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CRA ‘does not expect’ tenants to withhold rent from foreign landlords

Tenants are only on the hook when they and their landlord have a 'business relationship,' the federal agency said 
National Revenue Minister Marie-Claude Bibeau rises during Question Period in the House of Commons on Parliament Hill, in Ottawa, Thursday, April 18, 2024.

EDITOR’S NOTE: This article originally appeared on The Trillium, a Village Media website devoted exclusively to covering provincial politics at Queen’s Park.

After weeks of confusion, the federal revenue minister has clarified that individual tenants do not have to withhold 25 per cent of their rent from foreign landlords.

"I want to reassure Canadians that the Canada Revenue Agency does not intend to collect any portion of any non-resident landlords’ unpaid taxes from individual tenants. It is incorrect to state otherwise," Marie-Claude Bibeau said in a statement to The Trillium on Friday, following reports it went after a Montreal man for failing to do just that.

In April, the Globe and Mail reported that the Canada Revenue Agency pursued a case against a tenant after he didn’t remit 25 per cent of his rent because his landlord was a non-resident. 

The tenant was responsible for paying when the CRA couldn’t collect from the landlord, according to a Tax Court ruling in 2023.

That case "was an extremely rare situation," Bibeau said. "This law has existed for nearly a century, and there is not a single instance of an assessment made to an individual tenant in the last decade."

"The CRA does not expect individual tenants to withhold 25 per cent of the rent from their landlords."

Bibeau added that she's working with Finance Minister Chrystia Freeland "to provide absolute clarity on the law and to ensure that tenants have the certainty they need and deserve, but I can assure Canadians that it does not, and will not, apply to them."

The 25 per cent remittance rule only applies when the landlord and tenant have a “business relationship,” the CRA said in a separate statement. The agency didn’t immediately respond to a request to clarify what that means.

The Montreal tenant lived in a residential unit, but paid his rent via a company that he held shares in.

“In most situations involving rental income, the CRA’s practice is to engage with the landlord rather than the tenant. However, to ensure tax fairness the CRA would engage directly with a tenant where there is a business relationship between the tenant and the landlord,” it said.

“These are exceptional and rare circumstances.” 

Nevertheless, tenants across the country were spooked and Ontario politicians took note. 

Ontario Housing Minister Paul Calandra wrote to Bibeau on Thursday asking her to fix the law. 

“Our government firmly believes these actions, which are permitted under federal legislation, are unfair to tenants and ought to be prohibited. If landlords refuse to pay their taxes, then the CRA should be going after these landlords, not their tenants,” Calandra wrote. 

Calandra’s letter followed a missive from NDP housing critic Jessica Bell earlier in the week. She called on the federal government to change the “un-Canadian” rules so the CRA would no longer be allowed to collect unpaid landlord taxes from tenants.

After The Trillium asked the CRA to confirm that tenants should proactively withhold 25 per cent of their rent if their landlord is a non-resident, an agency spokesperson said on Wednesday that they should — as long as a property manager or agent is not doing so already. 

“The responsibility lies with the tenant to withhold and remit. If the non-resident fails to remit, the tenant is responsible for the full amount,” spokesperson Sylvie Branch said in a statement two days ago.

The agency pointed to a federal web page that appeared to affirm its position, noting that “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 per cent on the gross rental income paid or credited to you.”

On Thursday, the Trudeau government gave no indication it planned to change the rules.

It took until Friday for CRA to provide the “additional clarification” that without a tenant-landlord “business relationship,” the 25 per cent rule doesn’t apply.

“We understand that it is important for people to feel safe in their homes and this government will continue to ensure that the tax system is both fair and efficient for all Canadians,” Branch said.


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