Non-Resident Tax on Rental Properties in Canada: A Brief Overview 

If you’re a non-resident owning real estate in Canada, it’s crucial to understand the tax implications. This article provides a concise guide on the topic. 

• Tax Account Number: Before anything else, ensure you have a tax account number. The Canadian Revenue Agency (CRA) uses this to monitor your tax filings. If you possess a social insurance number, it doubles as your tax account number. If not, contact the International Tax Services office to get one. 

• Withholding Tax: Non-residents must be aware of the withholding tax, which is 25% of the rents collected in Canada. For instance, if you receive $1,000 as rent, you’ll need to set aside $250 (25%) as withholding tax. This amount should be remitted by the 15th of the subsequent month. 

• Payment of Withholding Tax: Making this payment is straightforward. Write a cheque to the ‘Receiver General of Canada’. Ensure your name, tax account number, and the relevant month & year are written on the back. The CRA website provides the mailing address. 

• The NR6 Waiver: The 25% withholding tax might seem steep, but there’s a way to reduce it. File the NR6 form or the Waiver, available on the CRA website. This form requires details of your expected gross rents and expenses for the upcoming year. It’s advisable to file this around October or November to receive it by January. 

• The NR4 Slip: This slip reports the total gross rents and the withholding tax remitted to the CRA. It’s essential to obtain this form from the CRA by March 31st of the following year to avoid penalties. 

• Annual Tax Returns: Every year, non-residents must file a tax return. The Section 216 non-resident tax return for rental properties outlines the gross rents and expenses. Expenses can include property tax, repairs, utilities, insurance, condo fees, and property manager fees. The net income (gross rents minus expenses) is taxed at a high rate of 48%. However, tax credits and the previously remitted withholding tax can reduce the amount owed. This return is due by June 30th of the subsequent year. 

While the process might seem daunting, it’s recommended to engage a professional to ensure accurate filing and to maximize deductions.