If you are a non-resident and receive rental income from real property in Canada, a non-resident tax at the rate of 25% of gross income has to be withheld and remitted to the Canada Revenue Agency (CRA). However, you can choose to have tax withheld on your net rental income instead of on the gross amount by filing a Form NR6.
Form NR6 has to filed each year
Form NR6, File an Income Tax Return by a Non-Resident Receiving Rent from Real Property or Receiving a Timber Royalty, has to be filed on or before January of each year, or before the first rental payment is due. Tax must continue to be withheld on the gross rental income until the CRA approves your Form NR6.
Tax has to be remitted on time
After Form NR6 is approved, tax can be withheld at the rate of 25% on your net rental income (i,e,, the amount of rental income available after the rental expenses have been paid). The tax withheld must be remitted to the CRA on or before the 15th day of the month following the month the rental income is paid.
At the end of year, Form NR4 – Statement of Amounts Paid or Credit to Non-Resident of Canada has to be filed with the CRA.
A section 216 return has to be filed
If the CRA approved your Form NR6 for certain year, you must file a section 216 return for that year by due date. You have to file the return even if you have no tax payable or you are not expecting a refund.
If a section 216 return is not filed by the due date, you will be subject to non-resident tax on your gross rental income.
For example:
Gross rental income: $30,000
Allowable expenses: ($20,00)
Net rental income: $10,000
Because Form NR6 is approved, the tax is $2,500 (25% of $10,000). If a section 216 return is not filed by the due date, the CRA will charge additional tax of $5,000 (25% of $30,000 minus $2,500).