Non-Resident Rental Property Taxes
Written by Jamie Palmer, President & Broker of Power Properties
Owning rental property in Canada as a non-resident comes with its own set of tax responsibilities and opportunities. Understanding the basics of non-residency taxation can not only save you time and effort but also put more money back in your pocket. Here's a simplified guide to help you navigate the essentials.
What Does It Mean to Be a Non-Resident?
Being a non-resident for tax purposes is more than just living outside Canada. It depends on factors like your residential ties (e.g., property ownership, memberships, healthcare access) and your intention to return. If you qualify as a non-resident, specific tax rules apply to your rental income.
Key Forms for Non-Residents: NR6 and NR4
NR6: Your Tool for Better Cash Flow
The NR6 form lets you reduce the withholding tax from 25% of your gross rental income to 25% of your net rental income (gross income minus eligible expenses). To file, you’ll need to provide a rental property budget listing your income and expenses such as property taxes, insurance, and management fees. Submit this form early—ideally before your first rental payment.
Advantages of the NR6 Form:
Reduced upfront withholding tax
Easier tax filing with fewer adjustments
Flexibility in choosing gross or net income tax withholding
NR4: Your Income Summary
The NR4 is a year-end report detailing your rental income and the taxes withheld. It’s crucial for completing your Canadian tax return and claiming eligible deductions.
Filing Your Section 216 Tax Return
The Section 216 tax return is specifically designed for non-residents earning rental income. Filing accurately and on time can lead to significant benefits:
Expense Deductions: Mortgage interest, property taxes, and repairs can reduce your taxable income.
Tax Refunds: Properly filed returns may result in a refund if you've overpaid.
Key Deadlines:
June 30 for non-resident tax returns
April 30 if taxes are owed
If you’ve filed an NR6, ensure you submit proof by May 31 to avoid penalties.
Selling a Rental Property as a Non-Resident
When selling, you’ll need a Certificate of Compliance (Section 116) from the CRA to avoid hefty withholding taxes (up to 50% of the sale price). Start the application process early to ensure smooth sailing during the sale.
Stay Organized
Record-keeping is essential for managing your property and taxes. Maintain detailed records of income, expenses, and any significant repairs to simplify tax filing and optimize deductions.
Ready to Dive Deeper?
Non-resident taxation can feel overwhelming, but you don’t have to navigate it alone. Want to know more about non-resident taxes in detail? Download our free eBook to learn more.