Know Your Responsibilities
Non-residents of Canada must file and pay income tax if they have Canadian source income such as rental or other investment income. We offer unique one-stop-shop solutions to non-residents that save them money and time by providing not just tax preparation services but also acting as the non-residents Canadian agent, withholding and remitting the non-resident taxes and applying for the annual CRA approval. The process is as follows.
When a non-resident receives income from renting a property in Canada, the payer (the tenant, or agent of the landlord) must withhold non-resident tax at the rate of 25% on the gross rental income paid or credited to him/her. The payer must remit the withholding taxes to the the CRA on or before the 15th day of the month following the month in which the rental income was paid.
If you decide to engage an agent to remit the taxes, the agent must provide the non-resident two copies of an NR4, a Statement of Amounts Paid or Credited to Non-Residents of Canada highlighting the gross amount of rental income paid during the year and the amount of non-resident tax withheld. The agent also has to send CRA an NR4 information return.
In most cases the non-resident tax withheld discharges the non-resident of hi/her tax obligation to Canada on the income derived from real property in Canada. However an election under section 216 of the Income Tax Act, allows the non-resident report the rental income on a Canadian tax return and therefore pay tax on their net rental income instead of the gross amount and may even result in lower overall taxes. If actual expenses exceed the expected or projected expenses, a refund can be obtained from the CRA. To make this election the non-resident individual’s Canadian agent must complete Form NR6 and and mail it to the CRA for approval before the first of January each year, or before the first rent payment is due.
Upon CRA approval , the non-resident’s Canadian agent will withhold non-resident tax at the rate of 25% on the net rental income . The non-resident’s Canadian agent must remit the withholding taxes to the the CRA on or before the 15th day of the month following the month in which the rental income was paid.
Call us at (416) 836-4731 to book a consultation.