The following information is intended to assist non-resident in Canada to understand the tax implications and filing requirements set by the Canada Revenue Agency (CRA) related to their Canadian rental property.
Canadian Income Tax on Non-Resident’s Rental Property
A non-resident who owns a residential property in Canada that has been rented to another party for any part of the tax year must withhold and remit taxes to the CRA. The taxpayer has two options:
1. Pay a tax equal to 25% of the gross rent or
2. Pay tax on the net rental profits
First Option (Gross Rent Method):
If you elect the first option, your rental agent or the actual renter must withhold the 25% of gross income and forward it directly to the CRA and you are not required to file a Canadian tax return. A NR4 tax slip must be submitted to the CRA by the rental agent or renter and a copy sent to the property owner(s) reporting the gross income and taxes withheld. See CRA guide for more information Guide 4061: NR4- Non-Resident Tax Withholding and Remitting.
Second Option (Net Rent Method):
If you elect the second option, you must file Form NR6 “Undertaking to File an Income Tax Return by a Non-Resident Receiving Rent from Real Property or Receiving a Timber Royalty” and be approved by the CRA. Your rental agent or the actual renter must withhold 25% of net income and forward it directly to the CRA. The 25% of net income tax withheld will need to be calculated by working with your accountant. The NR4 slip mentioned above will still be required to be completed. You must file a Canadian Section 216 non-resident income tax return. If the Canadian non-resident tax withheld is more than the amount of tax payable calculated on your tax return, the excess amount will be refunded to you. See CRA guide for more information Guide T4144: Electing Under Section 216
There are other additional forms that may need to be filed, which we will gladly assist you with.
Additionally, you must file a Canadian income tax return for the tax year in which you sell any Canadian rental property. There are also forms that should be prepared just prior to selling the property.
AG TAX LLP Can Help
If you have any other tax-related queries, and/or need assistance with tax planning/filing please contact AG Tax. Our tax professionals are highly-experienced with U.S. and Canadian tax laws and can provide you the right guidance to handle your tax situation.
Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to U.S., Canada and other international tax laws.
We can assist with:
- Canadian Personal and corporate tax returns
- Cross Border Taxation and Business Planning
- Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- Estate Planning, Inheritance tax advice
To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:
- 416-238-5920 (Greater Toronto Area, ON)
- 604-538-8735 (Greater Vancouver Area, BC)
- 780-702-2732 (Greater Edmonton Area, AB)
Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.