Non-residents tax obligations for a Canadian rental property

When you are living outside of Canada and own a rental property in Canada you are obligated to file a Non-Resident tax return with the Canada Revenue Agency.

If you receive rental income from real or immovable property in Canada, the payer 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.

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 may pay less tax. You may also receive a refund for all or part of the non-resident tax withheld.

As a non-resident of Canada, you can choose to send the CRA a separate Canadian tax return to report your rental income from real or immovable property in Canada. Choosing to send the CRA this return is called electing under section 216 of the Income Tax Act.

Electing under section 216 allows you to pay tax on your net Canadian-source rental income instead of the gross amount. If the non-resident tax that the payer withheld is more than the amount of tax payable on your Section 216 return, the CRA will refund the difference to you.

If you elect under section 216, you can elect to have tax withheld on your net rental income instead of the gross amount. To have non-resident tax withheld on your net rental income, you (or each non-resident who is a member of a partnership) and your agent 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 can learn more at https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4144/income-tax-guide-electing-under-section-216.html#P115_7305