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Written by: Dagmar Zanic, CPA, CA
When a non-resident of Canada receives rental income from a property in Canada, the payer (renter or a property management company) is required to withhold tax at the rate of 25% on the gross rental income. This tax must be sent to Canada Revenue Agency (“CRA”) by the 15th day of the month following the month the rental income is earned.
The payer also must file a NR4 return annually with CRA, in order to report the gross rental income earned and the non-resident taxes withheld.
Generally, this is considered the non-resident’s final tax obligation to Canada.
In order to claim related rental expenses and pay tax based on the net rental income, a non-resident can elect to file a Canadian income tax return (under Section 216 of the Income Tax Act) within 2 years from the end of the year in which the rental income is earned.
If a non-resident property owner would like to have 25% non-resident taxes withheld on the net rental income instead of the gross amount, he/she must have a Canadian agent, and file a 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, with CRA for approval.
If CRA approves the Form NR6, the non-resident must file a Section 216 income tax return on or before April 30th.
If you are a non-resident who is planning on buying an investment or rental property in Canada or you have been renting a property, but did not know about the related tax obligations, please contact your Manning Elliott tax advisors in Vancouver for assistance or call 604-714-3600.
See also our Manning Elliott blog article on Non Resident Taxation in Canada.
Dagmar Zanic, CPA, CA is a Senior Tax Manager and member of Manning Elliott's tax team. She advises our individual and corporate clients on a wide range of income tax planning and tax compliance matters. To contact Dagmar, feel free to call her at 604-714-3640 or email her at firstname.lastname@example.org
The above content is believed to be accurate as of the date of posting. Tax laws are complex and are subject to frequent changes. Professional advice should be sought before implementing any tax planning. Manning Elliott LLP cannot accept any liability for the tax consequences that may result from acting based on the information contained therein.