Federal Government Clarifies Tax Collection Rules for Tenants of Non-Resident Landlords

1. Government Assurance

The federal government will not require tenants to pay unpaid taxes owed by their foreign landlords, Minister of National Revenue Marie-Claude Bibeau confirmed on Friday. This clarification comes amid confusion from renters following an “extremely rare” tax court decision.

2. Official Statement

In a statement released on Friday, Bibeau reassured Canadians that the Canada Revenue Agency (CRA) does not plan to collect any portion of non-resident landlords’ unpaid taxes from individual tenants.

“I want to reassure Canadians that the Canada Revenue Agency (CRA) does not intend to collect any portion of any non-resident landlords’ unpaid taxes from individual tenants. It is incorrect to state otherwise,” she said in a statement posted to X, formerly Twitter.

3. Background of the Issue

The confusion arose from a 2023 Tax Court of Canada decision where a Montreal renter was ordered to pay six years’ worth of his foreign landlord’s taxes, along with interest and penalties. The tenant appealed the order, but the court found that he had been required to withhold 25 percent of the rent for the CRA, as the landlord was a non-resident. The tenant argued that he was unaware the landlord lived abroad.

4. Legal Requirements

Under Canada’s Income Tax Act, foreign property owners must be taxed on rental income collected from Canadian residents. To ensure compliance, the CRA directs tenants or property managers to withhold 25 percent of the rent and remit it to the revenue agency.

5. Government Clarification

In her statement, Bibeau described the Montreal case as an “extremely rare situation” and emphasized that the CRA does not expect individual tenants to withhold 25 percent of their rent.

“The tax 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,” Bibeau stated. She assured Canadians that the law does not and will not apply to them, adding that she is working with the Minister of Finance to provide clarity and certainty for tenants.

6. Political Response

Before Bibeau’s clarification, Jessica Bell, the New Democrat MPP for University-Rosedale, reported that her office had received numerous concerns from tenants worried about potential eviction if their non-resident landlords failed to pay taxes.

7. Tenant Concerns

In a letter to Paul Calandra, Ontario’s Minister of Municipal Affairs and Housing, Bell cited an example where a tenant was directed by the CRA to withhold 25 percent of their rent if their landlord was a non-resident. The CRA threatened to charge interest and fines for non-compliance. However, the tenant’s landlord refused to confirm their residency status, and the CRA cited privacy reasons for not disclosing it.

8. Risk of Eviction

Bell’s letter mentioned that the landlord threatened to evict the tenant if they withheld 25 percent of the rent. Bell emphasized that tenants should not risk eviction over their foreign landlord’s tax obligations.

“No tenant should risk eviction for paying their foreign landlord’s tax bill. This is fundamentally unfair, and it is fundamentally un-Canadian,” Bell wrote.

9. Future Actions

Bibeau concluded by stating that she is collaborating with the Minister of Finance to ensure the law is clear and that tenants can feel secure in their rental agreements, free from the fear of bearing their landlords’ tax burdens.