carrieann

i know there is a similar question already posted but what i need to know is if we own a house and rent it out, only charging enough to cover morgage will we still have to pay canadian tax on it i know in uk we dont because we will not be making any profit on it.

carrieann

i take it no one knows the answer to my question :scared:

gooding

yes you will have to pay tax on any income you receive from renting a property. With that said, you only pay tax if tax is due.
You will have to submit a canadian tax return and british, but you do not pay tax twice.

In this country if you are doing things above board or through an agent, you must charge the going rent for the property. This should be assessed.

Everyone is allowed to earn a certain amount without paying tax.

You need to use and agent, and there are tax rules when it comes to selling the property, if you never live in it before selling. Your agent will have to withhold part of the rent to pay Revenue Canada any relevant taxes due.
Look at the revenue Canada website, and there is all the information on overseas property owners and there tax liabilities.

if you do rent out long term rather than as a holiday let, you can also claim a lot of expenses, which can infact wipe out any taxes due.
All this info is as follows
http://www.cra-arc.gc.ca/tax/nonresi.../nonres-e.html

Hope it helps.

dbd33

Why would you tell Revenue Canada about a property outside Canada purchased without using income or tax deductions in Canada ? What masochism is this ?

Snave

Surely, you need to declare any "income" to the tax authorities of the country you live in - whether it's income through employment, pension earned there or overseas or in this case renting out a home in another country. My Canadian wife has been paying UK Inland Revenue tax on a pension she receieves in Canada for the last two years. Now we're going to Canada to live and she'll have to pay tax there instead.
When I agreed to rent out our UK house I was given a form by the agent letting the property for me, that confirms to IR I'm not resident in the UK from the date we move out (29APRIL2005) and so I won't be liable to pay UK tax on the rental income, so the agent won't deduct tax before forwarding it to me. The fact that the income doesn't quite equal the mortgage payment means I don't actually "make" any profit on the deal - I'm hoping Revenue Canada will take that as a capital loss - and not tax me on the rental, this remains to be seen...

dbd33

I think "need" is a bit strong, one might feel a moral obligation, "one" not being me. Rather than bring the rental income to Canada why not stick it in a bank somewhere else where it won't be taxed and use it for vacations and so on. I expect your high street bank in the UK can provide an account in the Isle of Man or similar and a bank machine card. Have the rental income paid to IofM and withdraw cash when in the states, or wherever. I don't suppose Revenue Canada helped you buy the house you're going to let and I can't imagine you can get a tax break on losses incurred now, so why bother them with it ?

Biiiiink

Snave, I do this. I get income from my condo in Calgary, I declare to both canadian and UK authorities but only pay tax to Canada on the income (25% gross witheld as I'm non-resident). I get all of it back when I submit my expenses. Well, I have in previous years.

dbd33 - you really are a model citizen, aren't you

dbd33

I'm not a dedicated tax payer if that's what you mean. However, I've survived a recent audit, so I'm on the right side of the line. Just.

ajphilpott

Have to fully agree - when I moved to Aus, I rented out my house in the UK and fortunately was able to ensure the mortgage was paid but that was it. Certainly expenses came off it, but at the same time as moving abroad, opened an off-shore bank account and put money into there. It's very easy to open an off-shore account (same as usual account) and you'll just need to open it before you go then update the address etc details when you are abroad. I certainly still have mine open although moved back to UK some 3 years ago. I was then sent a tax return form for the past 3 years (given I was suddenly coming back) but when that was fine, they wrote and said - OK, we'll stop sending these to you now....

Sometimes there is no need to report everything to everyone unless you are very nice...

TrishP

You need to fill out a P85 form for the IR to let them know you're no longer resident in the UK. Then fill out a NRL1 form - both parties to the mortgage (if you own property jointly with a spouse or partner) need to complete this form - this means the rental agent won't withold part of the rental income for the IR, but you will have to do a tax return each year. Unless you make a whopping profit on the rental income, you won't have to pay tax - don't forget, you'll still be entitled to a personal allowance prior to tax liabilities kicking in! So, by the time you've accounted for the mortgage, insurance on the property, agent's fees and maintenance costs, you probably won't have to pay any tax.
Hope this helps!

Mans

My understanding that if in Canada you have to declare "worldwide income".

Question for you TrishB.....if you have the income from rental in the Uk can you "elect" to pay the tax in the UK rather than in Canada so that you effectively get two sets of personal allowances (i.e. get a personal allowance in Canada and in the UK)?

Rgds
Mans

Cowtown

If you are resident in Canada you need to declare your worldwide income on a Canadian return. You cannot "elect" to pay tax in the UK instead. You MUST declare it in Canada otherwise it will be tax evasion and big trouble can come of that. Plus there is a question on the front of the tax return asking if you have foreign property overseas worth greater than $100K and you really dont want to be telling fibs there.

When you are considering your mortage the capital repayment part is not deductible so the profit might be greater than you are anticipating.

TrishP

Income earned in the UK is taxed in the UK - the double taxation system means that when you declare the 'profit' from your rental as income on your Canadian return, it isn't taxed again. So, I'm assuming that this figure would be 'stand alone' as far as Canadian finances are concerned after declaring it.
Even so, I've worked out that, after deductions, I won't have to pay any tax in the UK!

Mans

Thanks Cowtown and Trish B.......your replies are very useful.

Did anyone use an accountant....at least in the first year or are were you able to fill the forms (no doubt with a few headaches)

Rgds
Mans

Cowtown

This is completely wrong. It is taxed again just that the tax you paid in the UK is 'converted' to a credit so you get a reduction in the tax due. There are some very complicated rules relating to foreign tax credits so in some cases this might mean you dont recover all of your tax. It does not 'stand alone' - its added to the rest of your income.

Plus you need to remember that you calculate your profit under Canadian law and not UK law.