Section 216

Non-resident rental tax election

An election that lets a non-resident landlord pay Canadian tax on net rental income instead of the default 25% withholding on gross rent.

Rent from Canadian property paid or credited to a non-resident is subject to a 25% non-resident tax on the gross amount. The payer or agent, such as a property manager, must withhold it. They remit it by the 15th day of the following month and issue an NR4 slip.

Section 216 of the Income Tax Act gives the non-resident another route. They file a separate Canadian return, Form T1159, and pay tax on net rental income instead of gross. The NR4 amount is claimed on that return, and any tax withheld beyond what is owed is refunded.

The return is generally due within two years after the end of the year the rent was paid. If it is late, the election is invalid, and the 25% tax on gross rent stands. Any balance owing is due by April 30 of the following year, and interest runs after that date.

Form NR6 lets the agent withhold 25% of the estimated net rental income during the year, instead of the gross. It must reach the CRA on or before January 1 of each year, or before the first rental payment is due. With an approved NR6, the section 216 return is due by June 30 of the following year, even if no tax is owing.

The agent carries real risk. Under the Income Tax Act, a person who fails to withhold is liable for the tax on the non-resident's behalf. The CRA can also charge interest and penalties on amounts not remitted. Owners and agents should agree on the process early and check CRA guidance or a tax professional each year.

General information only, not legal, tax, or financial advice. Rules change and vary by province; confirm the current details with the relevant authority before you rely on them.