The Canada Revenue Agency will not pursue tenants for taxes owed by their landlords who live outside the country, according to a statement from the Minister of National Revenue.
The clarification comes after confusion emerged online this week over whether a tenant is responsible for withholding taxes paid on rent to their landlord if the property is owned by someone outside of Canada.
“I want to assure Canadians that the Canada Revenue Agency does not intend to collect any portion of non-resident landlords’ unpaid taxes from individual tenants,” it reads. a statement issued by Minister Marie-Claude Bibeau on the 10thformerly known as Twitter, on Friday afternoon.
“It is incorrect to state otherwise.”
Claims that tenants could be liable for their landlords’ unpaid taxes, or that a tenant should withhold 25 percent of their rent in advance and remit the taxes directly to the CRA, arose in response to a Tax Court ruling from Canada last year.
Bibeau called the case (3792391 Canada Inc. v. The King) “an extremely rare situation.”
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The case law and its possible implications for tenants were first widely reported by The Globe and Mail last month. That article described a Montreal man who was ordered to pay six years of unpaid taxes plus interest on behalf of his landlord, a decision that was delayed in tax court.
This past week, debate over the legitimacy of the law and the responsibility of tenants to remit taxes to their foreign owners took off online.
But Bibeau said the law in question “has existed for almost a century, and there is not a single case of an assessment performed on an individual tenant in the last decade.”
In a statement to Global News on Friday, the CRA stated that it “does not expect tenants to withhold 25% of rent from their landlords.”
“In most situations involving rental income, the CRA’s practice is to engage in dialogue with the landlord rather than the tenant,” a spokesperson said in an email.
The CRA added that “to ensure tax fairness,” the CRA would engage directly with a tenant “when a business relationship exists between the tenant and the landlord,” adding that these are “exceptional and rare circumstances.”
“We understand that it is important for people to feel safe in their homes and this government will continue to ensure that the tax system is fair and efficient for all Canadians,” the statement concludes.
Global News asked the CRA in another email if it could provide examples of those business relationships, but did not receive a response.
Bibeau said in his statement that he would work with Finance Minister Chrystia Freeland “to bring absolute clarity to the law and ensure tenants have the certainty they need and deserve.”
“But I can assure Canadians that it does not and will not apply to them,” he said.
– with files from Uday Rana of Global News
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