In 3792391 Canada Inc. v R, 2023 TCC 37 (informal procedure), the Canadian tenant of a residential unit paid rent to a resident of Italy for six years without remitting tax under Part XIII of the Income Tax Act (Canada) (the “Act”). At trial, the tenant was put in the awkward position of attempting to prove that the landlord was actually a resident of Canada, which attempt failed. The Court held that the tenant was liable for failing to remit the Part XIII tax although he claimed not to know that the landlord was a non-resident. The Court found that the payor’s knowledge or lack of it is irrelevant for determining liabilty for tax under Part XIII.
The Court also upheld the penalties imposed by the CRA under subsection 227(8) of the Act. The tenant’s claim that he had no reason to know that the landlord was a non-residence was dismissed in a rather offhand manner: “Unfortunately, that is not enough to meet the standard of a high degree of diligence.”
