Since you have income from renting out your house in Canada, according to Canadian tax law, even as a non-tax resident of Canada, you are still obliged to report and pay taxes to the Canadian government for your income in Canada. If you fail to fulfill your obligations on time, there will be penalties and interest. If you plan to sell your house in the future, this work is particularly important, because if you fail to report income and pay taxes on time, you will not be able to get the full house price when you sell the house. The lawyer who takes over the house will withhold part of the house price on behalf of the tax bureau because the tax relationship of your house sale has not been clarified.
Therefore, in order to avoid fines/interest/withholding of part of the house payment, we recommend that customers declare and pay taxes on time, and we are also very willing to help you. Below we will introduce the specific operation process, which is divided into the following two situations:
You pay taxes to the Canadian government as a non-resident
In this case, you need to prepay taxes to the Canada Revenue Agency at 25% of your monthly gross rental income in each rental year, and then declare the specific rental income and expenses of the previous year during March to June of the second year. The tax agency will refund or supplement the difference between your tax return and the prepaid tax. The information you need to provide is as follows:
- Copy of passport (for tax number application)
- House purchase contract
- House handover lawyer documents (for fee deduction)
- House rental contract
- Bank account information (used to set up pre-authorization so that the tax bureau can deduct withholding tax directly from your account)
You sign an authorization with a Canadian agent, who will use his/her own credit to declare and pay taxes on your behalf to the tax bureau. (For the convenience of our clients, our firm can act as your Canadian agent under your authorization)
In this case, you need to apply to the tax bureau for agent authorization at the end of the year before each rental year. Once approved, you can prepay taxes to the Canada Revenue Agency at 25% of your estimated monthly net rental income (i.e. rental income minus estimated expenses) in each rental year. Then, from February to April of the second year, you can declare the specific rental income and expenses of the previous year. The tax bureau will refund or supplement the difference between your tax return and the prepaid tax. The information you need to provide is as follows:
- Copy of passport (for tax number application)
- House purchase contract
- House handover lawyer documents (for fee deduction)
- House rental contract
- Bank account information (used to set up pre-authorization so that the tax bureau can deduct withholding tax directly from your account)
In addition, if you plan to sell your house, in order to ensure that you can get the full house payment on time when the house is handed over, it is recommended that you apply for a tax clearance certificate in time. If you do not apply for a tax clearance certificate, the tax bureau will impose a fine of $25/day starting from the tenth day after the house handover date, with a maximum of $2,500/year. In order to avoid fines and get the full house payment in time, we recommend that customers apply for a tax clearance certificate in time. The specific process is as follows:
- After the purchase contract is finalized, apply for the tax clearance certificate immediately.
- Due to the limited processing speed of the tax bureau, it is recommended to leave a certain amount of time between the house delivery date and the contract signing date to apply for the tax clearance certificate.
- The information you need to provide is as follows:
- House sale contract
- House purchase contract
- Lawyer documents for house handover when buying a house
For more information on non-tax resident properties, please click on our " Property tax refund "Special topic.