I’m well aware of the 25% non-resident withholding requirement for a non-resident of Canada with a rental property (Canadian withholding agent, NR4 slip, NR6 - optional, S.216 - optional but recommended, etc). What I’m trying to find out is if you still need to abide by these requirements if the owner of the property is not charging fair market value for the rent (renting to a friend or family member for a nominal amount for example).
I know how this works when you are a resident of Canada. CRA does not want you to report the rental income or the expenses if you are not charging fair market value. This makes sense, as you would create an “artificial†loss; which you could deducted against your other sources of income. To prevent this, CRA does not want you to report anything.
For this reason, I assume the answer is no. In other words, there is no need to hire a Canadian agent to withhold the 25%, etc. The only thing you would have to worry about is the T2062 requirements when you ultimately sell the property as a non-resident?
Anyone know for sure?
Non-Resident of Canada 25% Withholding on Rental
Moderator: Mark T Serbinski CA CPA
CRA certainly wants you to report any rental income you have. What they won't allow is you to claim expenses against this income to create a loss since you are not operating for a profit.
This is slightly different than a "cost-sharing arrangement" where the relative lives WITH you. In this case no income, no expenses need are reported. This allows one to keep principal residence status. This is not your case. This home cannot be your PR anymore as a non-resident.
As a non-resident, you MUST have the 25% GROSS rental income withheld, until such time as you establish the lower rate (by Nr6).
Reluctantly, I would call international on this one.
You also need to determine how IRAS will view this income and expenses.
This is slightly different than a "cost-sharing arrangement" where the relative lives WITH you. In this case no income, no expenses need are reported. This allows one to keep principal residence status. This is not your case. This home cannot be your PR anymore as a non-resident.
As a non-resident, you MUST have the 25% GROSS rental income withheld, until such time as you establish the lower rate (by Nr6).
Reluctantly, I would call international on this one.
You also need to determine how IRAS will view this income and expenses.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
As someone who rents out their property in Canada, you don't need an agent to do the 25% withholding.
The CRA has a procedure where you can pay the 25% withholding yourself and then request the CRA to send you a "Proforma NR4" at the end of the year stating the amount you had withheld for the tax year.
I used to send the CRA postdated cheques for each month, but you can now (new this year) set up electronic direct deposit of the 25% withholding by logging into the CRA website. You can also change the amounts online if the rent changes.
Don't forget to report the FMV of your property on T1161. It's a $2,500 penalty for missing this form.
The CRA has a procedure where you can pay the 25% withholding yourself and then request the CRA to send you a "Proforma NR4" at the end of the year stating the amount you had withheld for the tax year.
I used to send the CRA postdated cheques for each month, but you can now (new this year) set up electronic direct deposit of the 25% withholding by logging into the CRA website. You can also change the amounts online if the rent changes.
Don't forget to report the FMV of your property on T1161. It's a $2,500 penalty for missing this form.
Great information guys!
Yes, what I was referring to was a cost sharing arrangement when living with a family member. I was not aware of the distinction if you don’t live in the home; I assumed the mechanics were the same.
So if I don’t live in the home, but rent to a family member at less than FMV, are you saying that I can’t claim any expenses at all or just not more than my rental income? Example, rent $10K, expenses $13K, do you claim $10K of expenses or zero?
Yes, what I was referring to was a cost sharing arrangement when living with a family member. I was not aware of the distinction if you don’t live in the home; I assumed the mechanics were the same.
So if I don’t live in the home, but rent to a family member at less than FMV, are you saying that I can’t claim any expenses at all or just not more than my rental income? Example, rent $10K, expenses $13K, do you claim $10K of expenses or zero?
For 216 purposes, you can never claim losses, so it really doesn't matter. You will get whatever expenses you need to zero out your return.
You will need to check IRS rules on this too.
You will need to check IRS rules on this too.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Thanks, very good point!
Here’s an interesting article from Tim Cestnick. It says “If you’re renting ALL or part of your home at a rate less than fair market value (perhaps to a family member, for example) and you expect to incur a loss on the rental activity, then you aren’t required to report rents and you’re not entitled to claim deductions.â€
http://www.theglobeandmail.com/globe-in ... le4544160/
This would suggest that even know I don’t live in the home, I still don’t report rental income or expenses.
In any event, I suppose the net result is the same. If you don’t report anything at all, or report the income and only enough expenses to reduce your income to zero; it’s the exact same thing.
So I suppose to be on the safe side, you should probably remit the 25%, and then complete a S.216 return to recover it all.
Yeah, not sure how the IRS will handle this, I will have to do some investigating. Thanks gain!
Here’s an interesting article from Tim Cestnick. It says “If you’re renting ALL or part of your home at a rate less than fair market value (perhaps to a family member, for example) and you expect to incur a loss on the rental activity, then you aren’t required to report rents and you’re not entitled to claim deductions.â€
http://www.theglobeandmail.com/globe-in ... le4544160/
This would suggest that even know I don’t live in the home, I still don’t report rental income or expenses.
In any event, I suppose the net result is the same. If you don’t report anything at all, or report the income and only enough expenses to reduce your income to zero; it’s the exact same thing.
So I suppose to be on the safe side, you should probably remit the 25%, and then complete a S.216 return to recover it all.
Yeah, not sure how the IRS will handle this, I will have to do some investigating. Thanks gain!
For anyone coming across this, I have an answer. You absolutely do NOT need a Canadian agent any more, however you must remit the full 25%. If you want to do the net tax, you need an agent.
What you do is you call up "Part XIII tax and non-resident withholding accounts" number (currently 1-855-284-5946) and tell them your information. You will need SIN, your address, the rental information, and the amount of rent. They will give you a non-resident account number and instructions on how to pay the monthly 25%!
It took about 15 minutes. Really easy, just give them a call.
What you do is you call up "Part XIII tax and non-resident withholding accounts" number (currently 1-855-284-5946) and tell them your information. You will need SIN, your address, the rental information, and the amount of rent. They will give you a non-resident account number and instructions on how to pay the monthly 25%!
It took about 15 minutes. Really easy, just give them a call.
Hopefully this is a first step to allowing non-residents to eventually beable to BOTH be their own agent and also get reduced withholding.
Given that many qualify to have 0% withheld, giving the govt 3-months rent to play with for a year would induce me to find a willing relative -- or even the tenant -- to act as my agent, even if there was a small payment made to that person.
Given that many qualify to have 0% withheld, giving the govt 3-months rent to play with for a year would induce me to find a willing relative -- or even the tenant -- to act as my agent, even if there was a small payment made to that person.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Having gone through this process.
Remember FOLKS, your NR6 is due.
If you're married, don't make the mistake I made. When I initially filed my NR6, I did one form, but for most spousal arrangements, you co-own the property 50-50%. If that is the case, you submit two NR6 forms. Not so hard, once you get an agent. For me, I do everything myself, so all I need from the agent is them to register, and then I manage the rest.
Remember FOLKS, your NR6 is due.
If you're married, don't make the mistake I made. When I initially filed my NR6, I did one form, but for most spousal arrangements, you co-own the property 50-50%. If that is the case, you submit two NR6 forms. Not so hard, once you get an agent. For me, I do everything myself, so all I need from the agent is them to register, and then I manage the rest.