If you own rental property in Canada but do not live here for tax purposes, Canada taxes the rent. The default treatment is often more expensive than owners expect, and there is a way to fix it.
The default: 25% of gross rent
Anyone paying rent to a non-resident, usually the tenant or a property manager, must generally withhold 25% of the gross rent and remit it to the CRA. The rate can be lower under a tax treaty, but the default applies unless you take steps. Withholding is on the gross amount, before your mortgage interest, property tax or repairs.
The withholding agent reports this on an NR4 slip. A property manager or agent often takes on this role.
The fix: file a Section 216 return
A non-resident landlord can elect to file a Section 216 return and pay tax on net rental income, meaning rent less expenses, at regular graduated rates. This often produces a refund of a large part of the tax withheld. Certain conditions apply, including filing within two years of the end of the tax year, and you also can file an NR6 form in advance so the withholding is based on estimated net income.
Selling Canadian real estate
When a non-resident sells taxable Canadian property, the buyer must withhold a portion of the price unless the seller obtains a Section 116 clearance certificate. The seller should notify the CRA of the sale and file the required forms within the deadlines, or penalties can apply. Plan this before the deal closes, not after.
Other points
- Non-residents generally do not receive the personal basic credits that residents do, so the outcome depends on your situation.
- You may owe tax in your home country as well. A tax treaty and foreign tax credits can limit double taxation. Our US tax accountants can help if you are a US person with Canadian property.
- If you become a Canadian resident later, other rules apply.
If you also own Canadian property as a resident investor, our guide on capital gains and the principal residence exemption may be relevant.
Our non-resident tax team prepares Section 216 returns, NR6 filings and Section 116 applications.
This article is general information, not tax advice. Treaty rates and deadlines vary, so confirm your situation before acting.
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