Frequently asked accounting questions

The following accounting information applies to Non-Canadian Residents

 

Q. If you have a property in Canada, would it be subject to Canadian taxes?

A. It would be subject to Canadian taxes if that property is generating income deriving from Canada e.g. rental income, capital gains.

Q. How would the rental income be taxed?

A. The rental income would be subject to 25% withholding taxes.

Q. Would the withholding taxes be refundable?

A. Yes, if the non-resident taxpayer files an income tax return stating the income and expenses incurred for that property in the year. Any excess taxes paid would be refunded. If no tax return is filed, the withholding taxes would not be refunded.

Q. What is NR6?

A. Instead of paying 25% withholding taxes on gross rental income earned, the taxpayer could make an application to Canada Revenue Agency to be taxed on net rental income. That application is called a NR6 application.

Q. If the Canadian property was to be sold, would it be subject to Capital Gains tax?

A. Irrespective of whether the Canadian property is for private use or for income producing purposes, at the time of disposition, the property would be subject to capital gains taxes. 50% of the capital gains are taxable.

Q. What are Certificates of Compliance?

A. For sale of a Canadian property, the purchaser’s lawyer is obligated to withhold (or put the vendor’s lawyer on an undertaking to withhold) funds for payment of the capital gains tax. If the non-resident vendor wishes to have the funds be released after the capital gains taxes are paid, they need to apply to the Canada Revenue Agency for certificates of compliance. The time limit for making the applications is 10 days after the disposition.

Q. Would withholding taxes on capital gains be refundable?

A. Yes. Provided an income tax return is filed, if the withholding taxes paid which exceed tax liabilities, any excess would be refunded.