Property Management Resources

TENANTS BEWARE: Withholding Tax on Rent Paid Directly to Non-Resident Landlords

If you’re a renter in Canada paying rent directly to your landlord, do you know your landlord’s residency status?


As a tenant, you need to understand the implications of Canada’s tax system when it comes to paying rent directly to a non-resident landlord. Under Canada’s tax rules, tenants paying rent directly to non-resident landlords are required to withhold a percentage of their rent, (in most cases 25%) and submit it to Canada Revenue Agency monthly. 


However, many tenants don’t know this, which can lead to unfortunate surprises. Understanding these tax responsibilities is important to protect yourself from costly tax bills and penalties.


Here’s what this means for you as a tenant and how to avoid this undesirable scenario.

What Does it Mean to Have a Non-Resident Landlord?

In Canada, a non-resident landlord refers to an individual who owns rental property in the country but is not considered a resident of Canada for taxation purposes. This status is determined by the Canada Revenue Agency and is based on a host of criterias related to residency and taxation.


An Example of a Non-Resident Landlord

John owns an apartment in Ottawa that he rents out to tenants. However, John's primary residence is in Florida, where he spends most of the year. He visits Canada occasionally for short periods, mainly to oversee maintenance or visit family.


In this scenario, John would most likely be classified as a non-resident landlord by the Canada Revenue Agency. Despite owning rental property in Canada, his primary place of residence and habitual abode is in another country (United States). Therefore, he would be subject to taxation and other regulations governing non-resident landlords in Canada.

Importance of Understanding Your Landlord's Residency Status

It's essential for tenants who pay rent directly to landlords, to determine if their landlord is a resident of Canada for taxation purposes. Knowing the landlord's residency status ensures you meet your tax withholding obligations and avoid penalties for non-compliance.


This awareness also allows you as a tenant to make informed choices about your rental agreements, ensuring you adhere to Canadian laws and regulations.



Tax Withholding Requirements

Tenants paying rent directly to non-resident landlords in Canada are obligated to withhold a portion of their rent for tax purposes and remit it to the Canada Revenue Agency on a monthly basis. This requirement ensures that the appropriate taxes are withheld and remitted to the government on behalf of the landlord.


As of the writing of this blog, the current percentage of rent that tenants must withhold when paying a non-resident landlord directly, is typically 25%.


What Happens if I Don't Withhold Taxes?

Unfortunately, failure to withhold taxes as required by law can have serious consequences for tenants. It may result in penalties, fines, or legal action by tax authorities.

Additionally, tenants could be held liable for any unpaid taxes owed by the non-resident landlord, potentially leading to financial hardship or legal disputes. Because of this, it's crucial for tenants to understand and adhere to their tax withholding obligations to avoid these negative outcomes.

DORE Keeps You Protected from Unwanted Tax Implications

When you rent from DORE Property Management, you’ll never have to worry about withholding tax on behalf of your landlord, no matter their residency status.


At DORE, we prioritise compliance with tax withholding requirements to provide peace of mind to both landlords and tenants.



How We Handle Tax Withholding

Our dedicated team at DORE Property Management takes care of all tax withholding responsibilities from non-resident landlords. We ensure that the correct percentage of rent is withheld and promptly remitted to the appropriate tax authorities in accordance with Canadian laws and regulations.

Benefits of Renting From DORE for Tenants

Renting from DORE Property Management tenants can rest assured that if there is any exposure to non-resident landlords, tax obligations are being handled professionally and accurately. By entrusting us with tax withholding duties, tenants avoid the complexity and potential pitfalls of managing tax matters themselves. Our proactive approach minimises the risk of non-compliance and shields tenants from the consequences of incorrect withholding, such as penalties or legal issues.


Choosing DORE Property Management not only guarantees efficient tax compliance but also provides tenants with a hassle-free rental experience, allowing them to focus on enjoying their living space without the burden of non-resident tax-related concerns.

Choose Peace of Mind with DORE Property Management

Understanding the tax responsibilities associated with renting from non-resident landlords in Canada is crucial for tenants to avoid potential financial and legal complications. By recognizing the significance of their landlord's residency status, tenants can fulfil their tax withholding duties and ensure compliance with Canadian tax laws if necessary.


At DORE Property Management, we recognize the complexities of tax withholding requirements and are committed to simplifying the process for our tenants. As a registered agent for non-resident tax withholdings, our comprehensive approach to handling tax obligations on behalf of tenants renting from non-resident landlords alleviates the burden and uncertainty associated with tax compliance.


By choosing DORE Property Management, tenants benefit from a seamless rental experience, knowing that their tax responsibilities are being shielded from any obligations to withhold and remit any taxes. Our dedication to ensuring compliance with tax withholding requirements reflects our commitment to providing superior service and support to our valued tenants.