Non resident renting out Canadian real property Posted on Jun 28, 2021

When a non resident rents out a Canadian property - withholding tax needs to be paid to CRA monthly. By the 15th of the month, following the month, rental income is received.

Non-resident needs to open a non-resident number with CRA. CRA will send Form NR75 with remittance voucher. If not received in time, send a letter to CRA and remit payment to receiver general. After you make your first remittance, the CRA will send you Form NR76, Non-Resident Tax Statement of Account, which includes a non-resident tax remittance voucher that you can use for your next remittance. You can also pay through “My payment”, “Pre-authorized debit”, Online banking”.

There are two options, for the withholding tax:

Option one – no NR6:

When a non resident rents out a Canadian property, without form NR6, the agent, will be withholding 25% of GROSS rent from rental proceeds and remitting that to CRA. At the end of the year, the agent will issue form NR4 to you, which is similar to a regular T4 that will show the gross rental income and withholding tax remitted. At this point it can be your final liability to CRA (nothing else needs to be done) OR you are allowed to submit a section 216 return which allows you to show gross rent, expenses you incur (mortgage interest, property tax, maintenance, travel to Canada etc) and calculate tax on the net income, using tax brackets. The tax on net rental income, calculated using tax backets, is usually much smaller or even zero, hence most non residents receive the entire withholding tax back. It is usually beneficial to file section 216 return.

Option two – with NR6:

By completing form NR6, you are getting an approval from CRA to make withholding tax remittances from the net rent, not gross. That could be zero (depending on your expenses) or much less than 25% of gross.

But by taking this option, you are committing to submit section 216 return annually. It is no longer optional as with option one above.