Home -> Real Estate -> Payments to Non-Residents
Buying or Renting Real Estate From a Non-Resident
Income Tax Act s. 116, 212, 215
Real Estate Purchased From a Non-Resident
Purchaser Liable if Non-Resident Does Not Pay
Renting Real Estate From a Non-Resident Landlord
Non-Resident Landlord s. 216 Election
Purchasing Residential Real Estate in BC
Purchasing Residential Real Estate in Ontario
Canada Revenue Agency (CRA) Resources
Real Estate Purchased From a Non-Resident
Income Tax Act s. 116
When real estate is purchased from a non-resident of Canada, the non-resident is normally required to complete and submit a form to Canada Revenue Agency (CRA), along with a tax of 25% (35% as of January 1, 2025) of the gain on the property. The rate of withholding tax is subject to any relevant tax treaty. CRA will then provide a certificate of compliance (T2064 or T2068) to the purchaser and the vendor.
Purchaser Liable if Non-Resident Does Not Pay
Income Tax Act s. 116(5)
If the non-resident vendor does not pay this tax, the purchaser of the property will be liable. Thus, the purchaser may withhold 25% (50% in some cases) of the cost of the property. The rate of 25% increases to 35% as of January 1, 2025 as proposed by the Federal 2024 Budget.
In a recent BC Supreme Court Case, Mao v. Liu, 2017 BCSC 226, Tony Liu Notary Corporation was sued by Mao. Mao had been assessed $600,000 by CRA related to the sale, because the seller was a non-resident of Canada. The Notary had handled the closing of the sale and failed to discover that the seller was a non-resident. Thus, the 25% tax was not remitted by the vendors. The Court found in favour of Mao.
Several factors made it seem, without doing sufficient investigation, that the vendors were residents of Canada:
 | The vendors had owned the property for 12 years; |
| their registered address was the address of the property; and |
| there was a history of mortgages against the property in favour of financial institutions in Canada. |
Tax Tip: When you're buying real estate, or are the agent for the purchaser, get verification that will stand up in Court that the vendor is a resident in Canada, unless it is already known that the vendor is a non-resident.
Renting Real Estate From a Non-Resident Landlord
Income Tax Act s. 212(1), s. 215(1)
A tenant is required to withhold 25% tax on rent paid to a non-resident landlord. See the Video Tax News June 2023 Life in the Tax Lane, as well as court case 3792391 Canada Inc. v. The King.
On May 17, 2024 the Hon. Marie-Claude Bibeau, Minister of National Revenue, tweeted the following:
I want to reassure Canadians that the Canada Revenue Agency does not intend to collect any portion of any non-resident landlords' unpaid taxes from individual tenants. It is incorrect to state otherwise.
The recent case at the Tax Court of Canada (3792391 Canada Inc. v. The King) was an extremely rare situation. This 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.
The CRA does not expect individual tenants to withhold 25% of the rent from their landlords.
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, but I can assure Canadians that it does not, and will not, apply to them.
It would be more reassuring to see this statement on a government of Canada website.
For a Canadian to not withhold the Part XIII tax would be contrary to s. 215(1)(d) of the Income Tax Act, which requires a tenant to withhold tax on rent paid to a non-resident landlord. The Income Tax Audit Manual Chapter 15.0 International audit issues is the chapter that would deal with this, but that chapter is currently under review and unavailable. It has been under review for at least 2 years now.
Most Canadians are unlikely to know about the Part XIII withholding tax requirement, and if they are aware, it may be quite likely that they do not know the country of residence of their landlord. For the CRA to ignore this law seems quite reasonable, but the law still exists.
Hopefully there is a plan to change the legislation to remove this requirement for Canadian tenants.
Non-Resident Landlord Election
A landlord can elect to pay Part I tax, meaning they would report the net rental income on their personal or corporate income tax return, under s. 216 of the Income Tax Act.
November 4, 2009 Technical Interpretation 2009-0311311E5 - Withholding Tax on Rental Income includes the following statement:
Where the rental income is income from property, the non-resident will be subject to Part XIII tax under paragraph 212(1)(d) of the Act on the rents received. Subject to any relevant tax treaty, the rate of withholding tax is 25%. Alternatively, the non-resident may make an election under subsection 216(1) of the Act to file an income tax return for a particular year and pay tax under Part I of the Act on the net rental income for that year (at the income tax rates applicable to Canadian residents)
Subsection 215(6) of the Act provides that when a person fails to deduct or withhold any amount as required by section 215 of the Act, from an amount paid to a non-resident person, that person becomes liable to pay as tax under Part XIII on behalf of the non-resident person the whole of the amount that should have been deducted or withheld. Any person liable to pay an amount on behalf of a non-resident person in accordance with subsection 215(6) of the Act is entitled to recover from that person the amount so paid.
Purchasing Residential Real Estate in BC
BC Property Taxes - including BC Home Flipping Tax - even on principal residence
BC Speculation and Vacancy Tax
If you're planning to purchase property in BC on which you plan to develop a farm, see:
Farm Status in British Columbia - Understanding the Regulation
Purchasing Residential Real Estate in Ontario
Know the tax implications when buying from a non-resident.
Make sure you know whether the vendor is or is not a non-resident!
Canada Revenue Agency (CRA) Resources
The above tax applies to some other types of Canadian property besides real estate. For more information on this topic, see Canada Revenue Agency resources:
T4058 Non-Residents and Income Tax
Non-residents disposing of certain Canadian properties
Income Tax Audit Manual Compliance Programs Branch Chapter 15.0 International audit issues - Under review
IC77-16R4 Non-Resident Income Tax (No longer exists)
Revised: June 15, 2024