Tenants Don’t Have to Pay CRA Taxes Owed by Non-Resident Landlords: Federal Minister

National Revenue Minister Marie-Claude Bibeau rises during question period on Parliament Hill in Ottawa on Dec. 14, 2023. (The Canadian Press/Adrian Wyld)

Canada’s tax agency will not order tenants to pay any taxes owed by their foreign landlords, says federal Minister of National Revenue Marie-Claude Bibeau.

Ms. Bibeau’s statement on May 17 came amid growing concerns from renters in recent weeks over whether they are obligated to withhold tax on rent they pay to their overseas landlords and whether they risk being evicted if they do not do so.

“I want to reassure Canadians that the Canada Revenue Agency does not intend to collect any portion of any non-resident landlord’s unpaid taxes from individual tenants,” Ms. Bibeau said in her statement posted on X. “It is incorrect to state otherwise.”

The cause of concern could be traced to a tax court decision last year ruling that a Montreal renter was liable to pay the Canada Revenue Agency (CRA) six year’s worth of unpaid taxes, plus interest and penalties, on behalf of his Italy-based landlord—when the agency couldn’t collect from the landlord. The case was first reported by The Globe and Mail in April of this year.

Details in the ruling indicate that the renter took the former National Revenue Minister Diane Lebouthillier to court after she assessed in 2018 that he failed to withhold and remit 25 percent of the rent to the CRA from 2011 to 2016. The minister also notified him that he was responsible for the interest and penalties incurred on the basis that his landlord was a non-resident.

The tenant filed an appeal, saying he didn’t know his landlord was living abroad, but his argument was dismissed by the judge on the grounds that he did not conduct due diligence on his part.

‘To Provide Absolute Clarity’

Ms. Bibeau said the case at the Tax Court of Canada was “an extremely rare situation.”

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“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,” she said.

“The CRA does not expect individual tenants to withhold 25% of the rent from their landlords.”

A search on the CRA’s website seems to suggest otherwise, as the agency provides specific instructions to foreign landlords on the requirements, as stipulated in Canada’s Income Tax Act.

“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% on the gross rental income paid or credited to you,” it said on a federal government webpage indicating the “date modified” as Jan. 23, 2024.

In an emailed statement to The Epoch Times, CRA said the 25 percent remittance rule will only apply when the tenant “is a business.”

“In most situations involving rental income, the CRA’s practice is to engage with the landlord rather than the tenant. The CRA would engage directly with a tenant when the tenant is a business,” the federal agency said on May 20.

The Epoch Times had asked the CRA to cite specific examples but the agency did not provide any in its response.

Ms. Bibeau said in her May 17 statement that she is 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.”

“[B]ut I can assure Canadians that it does not, and will not, apply to them,” she added.