Ottawa says tenants not on hook for foreign landlords’ tax bills
Clarification follows ‘extremely rare’ situation in which CRA ordered Montreal man to pay six years worth of fees plus interest and penalties
The federal government will not force tenants to pay unpaid taxes owed by their foreign landlords, the minister of national revenue confirmed Friday, after mounting confusion from renters caused by an “extremely rare” tax court decision.
In a statement released Friday, Marie-Claude Bibeau said tenants will not be on the hook for taxes owed by landlords who live outside of Canada’s borders.
“I want to reassure Canadians that the Canada Revenue Agency (CRA) does not intend to collect any portion of any non-resident landlords’ unpaid taxes from individual tenants. It is incorrect to state otherwise,” she said in a statement posted to X, formerly Twitter.
The clarification comes after rising confusion caused by a 2023 Tax Court of Canada decision that saw a Montreal renter ordered by the CRA to pay six years’ worth of his foreign landlord’s taxes, alongside interest and penalties.
As reported by the Globe and Mail, the tenant appealed the order but it was dismissed; the court found that, because the tenant was renting from a non-resident landlord, he had been required to withhold 25 per cent of the rent for the CRA. The tenant argued he hadn’t even known the landlord lived abroad.
Canada’s Income Tax Act requires foreign owners be taxed on property income collected from Canadian residents. To ensure compliance, the CRA directs tenants, or their property managers, to withhold 25 per cent of their rent and remit it to the revenue agency.
In her statement, Bibeau called the Montreal case an “extremely rare situation” and said the CRA does not expect individual tenants to withhold the 25 per cent of rent from landlords.
She said the tax law has existed for “nearly a century, and there is not a single instance of an assessment made to an individual tenant in the last decade.”
“I am working with my colleague, the Minister of Finance, to provide absolute clarity on the law and to ensure that tenants have the certainty they need and deserve,” Bibeau wrote, adding that she could assure Canadians “that it does not, and will not, apply to them.”
Last week before Bibeau’s clarification, Jessica Bell, the New Democrat MPP for the riding of University-Rosedale, said her office had been hearing from tenants “worried and stressed out” that they could be evicted if their non-resident landlord wasn’t paying their taxes.
In a letter to Paul Calandra, Ontario’s minister of municipal affairs and housing, Bell shared an example of one tenant who said the CRA had “directed” them to withhold 25 per of their rent and pay it to the revenue agency if their landlord lived outside Canada. The CRA “is threatening to charge interest and issue fines if a tenant does not comply,” Bell’s letter said.
But when the tenant asked their landlord if they were a non-resident, the landlord wouldn’t say. The CRA, too, refused to say if the landlord in question was non-resident, due to privacy reasons.
According to Bell’s letter, the landlord then threatened to evict the tenant if they withheld 25 per cent of their rent.
“No tenant should risk eviction for paying their foreign landlord’s tax bill.
“This is fundamentally unfair, and it is fundamentally un-Canadian,” Bell wrote.