Kathy Berner, owner of Regency Property Management and Real Estate, offers advice to those who are managing a property on behalf of a non-resident of Canada

With so many international buyers flooding into the market, many Canadian individuals and property companies are eager to manage units on their behalf. However, it can prove a costly business if you do not know Canada’s tax rules.  

Years ago, before we really understood Canada Revenue Agency (CRA) rules for non-resident owners, we were almost left with an investor’s income tax bill of over $3,000. We were lucky as the owner admitted it was his administrative mistake but not everyone is as lucky. 

Property managers and non-resident owners need to understand and follow the CRA rules. 

What you need to know

1. Non-residents are not required to file a Canadian annual tax return but are allowed to own a rental property here. The property manager or individual acting as their agent must remint 25 per cent of the gross rental income to CRA on a monthly basis. A property manager/agent is liable for unpaid taxes if the non-resident owner does not file a tax return.
2. The NR6 Form. Some savvy non-resident owners will try and convince property manager to sign this, which essentially estimates how much tax will be assessed for the year ahead. The full 25 per cent has to be paid and if the property manager only pays the estimate, the non-resident owner is required by law to file a tax return by a specific date.  
3. The risk. If an owner fails to file his/her tax return by the deadline, the taxes that are due are automatically assessed at 25 per cent of the gross rental income and the unpaid portion becomes the liability of the Canadian property manager/agent.  

Are they a non-resident?

Determining the residency status of an owner can be difficult. A non-resident for tax purposes is, by law, defined as:

• Normally, customarily, or routinely live in another country and are not considered a resident of Canada; or
• Do not have significant residential ties in Canada; and
• Live outside Canada throughout the tax year; or
• Stay in Canada for less than 183 days in the tax year.

Top Tips

We have a best practice policy now in place to ensure we are protected legally when dealing with non-resident owners.

• We get all owners to identify in writing (in our contract) whether they are residents or non-residents of Canada.  
• We do not approve the NR6 form until the contract has been signed. 
• We always hold back 25 per cent of the gross income on properties owned by non-residents of Canada and remit this holdback to CRA on a monthly basis.  

Kathy Berner is owner of Regency Management & Real Estate in Regina. Check out regencypropertymanagement.ca for further information or call 306-591-5439. 

by Kathy Berner