If you are a non-tax resident, or part of the property rights of your house is held by a non-tax resident, then the proportion of the non-tax resident property rights in the rental income needs to be reported as a non-tax resident.
What is a non-tax resident?
Non-tax residents include but are not limited to
(1) New immigrants who have not stayed for 183 days in the current year
(2) International students who have not stayed for 183 days in the current year
(3) Foreigners with visitor visas who have not lived in Canada for 183 days in the current year and have income
(4) Former tax residents who have left Canada and whose spouse or dependents are not in Canada
(5) Former tax residents who have left Canada and whose spouses are temporarily residing in Canada
(6) Former tax residents who have left Canada but have businesses, investments or bank deposits in Canada
The most common situations in which non-tax residents and tax residents jointly purchase a house:
- International students (tax) and parents (overseas non-tax) jointly purchase a house
- Brothers and sisters (including tax and non-tax) raise funds to jointly buy a house
However, does not include situations where a couple (one of whom is taxed and the other non-taxed) buys a house jointly.
Withholding taxHow to pay?
If the property is owned solely by a non-tax resident and is purchased and then rented out (commonly for overseas buyers to invest in property), the monthly withholding tax (withholding tax) that needs to be paid to the tax bureau needs to be calculated.
Method 1, directly pay 25% of the monthly gross rent income;
Method 2: Submit an NR6 application to the CRA. The property owner only needs to pay 25% of the monthly net rental income, excluding tax deduction expenses. This can significantly reduce taxes on rental income and increase cash flow from renting out your home. (The second method is more complicated, you can ask an accountant for help)
Payment time: Pay to the CRA tax bureau online or by mail before the 15th of the next month. (Attention! You must pay on time every month. If you forget to pay or pay late, you will be charged interest by the CRA tax bureau.)
Payment account number: Non-tax resident account number of NRK or NRF. Pay attention to non-ITN or SIN account numbers (many customers cannot tell the difference. Individual Tax Number and Social Insurance Number are for residents, NRK and NRF are for non-tax residents, and they are different departments)
Customers often ask, if they don’t want to pay withholding tax every month, it’s too troublesome. Is it okay to pay the tax all at once when filing taxes at the end of each year?
Answer: The tax bureau stipulates that withholding tax returns can be filed up to 2 years late, but you need to explain why you are late. If it exceeds 2 years, you will be subject to a large bill from the tax bureau.
Recommendation: Pay withholding tax on time every month according to tax bureau regulations. This is responsible for property tax and will also leave a good record with the tax bureau.