Non-resident who owns a rental property in Canada

It is all too easy to get lost in the complexities of Canadian Tax. This article is offers our expert Canadian tax knowledge in regards to non-resident who own a renal property in Canada.

 

Like in all countries worldwide, it is essential to be aware of all of your tax filing obligations, important due dates and other surrounding tax issues.  In Canada, the tenant or property manager has an obligation to withhold non-resident tax at a rate of 25% on gross rental income paid to a non-resident. This tax should be paid to the Canada Revenue Agency (CRA) on or before the 15th day of the month following the month the rental income is paid. Each year, the taxpayer must produce a NR4 slip thatbreaks down the gross amount of rental income along side the amount remitted to the CRA.

 

Under Section 216 of Income TaxAct you can elect to pay tax on only your net rental income instead of the gross amount.

 

An alternative to electing under Section 216 is to elect to file Form NR6 ‘Undertaking to file an income tax return by a non-resident receiving rent from real or immovable property. The NR6 form allows your agent to withhold 25% on your net rental income. If you process a property that has little to no rental income then this this is a suited option to consider. If your NR6is approved you will be required to file a Section 216 income tax return. As a non-resident, you will have until the 30th June of the following year to file your Section 216 income tax return.

 

Due dates to be aware of

 

NR6: Submit form prior to first payment of rent for the year

NR4: Withhold and remit 25% non-resident tax before the 15th of the following month and file the NR4 by 31st March

Section 216 Return: 2 year to file to pay tax on the net-rental basis

Section 216 Return if NR6 filed: 30th June following year

 

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