Tax & Owning Rental Properties In Canada

Perhaps you moved out of the country for a few years and then decided to make it permanent or you have purchased property in Canada as an investment to generate income.

No matter the reason, you should be aware that Canada imposes a withholding tax on the rents and sale of real property.

rental incomeKnowing the highlights can help you avoid nasty surprises when the tax man comes calling.

Real Estate & Tax Residency

Although the ownership of a residential property in Canada may be considered a significant residential tie, the property in Canada must be available for your occupation.

By renting the property, under a long-term lease to an unrelated third party, you may be able to avoid t being considered a resident for tax purposes.

Principal Residence Exemption

If you are leaving Canada, you can likely claim the principal residence exemption and avoid any immediate gains.

If you sell your home after you leave, the issue becomes more complex because you cannot claim the principal residence exemption for years in which you were not a resident of Canada.

You will also be subject to the 25% withholding tax applied on gains of the sale of real estate located in Canada.

Tax On Rental Income

Renting the property may generate much needed cash flow and may be more than sufficient to maintain the property while you are away.

Like most endeavours, rental income is still subject to Canadian income tax.

There are withholding taxes as well as annual non-resident rental tax filing requirements that you must comply with if you are a non-resident earning rental income from Canadian real estate.

Failing to comply with these requirements could result in significant interest and penalties. Some filing requirements must be met even if you never rented the property.

Final Words

Owning and renting property as a non-resident or former resident of Canada can carry with it significant tax obligations for non-compliance. There are withholding taxes that must be remitted monthly if the property is being rented and penalties for the failure to comply can be significant.

If you are a non-resident and are renting property in Canada, it is important to make sure that you are filing the proper returns and making the required installments.

We Can help

We can help you comply with these important regulations by assisting with the necessary filings and help reduce the overall tax burden.

If you have not complied for several years, there are programs available to help bring your tax situation up to date.

Call us at +1 (289) 288-1206 or send us an email to arrange an appointment to discuss your situation and what we can do to help.

Dean Paley

A graduate of Simon Fraser University, Dean started and operated an independent painting company while perusing a degree at SFU. After graduating from Simon Fraser, Dean entered the Certified General Accountants Program of Professional studies where he obtained the professional CGA designation. After a number of successful years as the head of finance for the Canadian operations in a global financial services firm, Dean moved into a marketing role and established and launched a tax, estate and financial planning support department and service to advisors and clients. During this time Dean successfully obtained the Certified Financial Planner (CFP) designation. Dean has been a member of the Canadian Forces Reserve spanning three decades serving in the Royal Westminster Regiment (B.C.), the Military Police and later as a commissioned officer in the Cadet Instructors Cadre in Hamilton Ontario. Dean Paley CGA CFP has been interviewed and quoted in major media such as the National Post, Financial Post, Toronto Star, Canadian Business, Money Sense and Investment Executive. Dean is married to his lovely wife Deborah and has four lovely children.