Rental Income and Non-Resident Tax

If you are a non-resident of Canada and are receiving rental income from real property located in Canada you have to remit non-resident (Part XIII) tax at the rate of 25% of the gross rental income paid to you. The tax has to be sent to CRA on or before the 15th day of the month following the month the rental income was paid to you.

If you do not withhold and remit this non-resident tax, CRA will charge you compounded daily interest on the amount not withheld and remitted. CRA may also charge a penalty of 10% of the unremitted withholding tax. An NR4 slip has to be filed with CRA by March 31 showing prior year’s gross amount of rental income and the amount of non-resident tax withheld.

Generally, the non-resident tax withheld is considered your final tax obligation to CRA on the rental income. However, you can elect to file a return under section 216 of the Income Tax Act and have your tax assessed on the net rental income and receive a refund on some or all of the non-resident tax withheld.

A non-resident owning property in Canada may also want to consider to have non-resident tax withheld on the net rental income, instead of on the gross amount. This could save significant monies. For more information contact us at 416-493-0444 or e-mail the head of our non-resident tax department at jerzy@taxperts.on.ca.