Non-Resident: Withholding Tax on Nightly Rentals
As a non-resident of Canada, you pay tax on the net income you receive from sources in Canada. The type of tax you pay and the requirement to file an income tax return depend on the type of income you receive. This is called Withholding Tax.
There are tax considerations based on whether you own the property personally, in a partnership, or a Trust. This real estate site will not go into each of these but will focus the page on personal ownership.
Withholding Tax
In essence, Canada Revenue Agency (CRA) wants non-residents who are earning income to pay tax on that income annually. However, the CRA wants to collect and hold 25% of your gross income monthly, so that if you skip the country, at least they have received a portion of your income that would be greater than the tax owing.
When your property earns income it must be collected and remitted at the source of payment. This source of payment is the person or company that receives the money from the guest. For example: if you hire a rental management company they will take care of this for you. Their job is to withhold 25% of the gross income and submit it to the CRA, each month. This could be considered a pre-payment of taxes. This 25% is usually more than the actual tax liability. However, this amount is held by the CRA until the non-resident files their Canadian income tax return by April 30th.
Reducing the Withholding Tax
The holdback of 25% on gross revenue can be reduced to 25% of net income after expenses when the non-resident and the rental manager co-sign the NR6 form which is then submitted to CRA for approval.
Actual income tax is determined when the income tax return is filed by your Whistler accountant and assessed by the CRA. Typically the rental management company takes care of working with the Whistler accountant to submit this annually.
Secure an Accountant
Please note: I am a realtor, not an accountant. It is important to secure an accountant. A good time for that is when you start your search for your Whistler property. It is important to have an accountant in place so that you are set for tax time. I can help you with that introduction.
Marion Anderson Personal Real Estate Corporation
marion@WhistlerSkiinSkiout.com (604) 938-3885