Managing, Collecting, and Filing Taxes
Managing your investment, and collecting and filing taxes for the Canadian Government is part of owning a property as a non-resident. When buying a Whistler property it is important to retain a Whistler accountant prior to writing the offer, and have discussions with any service providers, like a rental management company…you want to know how this investment fits with your expectations. Please note, this page was drafted by a real estate agent, Marion Anderson who is not an accountant. It is an overview and not a substitute for a conversation with an accountant.
Buying. Owning. Selling.
If you are a non-resident Buyer, do yourself a favor and read the following pages. It helps to stay informed.
- Buying Process
- Non-resident: Buying
- Non-resident: Finance and Funds
- Non-resident: Owning
- Non-resident: Selling
Table of contents
FAQ
Non-residents pay 25% of the gross rental income to the Canada Customs Revenue Agency (CCRA). To reduce the 25%, an NR6 form must be filed.
Only on rental income. By filing an NR6 you don’t have to submit 25% gross rental income but can file an annual Canadian Tax return. Your property manager or BC accountant handles this for you.
Between the owner, the owner’s spouse, or common-law partner must use their Whistler residential property for at least 28 days to avoid paying UHT.
The Canadian Government has not provided a ruling on this. Best to read my blog post on Underused Housing Tax.
No. As a non-resident of Canada, you pay tax on income you receive from sources in Canada.
Only when they sell the property.
Managing Your Investment
Managing your Whistler property from afar as a non-resident is simple as there are many services available to support you. You just need to identify what services you require. There will be a person or company in Whistler who will provide those services for a fee. Whistler was built on entrepreneurs who identified a service that was needed and then built a business around it. Whether you own a condo, a townhouse, or a luxury house, there is someone in Whistler who will provide service to you. Marion will help you determine what service providers you need and offer you recommendations.
Property Management Services
There are rental management companies that market and manage your property. In addition, there are property management services that manage a tenanted or residential property. Both are licensed and regulated under a property management license. Their governing body the British Columbia Financial Services Authority is also the regulating body for BC real estate agents.
There are a variety of rental management companies and the established ones seem to work on the marketing strategy of directing the user to their website for full details. However, this full-service rental management company also utilizes every channel available. More recently with the development of Airbnb and VRBO portals, rental management companies rely on these portals to market your property. This management fee ranges from 20% to 25% management fee, which is less than the established companies. The more established companies charge 35% plus, because they provide more services and means for rentals. It all depends on what you want and what you are prepared to pay for the services each provides. There is also a rental management company that will market your property, and you handle the cleaning and repairs and they charge 10% base. Marion will help you determine which rental management service, if any works for your situation.
Self-management
At this stage, all you have to do is Google the type of service you are after in order for you to self-manage your property. You may have a rental property, a tenanted property, or simply need support for your residential property. Regardless of your needs, there are Whistler companies that will be able to support you. Some developments have a registered rental property manager that must be retained. Other developments allow you to self-manage. Marion will be able to advise you accordingly.
Tax Considerations
As a non-resident of Canada, you pay tax on 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. The non-resident owner of Whistler property is required to file a Canadian personal tax return (called a T1) by April 30th of the following year if any taxes are payable. If no taxes are due then the T1 filing is due by June 15th. A business income statement must accompany the T1. It is easy to see that a BC accountant is one of the first professionals needed to assist with your Whistler purchase, ownership and eventually selling your investment.
There are tax considerations based on whether you own the property personally, in a partnership, or in a Trust. This real estate site will not go into each of these but will focus the page on personal ownership.
Section 216 Election
A non-resident of Canada, you choose to send the CRA a separate Canadian tax return to report your rental income from real or immovable property in Canada. Choosing to send the CRA this return is called electing under section 216 of the Income Tax Act.
Electing under section 216 allows you to pay tax on your net Canadian-source rental income instead of the gross amount. If the non-resident tax that the payer withheld is more than the amount of tax payable on your Section 216 return, the CRA will refund the difference to you.
Income Tax on The Four Property Types
1. Rented Nightly
In essence, Canada Revenue Agency (CRA) wants non-residents who are earning income to pay tax on that income annually. If 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, 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.
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.
GST Collection on Nightly Rentals
GST must be charged on nightly rentals. Generally speaking, GST charged and collected must be remitted to CRA and GST paid on purchases and expenses can be claimed as a refund by GST registrants.
If there is a property manager, they will generally charge and collect the GST on the nightly rentals. The property manager will either remit the GST collected directly to CRA monthly, or forward the GST to the owner and then it is the owner’s responsibility to submit the GST. The property manager may require the owner to sign a special election in order to remit the GST directly to CRA.
If the owner receives the GST from the property manager, they must pay it to CRA when the annual GST return is filed. This is called GST payable.
2. Business Income
The non-resident is required to file a T1 personal tax return and pay taxes by April 30 of the following year if any taxes are payable. the rental property management will provide you with a business income statement that must be included with the T1.
Phase 2 properties termed business income properties, have a similar opportunity for the rental management company to withhold 25% of net business income. The difference is that the rental management company will request a CRA waiver for the whole “hotel” building.
This website does not feature ski-in ski-out Phase 2 properties.
3. Rented Monthly
This is a tenanted property. The owner or their landlord does not collect GST on month-to-month rentals. The owner files an annual Canadian Tax return reporting any rental income. Keep all receipts and expenses incurred with your property. Marion can suggest a manager for your tenanted property if you do not wish to manage it from afar.
4. Never Rented
The best way to describe this property is to state that regardless of the zoning, the property has never been rented out from the day you bought it. It would be termed a residential property.
A non-resident owner of a property, which is not rented, is not required to file an annual income tax return as there is no income to report.
Change of Use
When you bought your property and decided it would be used as residential regardless of zoning, after a few years you may decide to use the tourist accommodation zoning that the property has in order to earn some revenue. This action is called a “change of use” from what you bought to what you want to do with your property. Before you do anything, talk with a Whistler Accountant. There are special very complex rules for the full or partial change of use of the property. There may be additional complications for a change to a mixed-use property (e.g. part-year nightly rental, part-year monthly rental, and some personal use). Complications could also result, for example, from renting a suite in the home. If the owner is considering renting the property on either a monthly or a nightly basis, there will be implications for both Canadian income tax and GST, and possibly the UHT.
Underused Housing Tax (UHT)
For as full an explanation as a realtor can offer you, please read the post on The Underused Housing Tax (UHT). The UHT was introduced by the Federal Government in June 2022. This tax pertains to non-residents who own residential property in Whistler. The owner, spouse, or common-law partner needs to use their residential property for 28 days in the year to avoid paying the 1% on the value of the property. If the value of your Whistler residence is $3M then the UHT would be $30,000 a year. However, if you are not using your residence for a month during the year…the bigger question is why not?
Whistler or BC Accountant
The Whistler accountants and lawyers have many clients who are in the same situation as you are. Therefore, when one client has a concern it means that 20 or more have the same concern. Working with a Vancouver professional you may find you are the only one in the practice who has a rental property in Whistler with questions. The UHT situation with the lack of information about non-resident and rental income property is a good example of this. The Whistler accountants and rental management companies know each other, they rely on each other to provide a better service to their clients.
Next Steps
The steps above are a guideline as to what you can expect. With an experienced Whistler realtor and a local accountant and lawyer on your team, this will not be a difficult process. If you are a non-resident who is considering buying or selling a property in Whistler, contact Marion Anderson, author of this site. If you have read the non-resident pages, you already know what kind of realtor, and person Marion Anderson is.
If you think I would be a good fit to work with you and your family, and you are not working with a Whistler realtor, please contact me. I look forward to hearing from you.
It’s a Good Life in Whistler!
Marion
Marion Anderson Personal Real Estate Corporation
manderson@sutton.com (604) 938-3885