Many people may be blissfully unaware of the rules for foreign investors in Canada. I am not. Every year I fill out the necessary Canada Revenue Agency Forms on behalf of the foreign investor clients I have.
There are very important benefits of having a property manager that knows what they are doing when it comes to compliance with Revenue Canada, not to mention the benefits of having someone here locally to deal with tenant issues, repairs and maintenance and the odd vacancy. Unless you feel comfortable leaving your $500,000 to $1,000,000 property unsupervised and unattended while you’re on the other side of the globe. (In which case… Go You!)
The Rules If You Go It Alone
According to CRA the tenants or yourself are supposed to send 25% of the gross income to CRA. If the rent is $2000 you are supposed to send $500 per month to CRA. At the end of the year, you file an income tax return and you pay a tax of 25% of the Net Income (Income after expenses) and you get money back from Canada Revenue.
Rules If You Have An Agent
If you have someone willing to be an agent in Canada (this doesn’t have to be a property manager) they sign a form guaranteeing that you will fill out an income tax return. Then you fill out a paper (We use a spreadsheet) with the expenses of the property and you pay 25% of the net income monthly to the CRA. In many cases that amount is $0. Basically if you have a mortgage, and deduct mortgage interest, you don’t pay anything.
We Provide This Service For Free
For the clients that need it, we provide this service for free with our property management service. There’s no extra charge and to be honest, it’s not that big of a deal. For those clients that need it, we also refer our accountant to do the annual income tax return. (That’s not free, we have to pay him)
Ex-Pats Are Our Major Customers For This Service
For our company, there is no flood of “foreign devils” with boatloads of cash. Most of our clients are people who live here and have to go work overseas and need someone to take care of their house. I have nothing against a flood of foreign investors, even a trickle would be lovely, but I think I just have 2 that are truly from other countries originally and never lived here and just have a house as an investment.
The NR-6 and NR-4 forms
Realistically they aren’t a big deal, they are one page forms, but they can be a bit intimidating until you get them figured out and develop a process to keep all the rents, deductions, letters, and sundry all sorted out properly. However to protect ourselves we do collect the rents directly for those properties so we can disburse funds to the CRA monthly if required.
This year, I’m all on time and done with my NR-6 forms and I feel quite organized about it…