NR4 – withholding tax on rental income received by a non-resident

If you are a non-resident owner of Canadian rental property, your Canadian “payer” (tenant or agent) is required to withhold and remit Part XIII tax, which is 25% of the gross rent, to the Canada Revenue Agency (CRA).

NR4 information return

The payer has to file an annual NR4 information return with the CRA by March 31st of the following year. The NR4 return summarizes gross rent paid or credited to you in the previous year and the amount of tax withheld. The payer should provide you with two copies of the NR4 slip.

Failure to file the NR4 return will be subject to penalty.

If you do not have a Canadian agent and have a non-resident account registered under your name, you are required to request a Pro-Forma NR4 slip from the CRA Non-Resident Withholding Division.

Section 216 tax return

The Part XIII withholding tax of 25% of gross rent is your final tax obligation. However, you can choose to file a separate Canadian tax return to report your rental income. This is called electing under section 216 of the Income Tax Act. This return simply requests your tax be assessed on net rental income and at marginal tax rates.  The benefit of filing section 216 tax return is generally to get a refund of excess withheld Part XIII.

Form NR6

You can reduce the withholding tax to 25% of estimated net rent if someone acts as your agent and file Form NR6 with the CRA. We provide Form NR6 preparation service. Generally all your agent need to do is to sign the form. If Form NR6 is filed, you are required to file section 216 tax return by the due date.