Tax on Canadian rental income

Hi,

Apologies in advance if this is quite straight forward.

I have fairly recently bought a furnished house in Canada and will be renting this out for the year.
After initial calculations, the total rental income I'd recieve for the year would be approximately £10,500.
However, the expenses involved with this house e.g mortgage interest, bills etc is greater than £10,500. More like £14,000.

So if this is the case, does anybody know roughly what the tax situation would be with this? Would I still have to pay any tax even though I made a loss? Or do I pay a reduction in tax? If so, does anyone have a rough idea of what kind of percentage I may be looking at?

Many thanks in advance for any help.

T

As this is an Irish site, I doubt you will get access to the expertise you need (UK / Canada taxation agreements?)

Agree with above post but not where UK reference is from. Canada will have primary taxing rights which means you pay tax there under their rules. Then it is necessary to do a calcuation using Irish tax rules. Based on your figures you should have a rental loss forward - make sure that you are not taking a tax deduction for capital items.

averageuser said:

Agree with above post but not where UK reference is from...

Click to expand...

As OP has pre-fixed all amounts with "£" symbol (British pound sterling) I think my conclusion that there is no Irish connection may be a safe one.

I give you enough credit to assume the '£' pound symbol is an error.
If not and you are in the UK.. no harm done, this thread may help someone else in a similar situation.

It depends how much you are earning from your day job. if you break the 20% threshold in your normal job then you'll pay tax on the rental income at 42%. if not you'll pay 20%. If you don't but your rental income puts you through the threshold then you pay 20% and 42% basically you pay 20% on everything under the threshold and 42% on everything over.



From http://www.myoverseasproperty.ie/overseas-property-tax/Canada/42/

Irish Residents: Taxable on worldwide Income and Gains

Tax Residency
You are considered tax resident in Ireland if you spend at least 183 days here per year or 280 days over a two year period.
As an Irish tax resident and Irish domiciled person you are liable to tax on your worldwide income and gains. Therefore, if you own and rent a property in Canada you are liable to Irish income tax on the rents you receive and Irish capital gains tax (“CGT”) on the gain if you decide to sell the property. (In addition to any Canada taxes that may be imposed).
In other words, as an Irish resident, no matter where your property is situated, if you receive rental income or you make a gain on the sale of your property - you are always assessable to tax in Ireland.

Irish Taxation of Canadian Rental Income in Ireland
1. Treat the property as though it is an Irish investment property and deduct all of the allowable deductions available under Irish legislation.
2. Tax the net amount at the marginal rate up to 42% (Plus PRSI & Levies) (2007: 41%).
3. Take a credit for the Canada tax paid.
4. Record the Canadian income received as Schedule D Case III in your Irish income tax return and submit the return together with your Irish Case III calculation. Note: if you calculate a loss, this can be carried forward and set against any future Case III liabilities.

I wonder how this would apply now that Canada's harmonized sales tax was introduced (especially in Columbia)... is there any major changes? If you want to check my sources, it's this http://www.tmf-vat.com/home.php?pageid=60&menuid=384&langid=1 (EU VAT website) (direct link as don't wanna breach copyright...).

I'm moving to Canada September this year so am just studying the economic situation... now more than ever!