Ignorance isn't bliss when it comes to #taxes! The Tax Court of Canada held that a tenant was liable for his failure to withhold taxes on rent payments to his non-resident landlord even if the tenant didn't know about the landlord's residency status. The tenant was ordered to pay six years’ worth of tax as well as the compounded interest and penalties. (3792391 Canada Inc. v. The King, 2023 TCC 37).
What can tenants generally do to protect themselves? Depending on the facts, it may be prudent to take the following steps:
1. Review lease agreement to ensure that protective covenants for the tenant are in place;
2. Confirm residency status of a landlord in writing (e.g., by email);
3. Conduct own inquiry to check the truthfulness of the landlord's statements; and
4. Obtain an indemnity from the landlord for any liability arising withholding taxes applicable to payments made to non-residents and any related penalties and interests.