Non-Residents Rental Income Filing And Reporting Requirements

Interms of Non-Rental Income, after you receive rental income from real or immovable property in Canada, the payer, such as the tenant, or agent, such as the property manager, has to withhold 25% non-resident tax on the gross rental income paid to you. The tax has to be paid to the Canada Revenue Agency (CRA) by the payer on or before the 15th day of the month following the month the rental income is paid or credited to you.

You will get two copies of an NR4 from the payer, Statement of Amounts Paid or Credited to Non-Residents of Canada indicating the gross amount of rental income credited or paid to you during the year and the amount of non-resident tax withheld. The payer also has to send CRA an NR4 information return.

In general, the non-resident tax withheld is considered to be your final tax obligation to Canada on the rental income from real or immovable property in Canada. Also, if you elect under section 216 of the Income Tax Act, you are choosing to report your rental income from real or immovable property in Canada on a separate Canadian tax return. This enables you to pay tax on your net Canadian-sourced rental income instead of the gross amount and its possible that you may pay less tax. Some or all of the non-resident tax withheld may also be refunded to you. If you plan to make an election under section 216, you may also want to consider having non-resident tax withheld on the net rental income instead of the gross amount. To achieve this, you and your agent (someone who acts on your behalf regarding your Canadian rental income) have to complete Form NR6 and and send it to the CRA for approval. This Form NR6 should br sent on or before January 1st of each year, or before the first rental payment is due.

If your Form NR6 is approved by the CRA, your agent can withhold non-resident tax at the rate of 25% on your net rental income (the amount of rental income available after the rental expenses have been paid). Your agent must ensure he/she pays CRA the tax on or before the 15th day of the month following the month the rental income is credited or paid to you.

Generally, your section 216 return has to be sent to CRA within two years from the end of the year in which the rental income was credited or paid to you. If your From NR6 was approved by CRA for a certain year, you have to file a T1159, Income Tax Return for Electing Under Section 216, for that year, even if you are not expecting a refund or have no tax payable. The return is due on or before June 30 of the following year. If you have rental income from more than one rental property in Canada and you elect under section 216, all of your Canadian rental income as well as expenses must be reported together on one section 216 return.

You can also read and understand tax deductible business expenses.