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What are the ramifications of moving down here and keeping your home in Canada and renting it out? Is it even possible? I know that if renting a second residence while living in Canada it is taxable income. Would you not just have to file a tax return just like you have to, to try and get some of the tax on your pensions back and include the rental income as well or is it much more complicated than that?
Thanks

Simon

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I rent my house out in Canada (Ontario) I file a tax return every April. When filling out my tax return as well as my pension I declare  the amount of rental income. Also declare any expenses  such as property taxes, repairs or any other expense I incurred . It is very simple to do. 

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1 hour ago, sue said:

Rental Income is income whether it is your 1st 2nd or 3rd house it should be declared.  People do it as long as you are not declaring non residence status in Canada and you declare the income it is legal

Sue is correct. Once you apply for official non residency in Canada, you must cut ties with Canada and that includes any property and giving up your health insurance. Then your income tax will (usually) be taken off at source and there will be no need to actually file unless you want to. The flat income tax taken off at source for non resident Canadians is 15%. The math is yours to play with to see if it benefits you or not. Also be aware, that if you do take up residency in Canada again, then your health insurance will kick in three months later after you inform them that you're back as a permanent resident.

Lots of variables in this equation and what suits one person does not suit another.

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Canadian non-residents have to file a 216 return for Canadian rentals. The tenant or rental agent is required to withhold 25% at source and submit to CRA every month. After filing a return with expenses you will receive a refund on any tax balance. CRA will send you (on request) an NR4 in March or April each year and this must be filed with your 216 return. CRA will hold your return until they receive this NR4.

Ferret has mentioned 15% withholding but she may have a special dispensation from CRA. All my clients are having 25% withheld as presently required by CRA.

I also recommend that, before leaving Canada, you have a real estate broker provide you with an opinion of value so that any taxes owing on the sale of the property (should you decide to sell) are limited to capital gains incurred after leaving Canada. it also serves to provide a value if you return to Canada and you should have a new opinion of value done at that time which limits capital gains to the period you were away from Canada and renting the property

 

Dave

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Thanks Dave. I thought that the tax arrangement with Mexico was 15%... when did that change? But I guess perhaps that I've been grandmothered in? Since we were granted non residency status in Canada in '97 when it was 15%... did a deemed disposition on portfolio assets and paid the capital gains owing at that time. And OAS is withholding exactly 15%... and I just turned 66 so it's a fairly new development as an income source.

 

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Ferret: The tax treaty between Canada and Mexico provides for maximum tax payable on monthly pensions as 15%. CRA also applies that rate to capital gains and dividends. Tax on rentals is not set in the treaty so CRA applies the non-treaty tax percentage of 25% to rental income withholding.

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11 hours ago, Simon said:

What are the ramifications of moving down here and keeping your home in Canada and renting it out? Is it even possible? I know that if renting a second residence while living in Canada it is taxable income. Would you not just have to file a tax return just like you have to, to try and get some of the tax on your pensions back and include the rental income as well or is it much more complicated than that?
Thanks

Simon

And why would you ask THIS BOARD when you could ask Revenue Canada and be sure of getting it all direct and correct? 

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23 hours ago, sue said:

“Rental Income is income whether it is your 1st 2nd or 3rd house it should be declared.  People do it as long as you are not declaring non residence status in Canada and you declare the income it is legal”

Sue: Your comment is correct up to “declared.”

Canadian non-residents may own a rental property in Canada but they must file a section 216 rental return each year. That income must be declared on their section 217 return (if they are required to, or if it is advantageous, for them to file one) .They are required to have 25% of the gross rental amount deducted by the Rental agent or the tenant and submitted to CRA on a monthly basis, any amount over-deducted will be refunded to the taxpayer after allowance for expenses. If you, as a renter, do not arrange for the tax withholding, CRA will do it for you on penalty of fines and interest for non-compliance.

I am beginning to hear of non-resident Canadians here at Lakeside who are repaying taxes owing to CRA on a monthly basis from lower incomes because they tried to fly under the radar. $200.00CDN a month does not sound like a lot but over 10 years it becomes 24,000.00 plus penalties and interest it could amount to 50,000.00 or more. If you can’t pay it back CRA will take it out of your CPP and/or OAS.

TelsZ4 said

I rent my house out in Canada (Ontario) I file a tax return every April. When filling out my tax return as well as my pension I declare  the amount of rental income. Also declare any expenses  such as property taxes, repairs or any other expense I incurred . It is very simple to do.”

So, are you are a declared non-resident or are you trying to fly under the radar? If you spend more that 183 days outside Canada per tax year you are by law, a non-resident and subject to NR tax requirements. It is not a decision you can decide for yourself.

If you are a non-resident, as a renter,  you are required to file a section 216 and maybe a section 217 return. Individual tax situations need to be addressed on an individual basis but the 216 return is necessary unless your are prepared to forego a flat 25% tax on the gross rental.

Natasha and TelsZ4

Talking to the CRA is like talking to dummies. You may get the rules but you won’t get the why’s and wherefore’s of how to go about it, or what the implications are for not complying with the rules. There is a bad attitude from CRA employees towards non-residents. I think it is jealousy but their answers and methods of assessment seem to change on a daily or at least tax year basis. Nowadays it is very difficult to talk to someone in the International Tax Office who knows exactly what they are talking about.

For the first 20+ years I did tax preparation in Canada, if we wanted ITSO help we had a direct line to ITSO and a prompt and correct answer from an ITSO incumbent. In the past few years the ITSO is staffed by the Ottawa Tax Office after they have finished Canadian Tax returns for the year and their training and knowledge is to not very good. This was a Conservative initiative a few years ago to reduce costs. The other fact is that they do not care about NR tax returns. They would much prefer you just pay the flat 15% and go away.

During the 20+ years in Canada I prepared some 16-20,000 tax returns and during the last 8 years I have done about 5-6000 NR tax returns, some complicated business and rental returns and some simple. 99% of them go through with no problem but there is always the 1% which seem to take longer to sort out. Then of course there are those who wish to fly under the radar.

The OP is correct, His question was best addressed by a non-resident as the information from CRA these days is often not correct or maybe not complete because the taxpayer may not be aware of the right questions to ask. Nothing to do with taxes is simple any longer.

That s life and taxes.

Dave

 

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Yeah my impression was that the OP had already talked to Revenue Canada and I assumed they are probably like the IRS and the answer he got was not to his liking or perhaps not intelligible. So rather than pay for the advice of someone like "Dave" was hoping to hear the answer on this board he was looking for, thus giving validation to his preferred course of action. This type of thinking seems to be used quite often here. "But I read it on the Chapala board". Good luck with that excuse.

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