In “Around the Courts” in our September 2023 Tax Letter, we wrote about the case 3792391 Canada Inc. v. The King, 2023 TCC 37, where a tenant had been renting a Montreal condo, and living there, since 1996. In 2010, the tenant signed a renewal 3-year lease with the condo’s owner. The lease showed a Canadian address for the condo owner, though it also showed that she signed the lease in Italy and her email address was in the “.it” domain. The tenant had his company pay the rent to the owner.
In 2018, after the company had paid $174,000 in rent from 2011-2016, the CRA assessed the company 25% non-resident withholding tax (over $43,000), plus interest and penalty, because the condo owner was not resident in Canada. The company’s appeal to the Tax Court of Canada was dismissed. Notably, it did not matter that the tenant did not know the condo owner was a non-resident.
This case attracted the attention of the media, who flagged the problem that residential tenants don’t always know such details about their landlords. In response, the Minister of National Revenue announced on Twitter (now “X”) on May 18, 2024 that this was “an extremely rare situation”, and “the Canada Revenue Agency (CRA) does not intend to collect any portion of any non-resident landlords’ unpaid taxes from individual tenants”.