What many tenants don’t know is there is a specific section of the Income Tax Act indicating that they are responsible to withhold 25% of the rent they pay to non-resident tax residents of Canada.
Crowe MacKay’s tax advisors explain the responsibilities of a tenant whose landlords are not Canadian tax residents and how they can navigate these tax obligations and avoid potential interest charges and penalties.
Most tenants are not familiar with their filing obligations and their responsibility to withhold funds and perform administrative duties, such as filing certain slips and information returns in a timely manner with the CRA. In the Income Tax Act, tenants (or payers) whose landlord is a non-Canadian tax resident should be withholding 25% of the rent they pay. Tenants are also required to open up a special non-resident tax account and send the withholdings to the CRA directly on or before the 15th of the month after the rental income is paid. Failure to make payments on time could result in the tenant being charged a compounded daily interest on the amount that should have been withheld and remitted.