Saw your website and wondered if you can answer a question. Property
purchasers at Sun Peaks are being actively pursued by Dept. of Revenue
who did not pay GST at time of purchase of their 2nd homes.
Like others we did not, because we anticipated personal usage to be
about 10%-which it has been - However, now they have changed the rules
and are saying it has to be 10% of the rented days. As you can
imagine in a ski place, there is little rental use for about 9 months
of the year-therefore we would be limited to 6 days of use if we
rented for 60-which is also a stretch at Sun Peaks. We hear the owners
at Whistler are not being pursued in this way. It seems to us if you
offer your house for rent at market value for 300 days a year and it
doesn't rent for many of those-we should be able to use it for 30.
Have you heard anything about this new tax law?And why they are
specifically targeting Sun Peaks?
And in addition-does a US owner have to have an agent if they are
renting themselves to other US residents (what type of profession does
that?)? And do we have to collect GST for US resident rental clients
who would get it back at the border??
Thanks-
---------------------------------------------------------
david ingram replies:
Unless you have the unit available for 100% of the time as a
commercial rental, you all should have paid the GST on purchase. A
personal unit with some part time rental is subject to the payment of
GST. Many people in Whistler and some downtown apartment hotel units
have been caught in this eight and nine years ago before TWIN PEAKS
really got off the ground for this type of property.
If you are renting it out and charging GST, you should have also been
paying GST on the personal use value when you used it yourself. The
GST return has a specific line for this self assessment.
There is nothing new about the law. What is happening is they are
enforcing the law against people running red lights.
The UNITED STATES has a specific rule for seasonal rentals. Their
rule is that if you use it more than 10% of the days rented or 14 days
(whichever is more) , there is no tax deduction for a lot of the
rental expenses.
With regard to your US owners renting to US renters and collecting the
money in the US. The US owners must file a section 216(4) rental tax
return in Canada and MUST collect the GST. The service is supplied in
Canada Now, If they have PAID the GST on the unit and did not use a
GST number to avoid paying the GST, AND they are going to be charging
less than $30,000 in gross rent, they will NOT have to charge their US
clients GST.
Now, before you think this is silly, ridiculous, a waste of time, the
State Of Hawaii has a General Excise Tax with two parts of 5% for ALL
Hawaii rentals and 4% for ALL transient Rentals. I have had several
Canadians caught in this Tax when they have been advertising in Canada
and collecting the rent on Canada. My favourite was a lady in West
Vancouver who had been renting out a very expensive Hawaii waterfront
home in the $1,000 a day / $5,000 a week range. When they caught up
to her after several years of rentals, her GET bill was over $80,000
US.
Her Hawaii income tax bill was over $20,000 and her US Federal Tax
Bill was over $150,000.00 after tax, penalties and interest.
Luckily, we were able to recover 50% of it by refiling The Canadian
tax returns to claim the foreign tax credits for the actual "taxes"
paid. Canada does not give any credit for the penalties and interest
paid.
If you are acting as an agent and collecting rent from US clients on
site for an individual owner who is registered for GST, you would have
to collect GST and they can claim it back at the border.
If you are renting out units as your own business and paying a
percentage to the owner for its use and you are looking after all the
cleaning and wages on your own hook then you have to charge GST if
"your" total billings are over $30,000.
If you are collecting rents for US owners or paying rent to US owners,
an NR6 should be filed. If you file the NR-6 showing that the owner
will lose money or not make as much as the gross rent because of
rental expenses, you have to deduct and withhold 25% tax on the
"expected" profit. If no NR-6 is filed, the person who collects the
rent for the owner must deduct and remit 25% of the gross rent to the
CRA (Canada Revenue Agency). If you are giving the owner a percentage
of the rent you receive, then you must deduct 25% from the amount you
send or credit to the owner unless you have an NR-6 approved for a
lower amount.
See the NR-6 here http://www.ccra-adrc.gc.ca/E/pbg/tf/NR6/nr6-00e.pdf
After the Canadian calculations have been done, the American will have
to convert the figures to US dollars, put the numbers on a schedule E
and claim any Canadian tax on US Schedule 1116.
I, of course would be glad to help you with these by fax, email, snail
mail or courier. We look after the tax returns of many Whistler and
Hemlock Valley units owned by Americans now.
Answers to this and other similar questions can be obtained free on
Air every Sunday morning.
Every Sunday at 9:00 AM on 600AM in Vancouver, Fred Snyder of Dundee
Wealth Management and I, David Ingram will be hosting an INFOMERCIAL
but LIVE talk show called "ITS YOUR MONEY"
Those outside of the Lower Mainland will be able to listen on the
internet at
www.600AM.com
Local calls are taken at (604) 280-0600 and Long Distance calls are
taken at 1( 866) 778-0600
I do not know how far the LD line reaches.
=========================================
David Ingram's US/Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Res (604) 980-3578 Cell (604) 657-8451
(604) 980-0321 Fax (604) 980-0325
Email to taxman at centa.com
www.centa.com www.david-ingram.com
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