Because you have income from renting houses in Canada, according to Canadian tax laws, even as a non-tax resident of Canada, you are still obliged to declare and pay taxes to the Canadian government for your income in Canada. If your obligations are not met on time, penalties and interest will accrue. This is especially important if you plan to sell your home in the future, because if you fail to declare your income and pay taxes on time, you will not be able to get the full payment when you sell your home. The house transfer lawyer will withhold part of the house payment on behalf of the tax bureau because the tax relationship of selling your house has not been clarified.
Therefore, in order to avoid penalties/interest/withholding of part of the house payment, we recommend that customers file and pay taxes on time, and we are very willing to help you. Next we will introduce the specific operation process. The specific operation is divided into the following two situations:
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You pay taxes to the Canadian government yourself as a non-tax resident
In this case, you need to prepay tax to the Canada Revenue Agency based on 25% of your monthly rental gross income in each rental year, and then file a declaration between March and June of the second year For the specific rental income and expenses of the previous year, the tax bureau will refund the excess and make up for the difference based on the result of your tax return and the prepaid tax. The information you need to provide is as follows:
- Copy of passport (for applying for tax number)
- House purchase contract
- House handover lawyer documents (for expense deduction)
- House rental contract
- Bank account information (used to set up pre-authorization so that the tax bureau can withhold prepaid taxes directly from your account)
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You sign an authorization with an agent in Canada, and the agent uses its own credit guarantee to declare and pay taxes to the tax bureau on your behalf. (For the convenience of our clients, our firm can act as your Canadian agent with your authorization)
In this case, you need to apply to the tax bureau for agent authorization at the end of the previous year of each rental year. Once approved, you can apply for agent authorization every month in each rental year. 25% of the estimated net rental income (i.e., rental income – estimated expenses) is prepaid to the Canada Revenue Agency, and then between February and April of the second year, the specific rental income and expenses of the previous year are declared. Tax The bureau will refund the excess or make up for the difference based on the difference between your tax return and the prepaid tax. The information you need to provide is as follows:
- Copy of passport (for applying for tax number)
- House purchase contract
- House handover lawyer documents (for expense deduction)
- House rental contract
- Bank account information (used to set up pre-authorization so that the tax bureau can withhold prepaid taxes directly from your account)
In addition, if you plan to sell your house, in order to ensure that you can receive the full payment on time when the house is handed over, it is recommended that you apply for a tax clearance certificate in time. If a tax clearance certificate is not obtained, starting from the tenth day after the house handover date, the tax bureau will impose a fine of $25/day, with a maximum limit of $2,500/year. In order to avoid fines and get the full 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 confirmed, apply for a 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 delivery date and the contract signing date to process 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 "Real Estate Tax Refund" topic.