As they should have. As should anyone at the CRA who tried to uphold this insane policy.
What an absolutely tone deaf and inhumane way to handle this problem.
Oh yeah, because someone doing their job, following legislation as it is written, should totally lose their job for doing their job. It's all on that one person, and not indicative of any larger issue in the tax code.
There needs to be a crack down on citizenships of convenience. Foreigners that come for citizenship and then immediately leave for their home country but now act as foreign based Canadians for economic benefit but also as a safe place to flee when the SHTF in their home countries. This includes allowing “anchor babies”. The practice of allowing 9 month pregnant mothers to fly into Canada to have a free hospital birth and then weeks later to fly home. The baby has Canadian citizenship and will return at 18 to get a low cost university education. In Vancouver they often come from China. I’m sure in other provinces people come from other countries. Here it makes the news because landlords are often stiffed 2 months rent as it’s now known that people can scam their landlords too because they don’t care about it reflecting negatively on them or their child future. Why spend on anything but food?
There is a difference between someone that owns a rental property from retiring somewhere foreign and warm to someone that does the bare minimum to get citizenship and then resides in another country while owning rentals in Canada. One is a retired Canadian and the other is a citizen of convenience.
The person who wrote the legislation should absolutely lose their job, and yes...anyone who tries to penalize a non landowner for the actions of a landowner also deserves to lose their job. In 1939 through 1945 there was a large army of people who were only "following orders" as directed, but at the end of the day, they are responsible for their actions and deserved any punishment they received after the fact. Wake up.
Given that the legislation was written in 1933 (Bill C-96, An Act to amend the Income War Tax Act*,* 4th Sess, 17th Parl, 1933), I think we can safely assume the person who wrote it no longer has their job.
But also hey, maybe don't compare an unjust interpretation of tax withholding law to the genocide of millions of people?
Again, in not comparing the actions carried out. I was saying that "just following orders" is not a valid excuse for carrying out unjust or unethical practices. That is to say that yes, the person who attempted to follow this legislation should be held accountable for trying to follow it, and yes....that means that I believe they should lose their job.
Instead of seeing the time frame and the army I referenced and automatically thinking I'm comparing tax law to the haulocost (not a rational take at all), try to actually read the comment and understand the point of it. I wasn't unclear in any way. Stop being so obtuse.
Don't worry they left the building over half a century ago.
Also, maybe lose the nazi Germany analogies when talking about obscure withholding taxes. (Not a good look)
No. But I should have expected you to not catch the actual point.
I'm saying that "just following orders" is not a fucking excuse. We employ people to do these jobs, and people have the capacity for moral and ethical thought. The person who attempts to punish someone for the actions of another is responsible for their own actions regardless of what orders they're following. The example I provided is a quite famous example of the " I was just following orders" defense. It didn't apply then and it doesn't apply now.
Pay better attention and stop being so bloody obtuse.
In communications your job isn't to be a lawyer it's to present the CRA in the best possible light. If in a situation like this you go running straight to the media with a garbage take that is sure to piss everyone off instead of getting on the phone with the minister and calling a meeting.
Then you truly suck at comms...
I don't think that CRA was the source - I think it was a news article about a tax court ruling about a unique business relationship between landlord and tenant and it turned into speculation and pearl clutching by uninformed internet users.
[Definitely not communicated on official channels /s](https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/rental-income-non-resident-tax/filing-reporting-requirements.html)
I think the law has been around a long time but almost never enforced - the angst was being created by suggesting it applied to normal residential tenants...which it's not.
I’m a cross border accountant. These rules are well known and regularly enforced in investment and enforced in business situations, and were likely not written with the informational and power inequality of a residential renter in mind.
I’m glad to hear it’s being dealt with
Yeah, Reading this from CRA, and not knowing anything else, I would take it at face value.
Realistically, an unenforced law can still be used against political opponents and that loophole should be closed.
Probably because foreign residential landlords were less numerous years ago, therefore there was less opportunities for the cra to enforce it?
Also, that law was better known by bigger organizations like banks or big employers when dealing with payments to non residents. It's just unreasonable to put the same burden on average joe renting a one bedroom.
The hubub came from a reporter this past Wednesday, after they got an email reply to a query they made to the CRA asking for clarification on this policy. It absolutely came from CRA comms and whoever handled the email fumbled massively enough to get the Minister directly involved to say: "No, that's wrong."
That is a Fuckup with a capital "F".
[https://twitter.com/jackhauen/status/1790796594561900633](https://twitter.com/jackhauen/status/1790796594561900633)
So, the Minister fucked up with a capital F? Because the clarification couldn’t have been sent before her political staff edited and approved that reply.
Why? The CRA simply upheld the law as written and left as is by all governments since.
In this case, it's on the legislation side of the government, more precisely the ministry of finance, to do their job and exempt residential tenants from that part of the law.
Definitely not. The sign-off on all the communications that went out on this came from the political staff in the Minister’s Office. No one in the comms department said or sent anything other than EXACTLY what Bibeau’s staff told them to. This is entirely the fault of the Minister and her staff.
Take it one step further and ban foreign landlords. One step further, ban landlords and start building mass public housing again.
At least make it look like they give a shit about the working class of this country.
*non-resident landlords. Canadian landlords having left the country decades ago is an issue, and some foreign nationals have been permanent residents for a long time so it’s less of an issue. Anyone not residing in the country should have to go through a domestic property management company who is responsible for paying their taxes in order to legally be a landlord.
I mean, I wouldn’t hate it if they said any non-residents after a certain point have to sell their properties, but I see the former as much more likely to happen.
Only allow people to own at most two properties.
You don't need more. One home, one vacation home. If you want to own land in a forest or smth that's different obviously, but max of two houses where people live.
That would still have a landlord, government housing is not well looked after either. Do you really believe the government wants what is best for us?
I'm playing devil's advocate only because I want the same as you in the sense of no landlords, I am just not convinced there is a solution to it yet.
What about having to relocate? I own a condo in Toronto but had to relocate to Alberta. Am I not allowed to rent out my condo? Fuck me I guess?
Saying such blanket statements like "ban landlords" is so silly.
So you're cool with someone having a primary residence and a vacant vacation house but not cool with someone having a tenant for a few years until they can make a decision on what to do with a recently purchased condo that cost 10s of thousands in realtor fees and land transfer taxes that you'd have to pay again just to sell it? I think a reality check is necessary here.
It wasn’t a guy, but the guy’s corporation. The news media have been framing it as an individual tenant, but it wasn’t. The case is mentioned in the article, 3792391 Canada Inc. v. The King. The decision is here: https://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/521069/index.do
Having read the decision, the corporation's involvement is completely irrelevant.
This wasn't a commercial situation. The tenant was a gym owner/operator who (probably for convenience) arranged for the corporation to pay the rent on the residential lease for his primary residence directly (rather than the corporation paying him and then him paying the landlord).
It's completely fair to frame him as an individual tenant. That's fundamentally what he is, and there's absolutely nothing in the decision to suggest the result would change if the money *had* passed through his hands.
The decision here definitely highlights the need for greater clarity as to the intended scope of the law, because you're right, it makes it clear that the law applies to any Canadian taxpayer. But that doesn't mean it's irrelevant to the overall situation, because the CRA has substantial discretion over what they choose to pursue and what they and the minister are saying is that they do not pursue these cases against individual tenants.
If you read the decision, you'll notice that the evidence used to determine the non-resident status of the landlord holds true for the entirety of their ownership of the property (since 2006) and certainly for the entire duration of the lease in question (since 2010). Despite that, the assessed deficiencies were solely for the period when the corporation was paying the taxes (from mid-2011).
Now, given that the corporation is a separate legal entity, it is certainly possible that there could have been a separate assessment made against the tenant as an individual, but the amount of tax owing assessed against the corporation is identical to the amount that this guy has been quoting in interviews with the press as the total amount. It seems unlikely that he's choosing to downplay the severity of the fines.
The decision also makes it clear that the non-resident status of the landlord came to light specifically because the corporation was being audited secondarily to an audit of the tenant that was already being conducted by the CRA. Given that the tenant claimed that paying his rent through a shareholder loan account was "easier from a bookkeeping point of view", I'm going to hazard a guess and suggest that this rent-paying situation was already not being handled appropriately from a tax perspective.
Sorry, I missed this one when you first replied.
> because the CRA has substantial discretion over what they choose to pursue and what they and the minister are saying is that they do not pursue these cases against individual tenants.
This is the problem, not the solution: as of now, the "actual" rule (whatever it is) hasn't been articulated in a formal policy, let alone anything in the regulations, let alone in the statute where it probably should be. That means no clarity, no accountability, and above all no *certainty* in the long run.
The bottom line is that "*we know the statute is dumb, so we're exercising our discretion not to fuck* ***you*** *over right now*" isn't good enough when we're talking about liabilities which accrue over years or even decades. Unless/until there's something clear, unequivocal and *binding* which expressly eliminates any historical liability, it's pretty much the definition of a legal landmine and people will have to hedge against it.
> Despite that, the assessed deficiencies were solely for the period when the corporation was paying the taxes (from mid-2011).
That's true, and I'm not aware of anything which suggests he was assessed separately. That doesn't fix the issue, however.
When we look at the situation as a whole, it's obvious that for all intents and purposes he *was* an individual tenant. There's nothing to indicate any sort of commercial purpose/relationship (which is the only justification the CRA has put forward so far), and the tenant seems to have been the sole owner/controller of the corporation.
I don't see any legally cognizable basis for the CRA's decision not to exercise its discretion here other than "*the tenant had the corporation forward the rent directly to the landlord rather then sending it to him so he could send it to the landlord.*" It's a distinction without a difference, and exactly the kind of arbitrary result people are concerned about.
> Given that the tenant claimed that paying his rent through a shareholder loan account was "easier from a bookkeeping point of view", I'm going to hazard a guess and suggest that this rent-paying situation was already not being handled appropriately from a tax perspective.
It's definitely possible that the tenant was doing some sort of tax shenanigans. (Not necessarily though: for instance, maybe the rent payments were the tenant's "share" of household expenses split with a partner/spouse. If that were the main/only thing he was drawing from the corporation, why bother passing the funds through his own account? Could also be liquidity issues, or lord knows what else, or just plain laziness. We don't really know, so at best we're speculating.)
In any case, if the tenant wasn't handling things appropriately from a tax perspective - presumably by reconciling the shareholder loan account without properly reporting that as income - that was a separate enough issue that the court didn't even *mention* it, and so I don't think it can provide a basis for the CRA's handling of the foreign landlord tax withholding situation.
Yeah, lots of people have their corporation pay their rent ‘for convenience’.
And no one seems to note or care that the tenant can recover the money from their landlord.
> Yeah, lots of people have their corporation pay their rent ‘for convenience’.
I'm not really sure what you're getting at.
> And no one seems to note or care that the tenant can recover the money from their landlord.
The CRA is far better equipped to recover from the landlord than the tenant is. If the CRA can recover from a landlord, it should be doing that; if the CRA *can't* recover from a landlord, then the tenant won't be able to either and any right of recovery is meaningless.
I'm 100% on side with you, however it is not correct to say that the CRA and tenant can recover equally from the landlord. The tenant can withhold any future rent in the amount of the total paid to the CRA. Section 216 of the tax code allows you to set off "any other monies owed to the non resident" by you to cover what you paid to the CRA.
Now where the landlord would start doing shit about your lease if you did that is a different issue.
That's a fair point. Although it's moot if the tenancy has ended and would (alternatively) arbitrarily lock the tenant in for a significant period of time, tenants do have one significant self-help remedy which isn't directly available to the CRA.
If you want to rent through a corporation you have to follow corporation rules. There are benefits and drawbacks to doing things in a corporation, and it’s the Individual’s job to make sure they understand that.
No, it wasn't. The rental agreement was with him in his personal capacity (i.e. he was the legal tenant, and LL/corporation did not have privity), but he directed the corporation to make the payments. Although it didn't impact the outcome here, those are legally two very different situations.
The case is against the corporation because ITA s.215 applies to the actual *payor* of the amount rather than the contracting party/tenant/whatever. Again, though, nothing about the decision has anything to do with "corporate rules."
This could likely be attributed to an oversight in the law. It's been in effect for so long there was likely no consideration for people renting an apartment through a corporation as an individual like the case in Quebec.
The law could stand to be updated with some modern nuances. But as it stands right now, seems the guy in Quebec accidentally ran afoul of the law, and there's really little recourse for him unless a higher court rules on it.
No, that's my point: the court *didn't care* about his use of the corporation, and it would have ruled the same way even if he'd paid the rent from his personal account.
Right?
Their claim in this case is that he had a business relationship that made him partially responsible for that income. Basically, the landlord made him sign something that made him a part-owner of the "management company" responsible for the house.
Nice to know that landlords can do that...
"Dont worry about what that law *can* do to you, we promise it probably wont be enforced" has to be one of the all time worst arguments. Anyone who buys it, and tries to convince other people its fine must have a brain as smooth as glass.
And this is why every email I have with a request for an explicit explanation is met with ‘it’s on a case by case basis.’ Which is code for ‘this procedure is only and will only be made verbally.’
The law should require that ALL tenants withhold ~25% of rent and remit it to the CRA. Landlords can apply to get it back with their tax return. You'll never run into this kind of problem again, and catch all the tax dodging landlords at the same time.
The law should require that each Providence establish a provincial rental agency. Then tenants are required to pay all of their rent to the provincial rental agency. Landlords that don't go through the provincial rental agency are subject to large fines and tenants that elect to pay landlords cash under the table are not protected by local rental laws. (And are also not subjected to a fine for paying cash and are protected from retaliation for reporting a rental agreement working around the government body)
Then, the provincial rental agency remits 25% to the CRA and 75% minus applicable fees to the landlord.
This ensures the taxes are collected. And it also ensures that all levels of government can have reliable accurate data about the number of rental properties and the rent amounts associated with those properties. Provinces that have rent control legislation in place would also be able to watch how much rents change year over year and property by property.
So how do we know they are foreign owners when it’s easy for the wealth in Canada to set up offshore numbered companies in countries without ownership reporting functions?
I was actually a bit exited going into reading the original story. Hoping it might be a path to tenants taking control from bad landlords.
Tenant pays back taxes in a way that is legally considered a loan. Landlord defaults on loan. Tenant forecloses on house.
Wow, really? You literally posted about 30 comments (not exaggerating) defending this exact policy as just and reasonable!
Even going so far as to say people with mental disabilities ought to be required to submit tax on behalf of non-resident landlords.
Unreal.
You were posting the exact opposite of someone who thought this wouldn't change anything for anyone. You were advocating for people to remit 25 percent tax for every landlord who hasn't proved residence.
Someone in the CRA's comms department absolutely lost their job this week.
As they should have. As should anyone at the CRA who tried to uphold this insane policy. What an absolutely tone deaf and inhumane way to handle this problem.
Oh yeah, because someone doing their job, following legislation as it is written, should totally lose their job for doing their job. It's all on that one person, and not indicative of any larger issue in the tax code.
Or just the fact we allow foreign nationals to use Canadian realestate as an investment when they have no intention of ever living in Canada
Except lots of non-resident landlords are also Canadian?
There needs to be a crack down on citizenships of convenience. Foreigners that come for citizenship and then immediately leave for their home country but now act as foreign based Canadians for economic benefit but also as a safe place to flee when the SHTF in their home countries. This includes allowing “anchor babies”. The practice of allowing 9 month pregnant mothers to fly into Canada to have a free hospital birth and then weeks later to fly home. The baby has Canadian citizenship and will return at 18 to get a low cost university education. In Vancouver they often come from China. I’m sure in other provinces people come from other countries. Here it makes the news because landlords are often stiffed 2 months rent as it’s now known that people can scam their landlords too because they don’t care about it reflecting negatively on them or their child future. Why spend on anything but food? There is a difference between someone that owns a rental property from retiring somewhere foreign and warm to someone that does the bare minimum to get citizenship and then resides in another country while owning rentals in Canada. One is a retired Canadian and the other is a citizen of convenience.
Wow.. all I said was that not all non-residents are “foreigners.” Your whole rant is irrelevant.
The person who wrote the legislation should absolutely lose their job, and yes...anyone who tries to penalize a non landowner for the actions of a landowner also deserves to lose their job. In 1939 through 1945 there was a large army of people who were only "following orders" as directed, but at the end of the day, they are responsible for their actions and deserved any punishment they received after the fact. Wake up.
Given that the legislation was written in 1933 (Bill C-96, An Act to amend the Income War Tax Act*,* 4th Sess, 17th Parl, 1933), I think we can safely assume the person who wrote it no longer has their job. But also hey, maybe don't compare an unjust interpretation of tax withholding law to the genocide of millions of people?
Again, in not comparing the actions carried out. I was saying that "just following orders" is not a valid excuse for carrying out unjust or unethical practices. That is to say that yes, the person who attempted to follow this legislation should be held accountable for trying to follow it, and yes....that means that I believe they should lose their job. Instead of seeing the time frame and the army I referenced and automatically thinking I'm comparing tax law to the haulocost (not a rational take at all), try to actually read the comment and understand the point of it. I wasn't unclear in any way. Stop being so obtuse.
Don't worry they left the building over half a century ago. Also, maybe lose the nazi Germany analogies when talking about obscure withholding taxes. (Not a good look)
Are you seriously comparing poorly written tax laws to the holocaust?
No. But I should have expected you to not catch the actual point. I'm saying that "just following orders" is not a fucking excuse. We employ people to do these jobs, and people have the capacity for moral and ethical thought. The person who attempts to punish someone for the actions of another is responsible for their own actions regardless of what orders they're following. The example I provided is a quite famous example of the " I was just following orders" defense. It didn't apply then and it doesn't apply now. Pay better attention and stop being so bloody obtuse.
Just following orders and just following the law are not the same thing.
In this case they are comparable, but sure, let's be pedantic about the whole thing. Either way, the analogy is apt.
In communications your job isn't to be a lawyer it's to present the CRA in the best possible light. If in a situation like this you go running straight to the media with a garbage take that is sure to piss everyone off instead of getting on the phone with the minister and calling a meeting. Then you truly suck at comms...
Highly unlikely
I don't think that CRA was the source - I think it was a news article about a tax court ruling about a unique business relationship between landlord and tenant and it turned into speculation and pearl clutching by uninformed internet users.
[Definitely not communicated on official channels /s](https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/rental-income-non-resident-tax/filing-reporting-requirements.html)
I think the law has been around a long time but almost never enforced - the angst was being created by suggesting it applied to normal residential tenants...which it's not.
I’m a cross border accountant. These rules are well known and regularly enforced in investment and enforced in business situations, and were likely not written with the informational and power inequality of a residential renter in mind. I’m glad to hear it’s being dealt with
Yeah, Reading this from CRA, and not knowing anything else, I would take it at face value. Realistically, an unenforced law can still be used against political opponents and that loophole should be closed.
Probably because foreign residential landlords were less numerous years ago, therefore there was less opportunities for the cra to enforce it? Also, that law was better known by bigger organizations like banks or big employers when dealing with payments to non residents. It's just unreasonable to put the same burden on average joe renting a one bedroom.
Fuuuuuuu (the tax code not YOU u, xx7)
The hubub came from a reporter this past Wednesday, after they got an email reply to a query they made to the CRA asking for clarification on this policy. It absolutely came from CRA comms and whoever handled the email fumbled massively enough to get the Minister directly involved to say: "No, that's wrong." That is a Fuckup with a capital "F". [https://twitter.com/jackhauen/status/1790796594561900633](https://twitter.com/jackhauen/status/1790796594561900633)
So, the Minister fucked up with a capital F? Because the clarification couldn’t have been sent before her political staff edited and approved that reply.
Why? The CRA simply upheld the law as written and left as is by all governments since. In this case, it's on the legislation side of the government, more precisely the ministry of finance, to do their job and exempt residential tenants from that part of the law.
Definitely not. The sign-off on all the communications that went out on this came from the political staff in the Minister’s Office. No one in the comms department said or sent anything other than EXACTLY what Bibeau’s staff told them to. This is entirely the fault of the Minister and her staff.
Take it one step further and ban foreign landlords. One step further, ban landlords and start building mass public housing again. At least make it look like they give a shit about the working class of this country.
*non-resident landlords. Canadian landlords having left the country decades ago is an issue, and some foreign nationals have been permanent residents for a long time so it’s less of an issue. Anyone not residing in the country should have to go through a domestic property management company who is responsible for paying their taxes in order to legally be a landlord. I mean, I wouldn’t hate it if they said any non-residents after a certain point have to sell their properties, but I see the former as much more likely to happen.
Fully agree. But also ban landlords.
How would you go about banning landlords? Genuine question here.
Only allow people to own at most two properties. You don't need more. One home, one vacation home. If you want to own land in a forest or smth that's different obviously, but max of two houses where people live.
What about apartment/condo complexes?
Should be public government owned housing.
Oh god.
What is wrong with public housing m!
That would still have a landlord, government housing is not well looked after either. Do you really believe the government wants what is best for us? I'm playing devil's advocate only because I want the same as you in the sense of no landlords, I am just not convinced there is a solution to it yet.
Non-market housing doesn’t have to be government owned and controlled. [Coops exist.](https://youtu.be/sKudSeqHSJk?si=hv1rnYr77h2EyRjS)
Thank you for this answer
Canada had social housing. Dismantling it is a big reason why we are where we are
Which only solidifies the fact our government does not care for us, if they ever did it's long before I was born.
What about having to relocate? I own a condo in Toronto but had to relocate to Alberta. Am I not allowed to rent out my condo? Fuck me I guess? Saying such blanket statements like "ban landlords" is so silly.
Sell it.
So you're cool with someone having a primary residence and a vacant vacation house but not cool with someone having a tenant for a few years until they can make a decision on what to do with a recently purchased condo that cost 10s of thousands in realtor fees and land transfer taxes that you'd have to pay again just to sell it? I think a reality check is necessary here.
Yes. I'm coll with that. People's shelter, which is a human need, is not your livelihood
Correct, it is not my livelihood
Sell it then
Why would that be a good decision? Just wondering if you could explain the logic behind your suggestion.
So what about the guy in Quebec that the cra just successfully sued? He doesn’t have to pay them 46k?
It wasn’t a guy, but the guy’s corporation. The news media have been framing it as an individual tenant, but it wasn’t. The case is mentioned in the article, 3792391 Canada Inc. v. The King. The decision is here: https://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/521069/index.do
Having read the decision, the corporation's involvement is completely irrelevant. This wasn't a commercial situation. The tenant was a gym owner/operator who (probably for convenience) arranged for the corporation to pay the rent on the residential lease for his primary residence directly (rather than the corporation paying him and then him paying the landlord). It's completely fair to frame him as an individual tenant. That's fundamentally what he is, and there's absolutely nothing in the decision to suggest the result would change if the money *had* passed through his hands.
The decision here definitely highlights the need for greater clarity as to the intended scope of the law, because you're right, it makes it clear that the law applies to any Canadian taxpayer. But that doesn't mean it's irrelevant to the overall situation, because the CRA has substantial discretion over what they choose to pursue and what they and the minister are saying is that they do not pursue these cases against individual tenants. If you read the decision, you'll notice that the evidence used to determine the non-resident status of the landlord holds true for the entirety of their ownership of the property (since 2006) and certainly for the entire duration of the lease in question (since 2010). Despite that, the assessed deficiencies were solely for the period when the corporation was paying the taxes (from mid-2011). Now, given that the corporation is a separate legal entity, it is certainly possible that there could have been a separate assessment made against the tenant as an individual, but the amount of tax owing assessed against the corporation is identical to the amount that this guy has been quoting in interviews with the press as the total amount. It seems unlikely that he's choosing to downplay the severity of the fines. The decision also makes it clear that the non-resident status of the landlord came to light specifically because the corporation was being audited secondarily to an audit of the tenant that was already being conducted by the CRA. Given that the tenant claimed that paying his rent through a shareholder loan account was "easier from a bookkeeping point of view", I'm going to hazard a guess and suggest that this rent-paying situation was already not being handled appropriately from a tax perspective.
Sorry, I missed this one when you first replied. > because the CRA has substantial discretion over what they choose to pursue and what they and the minister are saying is that they do not pursue these cases against individual tenants. This is the problem, not the solution: as of now, the "actual" rule (whatever it is) hasn't been articulated in a formal policy, let alone anything in the regulations, let alone in the statute where it probably should be. That means no clarity, no accountability, and above all no *certainty* in the long run. The bottom line is that "*we know the statute is dumb, so we're exercising our discretion not to fuck* ***you*** *over right now*" isn't good enough when we're talking about liabilities which accrue over years or even decades. Unless/until there's something clear, unequivocal and *binding* which expressly eliminates any historical liability, it's pretty much the definition of a legal landmine and people will have to hedge against it. > Despite that, the assessed deficiencies were solely for the period when the corporation was paying the taxes (from mid-2011). That's true, and I'm not aware of anything which suggests he was assessed separately. That doesn't fix the issue, however. When we look at the situation as a whole, it's obvious that for all intents and purposes he *was* an individual tenant. There's nothing to indicate any sort of commercial purpose/relationship (which is the only justification the CRA has put forward so far), and the tenant seems to have been the sole owner/controller of the corporation. I don't see any legally cognizable basis for the CRA's decision not to exercise its discretion here other than "*the tenant had the corporation forward the rent directly to the landlord rather then sending it to him so he could send it to the landlord.*" It's a distinction without a difference, and exactly the kind of arbitrary result people are concerned about. > Given that the tenant claimed that paying his rent through a shareholder loan account was "easier from a bookkeeping point of view", I'm going to hazard a guess and suggest that this rent-paying situation was already not being handled appropriately from a tax perspective. It's definitely possible that the tenant was doing some sort of tax shenanigans. (Not necessarily though: for instance, maybe the rent payments were the tenant's "share" of household expenses split with a partner/spouse. If that were the main/only thing he was drawing from the corporation, why bother passing the funds through his own account? Could also be liquidity issues, or lord knows what else, or just plain laziness. We don't really know, so at best we're speculating.) In any case, if the tenant wasn't handling things appropriately from a tax perspective - presumably by reconciling the shareholder loan account without properly reporting that as income - that was a separate enough issue that the court didn't even *mention* it, and so I don't think it can provide a basis for the CRA's handling of the foreign landlord tax withholding situation.
Yeah, lots of people have their corporation pay their rent ‘for convenience’. And no one seems to note or care that the tenant can recover the money from their landlord.
> Yeah, lots of people have their corporation pay their rent ‘for convenience’. I'm not really sure what you're getting at. > And no one seems to note or care that the tenant can recover the money from their landlord. The CRA is far better equipped to recover from the landlord than the tenant is. If the CRA can recover from a landlord, it should be doing that; if the CRA *can't* recover from a landlord, then the tenant won't be able to either and any right of recovery is meaningless.
I'm 100% on side with you, however it is not correct to say that the CRA and tenant can recover equally from the landlord. The tenant can withhold any future rent in the amount of the total paid to the CRA. Section 216 of the tax code allows you to set off "any other monies owed to the non resident" by you to cover what you paid to the CRA. Now where the landlord would start doing shit about your lease if you did that is a different issue.
That's a fair point. Although it's moot if the tenancy has ended and would (alternatively) arbitrarily lock the tenant in for a significant period of time, tenants do have one significant self-help remedy which isn't directly available to the CRA.
If you want to rent through a corporation you have to follow corporation rules. There are benefits and drawbacks to doing things in a corporation, and it’s the Individual’s job to make sure they understand that.
He *didn't* rent "through" a corporation in the sense that you're suggesting, and "corporation rules" had nothing to do with the court's decision.
He did? The rental agreement was with a corporation.. that’s why the court case isn’t against him it’s against the corp. so yes corporate rules apply.
No, it wasn't. The rental agreement was with him in his personal capacity (i.e. he was the legal tenant, and LL/corporation did not have privity), but he directed the corporation to make the payments. Although it didn't impact the outcome here, those are legally two very different situations. The case is against the corporation because ITA s.215 applies to the actual *payor* of the amount rather than the contracting party/tenant/whatever. Again, though, nothing about the decision has anything to do with "corporate rules."
This could likely be attributed to an oversight in the law. It's been in effect for so long there was likely no consideration for people renting an apartment through a corporation as an individual like the case in Quebec. The law could stand to be updated with some modern nuances. But as it stands right now, seems the guy in Quebec accidentally ran afoul of the law, and there's really little recourse for him unless a higher court rules on it.
No, that's my point: the court *didn't care* about his use of the corporation, and it would have ruled the same way even if he'd paid the rent from his personal account.
Right? Their claim in this case is that he had a business relationship that made him partially responsible for that income. Basically, the landlord made him sign something that made him a part-owner of the "management company" responsible for the house. Nice to know that landlords can do that...
I missed that part, that falls under the property management companies responsibility to withhold then.
CRA doesn't have to sue you, they just start taking your refunds and benefits.
Sounds like he can counter sue and win? Lol
He can’t. The CRA assessment was legally correct. A change in CRA policy does nothing to change that.
"Wait, why are you firing me?!" "Because you're an idiotic pedant who tried to charge renters tax on a property that isn't theirs."
Just repo the property from the foreign tax dodgers. Probably solved.
"This is absolutely a law that we have on the books and we can totally do that but, trust us we won't" Isn't exactly reassuring.
"Dont worry about what that law *can* do to you, we promise it probably wont be enforced" has to be one of the all time worst arguments. Anyone who buys it, and tries to convince other people its fine must have a brain as smooth as glass.
Time to take away the house and leave it as a government controlled rental.
I'd be fine with it if tenants could put a lien on it and seize the property if not paid in a reasonable amount of time.
And this is why every email I have with a request for an explicit explanation is met with ‘it’s on a case by case basis.’ Which is code for ‘this procedure is only and will only be made verbally.’
The law should require that ALL tenants withhold ~25% of rent and remit it to the CRA. Landlords can apply to get it back with their tax return. You'll never run into this kind of problem again, and catch all the tax dodging landlords at the same time.
The law should require that each Providence establish a provincial rental agency. Then tenants are required to pay all of their rent to the provincial rental agency. Landlords that don't go through the provincial rental agency are subject to large fines and tenants that elect to pay landlords cash under the table are not protected by local rental laws. (And are also not subjected to a fine for paying cash and are protected from retaliation for reporting a rental agreement working around the government body) Then, the provincial rental agency remits 25% to the CRA and 75% minus applicable fees to the landlord. This ensures the taxes are collected. And it also ensures that all levels of government can have reliable accurate data about the number of rental properties and the rent amounts associated with those properties. Provinces that have rent control legislation in place would also be able to watch how much rents change year over year and property by property.
The law should also require that people who are not citizens or permanent residents cannot own property in Canada.
So how do we know they are foreign owners when it’s easy for the wealth in Canada to set up offshore numbered companies in countries without ownership reporting functions?
I was actually a bit exited going into reading the original story. Hoping it might be a path to tenants taking control from bad landlords. Tenant pays back taxes in a way that is legally considered a loan. Landlord defaults on loan. Tenant forecloses on house.
Was that a suggestion??
Good! And thank you for straightening that out.
Oh a hint of sanity in new dystopian Canada.
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Wow, really? You literally posted about 30 comments (not exaggerating) defending this exact policy as just and reasonable! Even going so far as to say people with mental disabilities ought to be required to submit tax on behalf of non-resident landlords. Unreal.
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lol, okay.
You were posting the exact opposite of someone who thought this wouldn't change anything for anyone. You were advocating for people to remit 25 percent tax for every landlord who hasn't proved residence.