Hi - I'm a tax withholding agent for a non-resident.
We filed an NR6 which was approved so the rent income is taxed on the net amount
I understand that for each month I have to remit the tax, my question is about the net amount calculation.
I'll give a simple example, say these were the transactions:
January
Income 100$
Expense 200$
February
Income 100$
Expenses 0$
January remittance: 0$ (net income was -100$)
My question is about February remittance, which one is correct:
1. 100 + 100 - 200 = 0$
OR
2. 100 - 0 = 100$ * 25% = 25$
The difference is on what range do I calculate? "standing balance" (option 1) or Monthly (option 2)?
I'd prefer option 1 of course but I would like to comply. This doesn't seem to be specified in the CRA material.
Thanks in advance!
Daron
NR Net Rent Tax Calculation
Moderator: Mark T Serbinski CA CPA
Re: NR Net Rent Tax Calculation
Read your NR6 carefully. It may have stipulated the withholding you must remit every month based on the information you gave them.
It is not based on your current day-to-day balance, it is usually based on your YEARLY net from the previous year.
It is not based on your current day-to-day balance, it is usually based on your YEARLY net from the previous year.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Re: NR Net Rent Tax Calculation
Thank you for the answer. I read the NR6 again and cannot find information that supports previous year calculation.
The following text is from the NR6:
"If a valid NR6 is approved, the non-resident withholding tax must be determined when the actual rental payment is made taking into account expenses (excluding CCA). We must receive any non-resident tax withheld by the 15th day of the month following the month during which the rental payment was paid or credited to the agent on the non-resident's behalf."
To me, "actual rent payment" means current year. Which bring me back to my original question.
What am I missing?
The following text is from the NR6:
"If a valid NR6 is approved, the non-resident withholding tax must be determined when the actual rental payment is made taking into account expenses (excluding CCA). We must receive any non-resident tax withheld by the 15th day of the month following the month during which the rental payment was paid or credited to the agent on the non-resident's behalf."
To me, "actual rent payment" means current year. Which bring me back to my original question.
What am I missing?
Re: NR Net Rent Tax Calculation
No, sorry, you are correct.
The method would thus be CUMULATIVE.
Add you rental expenses for the year so far, and then add your income, including the last payment you receive. Then look at what you have sent to CRA.
If it is more than 15% of your net, you send nothing that month, if it is less than 15% of your net, then send the difference.
Using your example above,'
On Jan 1, when you receive your rent, you would send $15, since you have no expenses yet.
On Feb 1, your net income is $0 ($200 in rent, and $200 in expenses for the year so far). you send nothing.
On March 1, your net is $100 ($300 in income ncludng the march rent, $200 in expenses from Jan and feb), you would owe $15 but you would review what you haw previously sent and have $15 on account from January, so you send nothing for march.
Do this calc every month, and you should end up with a slight overpayment, which you will claim, along with your final accurate income/expense balance sheet (now including any CCA you might take), on your 216 return, which you must file since you have an NR6.
The method would thus be CUMULATIVE.
Add you rental expenses for the year so far, and then add your income, including the last payment you receive. Then look at what you have sent to CRA.
If it is more than 15% of your net, you send nothing that month, if it is less than 15% of your net, then send the difference.
Using your example above,'
On Jan 1, when you receive your rent, you would send $15, since you have no expenses yet.
On Feb 1, your net income is $0 ($200 in rent, and $200 in expenses for the year so far). you send nothing.
On March 1, your net is $100 ($300 in income ncludng the march rent, $200 in expenses from Jan and feb), you would owe $15 but you would review what you haw previously sent and have $15 on account from January, so you send nothing for march.
Do this calc every month, and you should end up with a slight overpayment, which you will claim, along with your final accurate income/expense balance sheet (now including any CCA you might take), on your 216 return, which you must file since you have an NR6.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Re: NR Net Rent Tax Calculation
No, sorry, you are correct.
The method would thus be CUMULATIVE.
Add you rental expenses for the year so far on the date you get your rent , and then add your income, including the last payment you receive. Then look at what you have sent to CRA.
If it is more than 15% of your net, you send nothing that month, if it is less than 15% of your net, then send the difference.
Using your example above,'
On Jan 1, when you receive your rent, you would send $15, since you have no expenses yet.
On Feb 1, your net income is $0 ($200 in rent, and $200 in expenses for the year so far). you send nothing.
On March 1, your net is $100 ($300 in income includng the march rent, $200 in expenses from Jan and feb), you would owe $15 but you would review what you haw previously sent and have $15 on account from January, so you send nothing for march.
Do this calc every month, and you should end up with a slight overpayment, which you will claim, along with your final accurate income/expense balance sheet (now including any CCA you might take), on your 216 return, which you must file since you have an NR6.
I
The method would thus be CUMULATIVE.
Add you rental expenses for the year so far on the date you get your rent , and then add your income, including the last payment you receive. Then look at what you have sent to CRA.
If it is more than 15% of your net, you send nothing that month, if it is less than 15% of your net, then send the difference.
Using your example above,'
On Jan 1, when you receive your rent, you would send $15, since you have no expenses yet.
On Feb 1, your net income is $0 ($200 in rent, and $200 in expenses for the year so far). you send nothing.
On March 1, your net is $100 ($300 in income includng the march rent, $200 in expenses from Jan and feb), you would owe $15 but you would review what you haw previously sent and have $15 on account from January, so you send nothing for march.
Do this calc every month, and you should end up with a slight overpayment, which you will claim, along with your final accurate income/expense balance sheet (now including any CCA you might take), on your 216 return, which you must file since you have an NR6.
I
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Re: NR Net Rent Tax Calculation
Thanks so much for the answer!
Isn't it 25% tax rate though (and not 15%)?
Isn't it 25% tax rate though (and not 15%)?
Re: NR Net Rent Tax Calculation
Yeah.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Re: NR Net Rent Tax Calculation
Thank you for the thread. I have encountered the same problem with my tax calculation. I was trying to figure out how to build to rent financing https://relentlessfinances.com/build-to-rent/ works. I have built a house that I plan to rent, but I am not really sure what taxes I should pay and what should be paid by the tenants. It would be great if you could suggest to me a source I can read from about these legal issues. I am not good with the US laws in this area, and I should have investigated it earlier. But I was too busy with the construction that I did not pay enough attention to it. Thank you for the replies