For those of you who read my Market Insight last Friday – “If a foreign landlord fails to pay taxes, the CRA can go after the tenant.” Things have changed. 

The story attracted a lot of attention when it was released by the media, so now we have some welcome good news. The federal government has released a statement saying - “The federal government will not force tenants to pay unpaid taxes owed by their foreign landlords, the minister of national revenue confirmed Friday, after mounting confusion from renters caused by an “extremely rare” tax court decision.

 In a statement released last Friday, Marie-Claude Bibeau, the national revenue minister, said tenants will not be on the hook for taxes owed by landlords who live outside of Canada’s borders. “I want to reassure Canadians that the Canada Revenue Agency (CRA) does not intend to collect any portion of any non-resident landlords’ unpaid taxes from individual tenants. It is incorrect to state otherwise,” she said in a statement. 

The clarification comes after rising confusion caused by a 2023 Tax Court of Canada decision that saw a Montreal renter ordered by the CRA to pay six years’ worth of his foreign landlord’s taxes, alongside interest and penalties.

In her statement, Bibeau called the Montreal case an “extremely rare situation” and said the CRA does not expect individual tenants to withhold the 25 per cent of rent from tenants. 

She said the tax law has existed for “nearly a century, and there is not a single instance of an assessment made to an individual tenant in the last decade.”

 “I am working with my colleague, the Minister of Finance, to provide absolute clarity on the law and to ensure that tenants have the certainty they need and deserve,” Bibeau wrote, adding that she could assure Canadians “that it does not, and will not, apply to them.”

In a letter to Paul Calandra, Ontario’s minister of municipal affairs and housing, there was an example of one tenant who said the CRA had “directed” them to withhold 25 per of their rent and pay it to the revenue agency if their landlord lived outside Canada. The CRA is threatening to charge interest and issue fines if the tenant did not comply. 

But when the tenant asked their landlord if they were a non-resident, the landlord wouldn’t say. The CRA, too, refused to say if the landlord in question was a nonresident, due to privacy reasons. 

According to a letter, the landlord then threatened to evict the tenant if they withheld 25 per cent of their rent. 

 “No tenant should risk eviction for paying their foreign landlord’s tax bill. This is fundamentally unfair, and it is fundamentally un-Canadian.”