Tuesday, 22 April 2014

Non-residents Must Elect under ITA S.216 to avoid 25% Tax on Gross Rent

Agents or tenants renting from a non-resident are required to withhold 25% from rent paid to a non-resident.  Non-resident has two years to elect to file a tax return under ITA Section 216.  This would enable the non-resident to pay tax on the net rental (after deduction of expenses such as property tax, depreciation, maintenance, mortgage interest, agent's fees. etc) at the Canadian graduated rates.(which is lower than 25% for net income up to about $43,000).  If the agent or the tenant does not deduct the 25% and the landlord does not elect within the two years limit, the landlord would have to pay the 25% tax on the GROSS rental.  This problem is widespread with Canadian citizens who are now non-resident of Canada. When the non-resident landlord wants to sell the property he must disclose the past rental history of the property.
Under extraordinary circumstances CRA may allow an election beyond the two year time limit. 
See CRA's policy by clicking on the link below.

http://www.cra-arc.gc.ca/tx/nnrsdnts/ntcs/216plcy-eng.html

 See my blog on selling Canadian real estate by a non-resident.  Also see my newsletter on selling real estate by a non-resident.  Click on the link below.

http://www.tavana.ca/newsletters/sale-canadian-real-estate-non-resident-november-2012




This blog is for general information only and cannot replace professional advice.
The reader is invited to contact the writer to discuss the contents of the newsletter.
Readers are advised to seek professional advice before acting on the material
in this newsletter

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