A non-resident who rents Canadian real property has obligations from the first rent payment, even if the property produces little profit or the owner already files a return in the country of residence. Withholding, monthly remittances, the NR4 slip and the section 216 return form one compliance calendar.
The owner also needs a person in Canada to act as withholding agent. Hiring a property manager does not automatically transfer every tax responsibility; roles and deadlines should be set out clearly.
Withhold and remit non-resident tax
Without an approved Form NR6, the agent generally withholds 25% of the gross rent paid or credited to the non-resident. The withholding therefore applies before expenses. Amounts are remitted to the Canada Revenue Agency under the non-resident withholding calendar, generally by the 15th day of the month following payment.
A tax treaty does not usually reduce rental withholding in the same way it may reduce tax on certain interest or dividends. The mechanism for recognizing expenses is the section 216 election.
Use Form NR6 to withhold on estimated net income
The owner and agent can request authorization to calculate withholding on estimated net rental income. Form NR6 should be filed before the year begins or before the first payment when the rental starts during the year. Until the CRA accepts the request, withholding on gross rent remains the prudent approach.
The estimate should be realistic and supported by expected expenses. If actual net income is higher, the balance will be payable with the return. If the section 216 return is not filed within the applicable deadline, the benefit of the authorization may be lost and the CRA can revert to tax on gross rent.
File the NR4 and the section 216 return
After year-end, the agent prepares the NR4 slip and summary reporting rent and tax withheld. The owner then files a separate section 216 return to calculate tax on net income after eligible expenses.
Where NR6 approval was obtained, an individual’s return is generally due by June 30 of the following year. A longer period may be available to make the election in other cases, but delay increases the risk of losing records, refunds and continuity. The precise calendar also depends on whether the owner is an individual, corporation or trust.
- Non-resident withholding account opened for the agent.
- Monthly remittances reconciled with rent actually paid.
- NR4 reporting completed after year-end.
- Income and expense schedule prepared for the section 216 return.
Maintain records through the eventual sale
Interest, property taxes, insurance, management fees, repairs and capital expenditures should be classified correctly. The property’s tax cost and improvements must be preserved for a future sale. Capital cost allowance may reduce current income but create recapture on disposition.
A sale by a non-resident triggers a separate section 116 certificate process. See our pages on the sale of Canadian property by a non-resident and non-resident tax returns.
Set up the calendar before the first rent payment
Compliance is much easier when the withholding account, agent, NR6 and bookkeeping are organized from the start. Correcting several years requires rent, expenses, remittances and slips to be rebuilt month by month.
Impôts Ici can coordinate the agent, prepare NR6 and NR4 filings and complete the section 216 return. To establish or regularize your rental file, contact our team.
