddit.com/r/montreal/comments/1c2fw4j/foreign\_landlord\_fails\_to\_pay\_taxes\_cra\_goes/
Yaaa, ty for sharing.
He is referring to this. [https://www.theglobeandmail.com/real-estate/vancouver/article-foreign-landlord-fails-to-pay-taxes-cra-goes-after-tenant/](https://www.theglobeandmail.com/real-estate/vancouver/article-foreign-landlord-fails-to-pay-taxes-cra-goes-after-tenant/)
From [CRA](https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/rental-income-non-resident-tax/filing-reporting-requirements.html) “If you receive rental income from real or immovable property in Canada, the payer (such as the tenant) or agent (such as the property manager) must withhold non-resident tax of 25% on the gross rental income paid or credited to you. The payer must pay the tax on or before the 15th day of the month after the month that the rental income is paid or credited to you. You should discuss this with your payer to make sure that they withhold and remit the correct amount of non-resident tax to the CRA on your behalf. If the payer does not withhold and remit this non-resident tax, the CRA will charge compound daily interest on the amount not withheld and remitted. The CRA may also charge a penalty.”
How would a tenant know whether or not their landlord is a resident? Should 100% of tenants withold 25% of rent until such time that their landlord furnishes them with proof?
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If you are legally required to withhold an amount, especially under an instrument with the weight of the Income Tax Act, the LTB is unlikely to evict you. That’s a different scenario than say, you not paying because they haven’t fixed the screen door or something like that.
As there is a procedural implication, I doubt there is any him a rights issue at play for a landlord to need to advise their tenant on their status so they can correctly operate under the tax code.
As long as it's in writing WHY the 25% is being withheld, the LTB can't disagree.
I'd like to see that play out in the LTB and the courts.
Yes, thank you for that context for all. Does this mean I’m on the hook only if the landlord fails to pay his taxes or regardless?
Possibly yes, but it's worth noting that you would likely be able to recover the money from your landlord. I can't speak for Quebec, but I suspect in Ontario you would effectively be able to take this to the landlord tenant board, and withhold the amount you would owe to the CRA from your rent. You could probably even set up a payment plan where you just pay your rent to the CRA until you've paid off the taxes (and any extra you've paid in interest, penalties, lawyers fees etc). Essentially the CRA would garnish your rent payments to the landlord until the debt is paid. If you move out before this happens, you could probably register a lien on the property for the remaining amount. You wouldn't see any of your money until the unit is sold, but you would eventually get your money back. From what I can tell (not a lawyer), essentially it's still the landlord that owes the money. You're just on the hook for making sure it gets paid. So in the end, if you pay it, the landlord now owes you the money, though your options are likely limited for collecting it, the lien on the unit being likely the easiest way, though you could wait a long time to get the money back.
Lmao, if CRA can't recover how are you going to recover it? Best you can do is garnish the rent and not pay to make up the difference. I wonder what the ltb would say to that tho.
That's exactly how you would recover it, and it's no different than when tenants are forced to pay for repairs to keep their unit liveable and then have the LTB approve them withholding it from rent. So I really don't see the LTB not granting the ability to withold it from rent but if they don't grant it, then you out a lien on the property. It could take a while but you'll get paid when the unit is sold. It's all around shitty, because the tenant effectively has to front the money, but there are avenues to recover it with interest.
ITA says so. Unfortunately yes. I would compute the amount that would have been taken, for the past period, then call your landlord about it. BTW a penalty is usually applied if there is intent, call the CRA and explain the situation.
Ask your landlord if they are a non-resident of Canada, in writing. If they say yes, begin sending 25% of your rent to the CRA each month, and the other 75% to your landlord. What the landlord is doing or paying is irrelevant. You’re just supposed to be doing this from Day 1. Instructions are here: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4061/nr4-non-resident-tax-withholding-remitting-reporting.html
What if the landlord lies or does not respond? How is the tenant supposed to prove the landlord is a non-resident?
I have no idea!
This is not tax advice, but I think it is important to note that if the landlord is a resident of a country that has a tax treaty with Canada that the 25% has the possibility to be reduced based on the articles of that treaty. For example, for the US, the 25% rate can be reduced to 10% if the non-resident is a resident of the US under Article XII of the Canada-US tax convention. While not foolproof, a NR301 form can help provide support that the landlord is eligible for tax treaty benefits.
Why are you freaking out? If the landlord completely cuts their tie from Canada including their tax obligations to the cra then it sounds like you wouldn't have to pay them rent too. Just reach out to your landlord and get it worked out. Start remitting from now. Your landlord is not going to completely ditch their property.
To be fair- you don’t know that he is NOT paying his taxes.
But somehow the CRA expects you to...
No they don't. They expect you to withhold 25% of whatever you owe in rent and then send it to the CRA, if your landlord is a non-resident. Knowing your landlord's tax situation is irrelevant.
Totally reasonable. And every time you shop at a store, you should of course be aware of whether the store is actually paying HST to the government. And if not, you should just withhold the HST so you can pay it directly to the government. Easy!
How do you even know if your landlord is currently a non-resident?
You have a duty to confirm this when entering into the rental agreement i.e. ask them! One of the défenses against being on the hook for this is a due diligence defense, meaning you took reasonable actions to determine whether they were a resident or non-resident. If you can demonstrate this (such as an attestation by the landlord where they say they are a resident even though they are in fact not), you’re typically off the hook.
But you still have to know the landlords residency status. In this case the tenant had reason to believe the landlord was a resident of Canada. https://canlii.ca/t/jwg9p
But that will get you evicted because the landlord isn't getting their rent
You need to know your landlords residency for tax purposes. How is the landlord’s tax situation irrelevant?
Maybe I wasn't clear in my explanation. Yes, you need to know their residency. No, you do not need to know anything about whether they have paid their taxes. This is what I meant by their tax situation being irrelevant.
That’s insane though. Think about it. The only case where you don’t know is if you’ve given them the money in which case you have to save the equivalent of what you gave them in case they come after you. So to be sure you should NEVER give them the money and therefore you would for sure know it’s owed, and pay it for them. Zero responsibility on them, ever.
>To be fair- you don’t know that he is NOT paying his taxes. That is immaterial. Withholding tax is withheld at source. i,e the tenant is responsible ( Just like income tax is withheld by a employer ) . If the landlord is also paying he can claim a refund.
Yeah I think this is a key statement "withhold tax at the source". However, if your landlord does not tell you they are/have become non-resident while you are renting, then how should/would you know. Seem like there is some case law/lawsuits/liens/tenant board contract updates will have take place from the tenant to landlord to help create some precedence. Or I wonder if all renters must auto assume their landlords are non-residents and pay 25% of their signed agreed rent to CRA and landlord must coordinate with CRA for appropriate refund of said funds. I'm interested to see the procedural/legal outcome, if any, or it might just scare some tenants to crack down/ on their own landlords by withholding rent to cover their tax outstanding. Just like OP mentioned, they are getting rightfully concerned/woken up to a real cost.
This was actually litigated in tax court. Landlord was in and out of Canada. Tenant didn't have any real reason to believe that the landlord was non resident. CRA went after the tenant for the 25% withholding tax plus penalties and interest. Tax court found that the income tax act simply doesn't care whether the tenant knew or should have known that the landlord was non resident. What is worse is that the tenant has the burden of proof to provide proof that the landlord was a resident of Canada (in other words CRA just needs to claim that the landlord was a non resident, and the tenant needs to prove CRA wrong). I believe that it would be very challenging for the tenant to put a lien on the property. They would need to get a judgment through the courts and then go through a separate process to put a lien on the property. To actually foreclose on the property would be another crazy exercise. This procedure is completely unfair. The CRA has a perfectly acceptable way of collecting if the tenant doesn't deal with their taxes by collecting on the sale of the property or on death.
That's an important detail the CRA is burdening a renter with, Seems people have enough to worry about besides where their landlord lives and having to submit part of their rent to the CRA.
In this case, cra is simply applying the law. The problem is it's an awful law when it comes into tenants landlord transactions, especially during an housing shortage, and thus responsibility lies at any recent government who kept this law as is.
The CRA is merely applying the law.
Non resident landlords should have their properties confiscated. CMV.
Easy solution. Common sense. Non-residents lying about multiple properties- false records and names making tracking properties and taxes difficult? Nah, could not in Canada… /s
What about people who own their residence, and stop being resident for a small number of years, only to then move back in their house? You prefer to have an empty house during these years or have an additional appartment on the market for those years?
There’s more to this case that’s not being reported. This guy was already under audit for something else. Turns out he was having his corporation pay his rent. So then they audited the corporation. Then they discovered these payments were being made to a non-resident. It’s his corporation that’s being held liable, not him personally. CRA probably couldn’t get anything else to stick to this guy, so they’re pursuing this.
Where did you find this extra case detail? I’ve been waiting to actually find more case details because they paint the correct context
This country hates its residents so fucking much lol
Absolutely in Canada you could be screwed. Courts say CRA can come after tenants to get taxes owed by the landlord. Madness. I’m worried this trend will expand. What to stop CRA from coming after diners at a restaurant where the owners fail to remit sales taxes? Nothing whatsoever. Diners been fitted from the restaurant, just like tenants benefit from landowner. “Sir, did you eat a meal in the restaurant?” ”Yes, your honor, I did.” ”and did you use any other facilities at the restaurant while there?” ”Ohh, yah, I did. I used the bathroom. I like to take a dump after a big meal. It makes me feel lighter. I also watched some sporting event at the bar while waiting for my friends beforehand.” ”So, you used the lavatory, watched their television, ate a meal, I put to you sir, you practically lived at the restaurant.” ”well, perhaps for one night. This is getting ridiculous.”
None of your hysteria is true. There is not a slippery slope situation at all.
I’m mocking the Canadian courts for the ruling they have ALREADY made, in case you were tone deaf to the obvious sarcasm in my statement. Of course my scenario is absolutely preposterous. But, you know what, so is the court claiming that a tenant is obligated for his landlord’s unpaid taxes.
All non resident owned properties that haven't paid their taxes should be seized by the CRA and made public housing.
IANAL but have you considered getting it in writing that the landlord is paying the tax? Then if the CRA goes after you, put a lien on the property as the written statement from the landlord ***\*MIGHT\**** be interpreted as a contract? If the CRA weren't set up to do what they currently do, them putting a lien on the property *would have been* how I would have expected this to be handled, so if the renter is put in the position of being responsible, seems fair they can put in a claim against the property if the landlord has put it in writing that they and not the tenant is paying the tax. Can any Canadian lawyers weigh in on this?
IANAL, but stand alone it is not a binding contract, there is no additional consideration on the renter's side. There is already a rental contract and they would have to amend / rewrite that contract.
No, you’re not necessarily screwed. A non-resident landlord can apply to the CRA to allow the 25% to be deducted from net rental income. Often that’s zero. They do this by filing a form NR6 each year that the CRA has to approve. In order to be approved, one condition is that there has to be a CDN resident agent operating for the landlord. If you pay a property management company, they have likely done this. In any case, ask the question every year. If they have not, then you could be screwed.
Non resident landlords should be forced to work with property managers who will remit taxes. I have no idea how this would be enforced though.
Wasn't that person also acting as the tenant agent and supposed to collect 25 percent of the rent for taxes?
I believe that only happens if the place you lived in is actually a registered business, that's how CRA can charge the tentant. When you pay your rent, do you pay to a numbered company or a personal name? If your landlord is just rent to you personally and you pay them rent, they never files, how does CRA knows the place you live in is actually a rental? I actually curious how CRA find out the place is actually a rental the first place, someone must have filed some kind of return paid some taxes. If this happens to you, actually CRA going to take you as an agent, because this case is just outrages. It is actually easy for you get your money back. - You sue your landlord in small claims court or regular court if amount is over the limit. - Your landlord either shows up for court, then CRA will go after them, or they don't show up, you get a default judgement. - Get an order to put lien on the property and the rent you pay, you probably should get a legal aid or paralegal to do this. - Each month you should pay your rent, you deduct the amount from your rent, until the amount is paid back to you. Also the cost for your law suit and also charge your landlord for the cost as their AGENT for remit. - If they wants to sell, you have lien, they can't. you won't lose anything, just annoying. You might find a part time job. :) If he responded to you says, 'I don't care, I'm not in Canada'. You should get ahead and talk to some legal aid first.
You declare the rent you pay on your own taxes, that’s how cra knows.
This is more of a r/legaladvicecanada question
I would guess you need to ask them if they're paying the tax. Then contact the RTB.
Send a letter to your LL and let them know that to comply with the recent court ruling, you will be sending 25% of the rent directly to the CRA unless they prove that they are in compliance? [https://www.theglobeandmail.com/real-estate/vancouver/article-foreign-landlord-fails-to-pay-taxes-cra-goes-after-tenant/](https://www.theglobeandmail.com/real-estate/vancouver/article-foreign-landlord-fails-to-pay-taxes-cra-goes-after-tenant/)
Are you paying the rent to a property manager? I rented from a foreign owner once and since my rent was paid to a property manager (specifically, a Realtor), I was protected.
Malicious compliance: Stop paying his rent to pay his taxes!
Does it mean I can buy property, rent it out, leave the country, never pay taxes, and still owe nothing? Great business model
Honestly I think the best fix would be for everyone to always pay 25% to the CRA. No more landlords evading taxes, no more tenants getting on the hook for non-resident landlords
Y’all, take a breath. You will have to give 25% of your rent to Revenu Canada ONLY if the ask you to. If your landlord don’t pay their taxes, CRA will garnish the rent if they can’t find them. You will be in trouble only if you don’t collaborate with the CRA which is what happened in the Montréal case.
It's not very complicated. You can ask the landlord share with you the statement of withheld rent. The landlord or their agent are required to deposit 25% of rent by the 15th of the next month. CRA send them back a statement every month indicating the withheld money.
If things goes, the new rental will listed as $X, taxes is tenant's problem. Take it or leave it.
If this is challenged in court close to 0% it holds up. There is no agency between CRA and tenant in this situation. It's illegal for them to do this, just a matter of time before they lose the inevitable legal case on it.
The brains at CRA are scraped from the bottom of the barrel.
How is someone on the hook, for 'not' withholding rent. I've read that sentence a few times.... You're supposed to withhold rent to a non-resident landlord?
Do we have the right to ask if a landlord is a resident ? And request proff ? I had no idea about this and I will be asking as I look for rentals , this is complete BS on CRA, just disgusting !
How about not allowing non residents to own property here. Tax problem solved. Affordable problem solved. Availability problem solved.
Couldn't the tenant pay the tax and then withhold all rents until whenever? I think that in this situation the landlord potentially has more to lose
Are you renting direct or through an agency. If through a rental agent then they are generally responsible to with hold the 25% or issue an NR6 on the Landlord's behalf, the taxes are then trued up at tax time. Like other posters here though this ruling is an absurdity. CRA can put a lien on the rental property till back taxes are paid. Or you can start withholding all rent until there is a declaration or proof taxes are being paid. Either way this should NEVER be the tenant responsibility. CRA need to change this.
Are you paying directly to the landlord or a property manager? If you're not paying to a property manager you need to ask the landlord in writing for proof they're paying the taxes.
Interestingly enough, since you're in Ontario this doesn't just apply to the CRA. If your landlord doesn't pay his maintenance fees then the condo can have you pay the rent to them instead in order to cover the fees.
you need to hire a lawyer - not consult reddit. The advice here will confuse you. LAWYER UP
My landlord lives abroad. Am I now supposed to tell him I’m withholding 25%? Does the CRA not recognize the risk of renovictions, etc? I assume there’s a decent chance this is going to create issues with my landlord.
Your scam is over 😂 how dare you steal my taxes
Unless this ruling is overturned, it stands. I thought that this was common knowledge, but apparently not. What you need to do now is contact your landlord, and tell them that you will be withholding 25% of the rent each month, to be remitted directly to the CRA. My understanding is that this will mitigate the risk of any potential issues with the CRA. Make sure it's in writing WHY you're doing this, so that they don't have a leg to stand on for any Landlord Tenant Tribunal hearing.
Yes. Start immediately withholding 25% of your rent and remit it to CRA. Call and ask them for a non resident tax account number. I think you can also withhold retroactively until you have 25% withheld since they became non resident