Non-residents selling rental property in Canada | Brampton | Mississauga | Oakville

Non-resident Canada

Selling Canadian Property

Buying and Selling Canadian Rental Property:


Canadian Economy

Canada’s solid banking system coupled with a strong economy have attracted investors from all over the world. Non-resident individuals have purchased rental properties across Canada. Owning a rental property in Canada can be profitable if you understand the Canadian tax laws that apply to non-resident individuals.

To own a rental property in Canada you are not required to be a citizen or even a resident. However, if you have Canadian source income you will be required to comply with Canada’s tax laws and file a annual income tax return. The Canada Revenue Agency imposes hefty interest and penalties on non-resident individuals if they don’t file Canadian income tax returns correctly.

What’s required to file a tax return?

Before you can file a tax return in Canada, you need to apply for a tax account number, usually referred to as Social Insurance Number (SIN) or Individual Tax Number (ITN). If you are a non-resident and need to file a tax return, you can submit an application to receive an ITN number. The supporting documents submitted must be certified true copies of the original document.

Non-Resident Withholding Tax 25%

Your tenant or property manager is required to pay 25% withholding tax on gross rental amount of your property to the CRA. This has to be done on a monthly basis usually on or before the 15th day of the month following the month the rental income is paid to you. The CRA imposes interest and penalties if the tax payer does not withhold and remit tax on a monthly basis.

At the end of the year your tenant or property manager is required to issue a NR4 return which shows the rental amount paid to you during the year and the amount of non-resident tax withheld.

In certain circumstances 25% withholding tax may not be required if you file the appropriate approvals before you start collecting rental income.

Example:

Anthony emigrated from Canada in 2013 and became a resident of England. He did not sell his house when he left Canada and decided to rent it out for a few years. In 2015, his property manager in Canada withheld and remitted non-resident tax of $5,000 (25% of the gross rental income of $20,000) to the CRA withholding tax division. Anthony had the following income and expenses from the property in 2015:

Gross rental income …………………………………………… $20,000
Less expenses: Allowable expenses ……………………. –$6,000
Net rental income ………………………………………………. $14,000

 To recover the extra taxes paid Anthony has the option to file a tax return and pay tax based on the $14,000 net rental income. Since Anthony has already paid taxes of $5,000 (which was based on the gross income of $20,000) the CRA will refund the extra taxes paid.

Expenses you can deduct related to your rental property: 

Advertising Legal & accounting Property taxes
Insurance Management fees Utilities
Interest Repair & maintenance Travel Costs

Non-Residents Selling Canadian Rental Property

When a non-resident sells Canadian rental property they must notify the CRA within 10 days, or face a $2,500 penalty. The sale proceeds will be held in Canada until you can obtain a clearance certificate. A clearance will only be issued once you have met all the tax requirements of the CRA.

 Who Can help me?

Our firm is specialized in non-resident tax matters and we can help you file all the required documents in a timely manner and be compliant with all the CRA reporting requirements. CRA imposes strict penalties on individuals who miss deadlines and these penalties can be high as $2,500 per tax payer. Contact our firm for all your non-resident tax needs.

Non-resident Sale Rental Property

CRA has more information on its website for non-residents owning rental properties in Canada: http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/nnrs-eng.html

Non-residents selling rental property in Canada | Brampton | Mississauga | Oakville

CRA Audit & Objections

CRA Audit & Objections

CRA Audit & Objections

  CRA Audit & Objections

Challenge the CRA / Dealing with the CRA? Here’s what you need to know.

Every year the Canada Revenue Agency (CRA) audits thousands of small and medium size businesses and issues notices of reassessments.  Many times the result of these reassessments requires these businesses to pay up to thousands and sometimes millions in tax, interest and penalties.

Is there a chance that these CRA reassessments can be wrong? Yes! It is absolutely critical that business owners are prepared to challenge incorrect reassessments. Handling reassessments improperly can have serious financial implications for your business.

Here are five things that you should be aware of when you receive the CRA’s notices of reassessment:

  1. The CRA isn’t always right. Notices of reassessments and tax disputes are not necessarily an indication that the taxpayer, or the accountant, has done something wrong. If you feel the CRA has it wrong, as a taxpayer you have the right to challenge the CRA’s interpretation and application of the facts and law to ensure you are not paying more than you have to.
  2. Act on time. You must file a notice of objection to dispute a notice of reassessment. Generally, you must file a notice of objection within 90-days of the date that the CRA mailed the notice of reassessment. If you do not deliver a proper notice of objection within the 90-day period, you may apply for an extension of time to object. The CRA will consider applications for an extension of time to object if the application meets all relevant conditions and if it is filed within one year of the 90-day period. However, the CRA may deny your application for an extension of time and, therefore, it important to file a proper notice of objection within the 90-day period.
  3. The onus is on you. The normal reassessment period is three years for individual taxpayers and four years for corporate taxpayers. If the CRA issues a notice of (re)assessment within the normal reassessment period, the onus is on you to prove that the assessment is wrong in fact and law. You should be prepared to present factual and legal support for your position that the reassessment is wrong. If the CRA issues a notice of reassessment outside the normal reassessment period, taxpayers should understand the impact of this shift in the burden of proof. This is an opportunity to take advantage of the shift and make strategic decisions.
  4. Know what you are talking about. In addition to knowledge of the relevant legislation, the tax dispute process is governed by the case law, rules of procedure, the onus of proof, the standard of proof and the rules of evidence. In our experience, the party with the greater understanding of the legislation, case law and rules often has a significant advantage.
  5. Contact the right people for help.Clients often struggle to research and retain the right tax accountant and tax lawyer. We recommend that clients take the time to understand their options and speak to competent tax professionals.

This is an example where the CRA made a mistake and resulted in Mr. Irvin Leroux losing millions of dollars.

It was a million-dollar mistake that turned in to a 13-year battle. A British Columbia man lost almost everything in a tax battle with the Canada Revenue Agency. The CRA admits they were wrong, but now refuses to repay his money. His original documents were shredded by the CRA auditor.

The judge found that the auditors owed Mr. Leroux a duty of care and that they breached it in the manner in which they imposed penalties. However, the judge concluded that she was unable to find a causative link between that breach and Mr. Leroux’s losses.

Mr. Leroux had a legitimate position to put forward in saying that if the assessments had been done correctly in the first place, he might have been able to handle all the other problems he had.

The full case can be found here.

Contact our firm Cheema CPA Professional Corporation for all your CRA review and audit needs. Our team of tax accountants and lawyers can professionally handle your file.

Importance of Bookkeeping

bookkeeping

 Importance of Bookkeeping

What is bookkeeping?

Bookkeeping is the process of recording all the financial transactions and events that occur in your business. Purchases, sales, receipts, and payments are all organized in chronological order and accurately recorded so that all the money that flows in and out of your business is accounted for. These records can be kept in designated books or in computer bookkeeping software.

Why is bookkeeping important?

Accurate bookkeeping is critical to the success of a business. It allows the business to see whether its earnings are enough to cover its expenses.  It provides guidance on the financial decisions.

Proper bookkeeping is also important for investing and financing activities. If the business is looking for bank financing, the bank will require financial records that support a healthy business. This type of financial data is achieved through organized and accurate bookkeeping.

Proper record keeping will also keep the CRA away. Discrepancies in your records will end up in faulty tax returns, which will send the CRA knocking at your door for an audit. Bookkeeping also assists with daily business management. By recording day-to-day financial details you can keep track of data, such as which customers owe you money and how much.

What are my options?

The most common software out there are Intuit QuickBooks or Sage Simply Accounting. Small business owners can do their own bookkeeping or use an accounting firm. Contact our firm for your small business needs. We can help you implement and maintain an accounting system.

Intuit QuickBooks has several different options at different price points. Visit the online store for more information.

Sage Simply Accounting also has multiple different options. Vist the online store for more information.

Contact Us

Contact Cheema CPA Professional Corporation for all your bookkeeping needs. We have bookkeepers who specialize in many different industries and can help you become more efficient.

 

Small Business Accountant Mississauga Brampton Oakville

Small Business Accountant

Small Business Accountant Mississauga Brampton Oakville

 

We help businesses in Mississauga, Brampton, and Oakville 

We live in an ever changing global economy where the dynamics of business have been revolutionized by the internet. Small business owners face many new risks in this economy. This is why hiring an accountant for your small business is no longer about finding someone good at number crunching. The services provided by an accountant have changed vastly over the last 50 years. Business owners need services which are much more enhanced and cumbersome from their accountants.

Our firm understands the needs of small business owners in Mississauga, Brampton, and Oakville and we look below the surface to find solutions to your problems. We go above and beyond providing tax services to our clients, we improve financial health, reduce risk, and help increase overall profitability. We use our expertise and  help our clients stay competitive and ahead of the competition.

Some common questions that we receive from our small business clients include:

1. Can we contact you through out the year? How often should we be in touch?

Each business is different and each business owner is different. The number of meetings required with your accountant will depends on a lot of factors. Some business require more accountant involvement because of the reporting requirements or the sensitivity of the business. A small business needs to have open and frequent communication with its accountant. With our clients we use an open door policy and have  frequent communications throughout the year. We like to connect with our clients on a monthly basis to make sure all the questions and concerns have been addressed. With constant contact with our clients it helps us understand the clients’ business better which in turn helps us put together better cost cutting techniques.

We understand how frustrating it can be getting a hold of your accountant when you really need them. This is why we respond to business owner inquiries in a timely fashion. We understand delayed responses will have a direct impact on the business. We respond to emails and phone calls within the hour. We provide business owners with a direct line and the phone is answered by an accountant directly.

2. Can you help me grow my business?

We work closely with our clients and help small business owners expand and grow their businesses over time. By working closely with our clients we put in the right foundation from day one. We present unique financial strategies to minimize expenses and increase overall margins. From the initial consultation we identify key areas and help our small businesses owners focus on these areas to help grow their business.

3. When the CRA audits my books, can you help me?

The Canada Revenue Agency conducts periodical review and audits. The process can be frustrating, expensive, and time consuming. Handling a CRA audit or review correctly requires a lot of detail and expertise.  We stand behind our work and directly represent our clients, we become the face of your business and directly deal with the CRA. We have an in house Tax Lawyer who assists us in handling any CRA audit or review. We fully represent our clients giving them peace of mind.

4. What are the biggest tax mistakes small business owners make?

Small business owners have multiple roles in a business which leaves very little time to focus on accounting and administrative duties. This time constraint leads to poor record keeping.  To asses how your business is doing from month to month, it is vital to keep good records, which helps determine efficiency and profitability. Thorough and accurate records also helps prepare accurate tax returns. It is common that legitimate expenses get ignored because the business owner never documented them property. This is why it is very important to work with a competent accountant who can help you keep a good set of books. We can help you organize your books and maintain good set of accounting and financial records. We help our clients implement good accounting tools and software to record income and expenses.

 Small Business Accountant Mississauga Brampton Oakville

We have helped business and business owners all over Mississauga, Brampton, and Oakville with accounting and tax related inquires. Contact our firm directly for your business needs.

 
Mississauga Accountant
Oakville Accountant
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