Filing and reporting requirements

If you receive rental income from real or immovable property in Canada, the payer (such as the tenant) or agent (such as the property manager) must withhold non-resident tax of 25% on the gross rental income paid or credited to you.

The payer must pay the tax on or before the 15th day of the month after the month the rental income is paid or credited to you. You should discuss this with your payer to make sure they withhold and remit the correct amount of non-resident tax to the CRA on your behalf.

If the payer does not withhold and remit this non-resident tax, the CRA will charge compound daily interest on the amount not withheld and remitted. The CRA may also charge a penalty.

The payer has to give you two copies of NR4 Slip, Statement of Amounts Paid or Credited to Non-Residents of Canada, showing the gross amount of rental income paid or credited to you during the year and the amount of non-resident tax withheld. The payer must also send the CRA an NR4 Information Return as explained in Guide T4061, NR4 – Non-Resident Tax Withholding, Remitting, and Reporting.

Generally, the non-resident tax withheld is considered your final tax obligation to Canada on the rental income. However, if you elect under section 216 of the Income Tax Act, you are choosing to report your rental income from real or immovable property in Canada on a separate Canadian tax return. This allows you to pay tax on your net Canadian-sourced rental income instead of the gross amount and you may pay less tax. You may also receive a refund for all or part of the non-resident tax withheld. For more information, see Guide T4144, Income Tax Guide for Electing under Section 216.

If you want to elect under section 216, you may want to consider another way of having non-resident tax withheld on your rental income. You can elect to have tax withheld on your net rental income instead on the gross amount. To do this, you and your agent (a resident of Canada who acts on your behalf regarding your Canadian rental income) have to complete Form NR6, Undertaking to File an Income Tax Return by a Non-Resident Receiving Rent From Real or Immovable Property or Receiving a Timber Royalty, and send it to the CRA for approval. You should send to the CRA Form NR6 on or before January 1 of each year, or before the first rental payment is due.

After the CRA approves your Form NR6, your agent can withhold non-resident tax of 25% on your net rental income (that is the amount of rental income available after the rental expenses have been paid). Your agent must pay the tax on or before the 15th day of the month after the month the rental income is paid or credited to you. You should discuss this with your agent to make sure they withhold and remit the correct amount of non-resident tax to the CRA on your behalf. For more information, see Guide T4144, Income Tax Guide for Electing under Section 216.

Generally, you have to send to the CRA your section 216 return within two years from the end of the year that the rental income was paid or credited to you. If CRA approves your Form NR6 for a certain year, you have to file a Form T1159, Income Tax Return for Electing under Section 216, for that year, even if you have no tax payable or you are not expecting a refund. The return is due on or before June 30, of the following year. If you have rental income from more than one rental property in Canada and make an election under section 216, all of your Canadian rental income and expenses must be reported together in one section 216 return. For more information on the section 216 return filing due date, see Guide T4144, Income Tax Guide for Electing under Section 216.

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