Saturday, September 11, 2010

Bet you didn't know this...

Neither did I until recently.

If you pay or collect rent as agent for some one who is a non-resident, YOU are obliged to deduct 25% and send it to Revenue Canada!

At least that's what someone told me and that's what it seems to state

I am certainly no tax expert - but I do know of people collecting rent and managing apartments who may not know this. One is doing it for a buddy who has gone to Singapore for a few years.

If you file a special form, you can reduce the 25% deduction from Gross rent to Net rent (which I guess is after strata and expenses and property taxes), but you have to file a tax return for the year.

Like I said I am not a tax expert by any means, but if you know of someone either paying rent to someone who has moved or lives elsewhere or is managing their property, send them the link above, as they should get professional advice.

Ignorance of the law is not a defense.

Here it is in full:

International and Non-resident taxes > Common Topics > Rental income and non-resident tax

Filing and reporting requirements When you receive rental income from real property in Canada, the payer, such as the tenant or a property manager, has to withhold non-resident tax at the rate of 25% on the gross rental income paid or credited to you. The payer has to send the tax to the CRA on or before the 15th day of the month following the month the rental income is paid or credited to you.

The payer has to give you two copies of an NR4 slip showing the gross amount of rental income paid or credited to you during the year, and the amount of non-resident tax withheld. The payer also has to send us an NR4 return, as explained in Guide T4061, NR4 - Non Resident Tax Withholding, Remitting, and Reporting.

Generally, the non-resident tax withheld is considered your final tax obligation to Canada on the rental income. However, if you elect under section 216 of the Income Tax Act, you may pay less tax, and you may also receive a refund of some or all of the non-resident tax withheld. For more information, see Guide T4144, Income Tax Guide for Electing Under Section 216.

If you intend to elect under section 216, you may also want to consider having non-resident tax withheld on the net rental income instead of the gross amount. To do this, you and your agent (a resident of Canada who acts on your behalf regarding your Canadian rental income) have to complete Form NR6, Undertaking to File an Income Tax Return by a Non Resident Receiving Rent From Real Property or Receiving a Timber Royalty, and send it to us for approval.

If we approve your Form NR6, your agent has to withhold non resident tax at the rate of 25% on your net rental income (i.e., the amount of rental income available after the rental expenses have been paid). Your agent must send us the tax on or before the 15th day of the month following the month the rental income is paid or credited to you. If we approve your Form NR6, you must also file a section 216 income tax return for that year, even if you have no tax payable or you are not expecting a refund.

You should send us Form NR6 on or before January each year, or before the first rental payment is due. For more information, read the Important reminder about Form NR6, and see Guide T4144


  1. Fish, dont be so naive please. Chinese never pay any taxes in general, it is smth engrained in their culture, no offense meant but having lived there and being of asian origin I can say this, paying taxes is smth very unusual for chinese. They evade taxes in china and they do so in Canada. CRA rarely goes after those investor types, in any case it is so easy to fool the CRA with chinese documents. According to law, if you reside here you have to declare and be taxed on your worldwide income. I only wish the CRA could enforce this law, it will be fair to every other hardworking and law abiding canadian resident. Do you think chinese investors that buy multimillion properties in vancouver declare their chinese income and pay taxes to the canadian goverment? Get real!

  2. Well Anon

    What you say may be true.

    However this applies to non-residents. So if you are a Real Estate agent managing property or even a renter, renting from someone who is not submitting a tax return in Canada- it looks to me like yo have to deduct 25% of the TOTAL rent and send it to CRA.

    Do real estate agents know this, how about property management companies? Are they doing it?

  3. BTW - Anon

    Just to be fair. Re-read this post and the comments especially. Tax evasion is not a just a Chinese disease. one wealthy Canadian family evaded $1 Billion in taxes:

  4. I'm an accountant and I think this is fairly common knowledge in the property management industry. I have acted as an agent for a non-resident landlord in the past and while the tenant puts rent cheques into the landlords bank account, we, as accountants, send in the 25% required each month. But if you know someone who you think isn't doing this, or filing a tax return to report the income every year, call CRA's tip line, I'm sure they would be interested in hearing about it!

  5. I know of a few types who avoid tax payments in this fashion. But usually for small time operations the net income isn't significant enough for CRA to bother. There are bigger fish to fry.

    I also know some who have been audited for a net outstanding in the many $10s of thousands. Given the reported incomes and house prices in some neighbourhoods, it seems pretty obvious to me there is some previous or recurring undeclared income playing a part.

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