Leaving Canada, keeping the rental? Non-resident landlord tax from NR6 to section 216

The default: 25 percent of gross, withheld before you see it

Non-residents do not report Canadian rent on an ordinary T1. Instead, Part XIII of the Income Tax Act requires the tenant or your Canadian agent to withhold 25 percent of gross rent — gross, not profit — and remit it by the 15th of the following month. That withholding is a final tax unless you elect otherwise. A Brampton house renting for $3,200 sends $800 a month to CRA even in a year when the mortgage, property tax and insurance leave you cash-flow negative.

The people this catches are rarely investors first. They are owners who took a job in Texas or California, kept the house, and heard about withholding two years later. It is the exact mirror of the file we run for Canadians who own US rental property — same logic, jurisdictions flipped. And where owners hold the property jointly, the rules split with the title: withholding applies to the non-resident co-owner's share.

Section 216 taxes the profit instead

A section 216 election lets you file a special Canadian return on net rental income — after mortgage interest, property tax, insurance, condo fees, management fees and repairs — at graduated federal rates plus the 48 percent non-resident surtax. For a leveraged GTA property that almost always lands far below 25 percent of gross, and the excess withholding comes back as a refund. Without an NR6 in place, you have two years from the end of the rental year to file; miss the window and the gross-based tax becomes permanent.

CCA is the judgment call inside that return. Claiming it can shelter the remaining profit, but it is recaptured into income when you sell — typically while you are still filing as a non-resident. We model the sale before claiming the first dollar.

The NR6 and a Canadian agent fix the cash flow in advance

Form NR6 is the forward-looking version of the same election. You and a Canadian-resident agent — often a relative or a property manager — file it before the year's first rent payment is due, with a budget of expected income and expenses, and CRA approves withholding at 25 percent of estimated net income instead of gross. On a break-even rental, the monthly remittance can drop close to zero.

The strings are real. The agent signs an undertaking, and the section 216 return is then due by June 30 of the following year. File late and CRA can revoke the arrangement and pursue the agent for the full gross-based withholding retroactively — which is why serious property managers treat the undertaking as a priced service, not a signature.

The calendar that keeps everyone out of trouble

Almost every non-resident landlord mess we untangle began as a missed date, not a wrong number. This is the full cycle for one rental year.

Selling from abroad, and the US return that mirrors all of it

When a non-resident sells Canadian real estate, section 116 requires notice to CRA within 10 days and lets the buyer hold back 25 percent of the price — more on the depreciable building portion — until a certificate of compliance arrives. Filing T2062 early, with a clean rental withholding history behind it, is what turns that holdback into a number based on the actual gain. Years you lived in the home as a Canadian resident can still shelter part of the gain, so the change-of-use history from the year you moved out matters.

If you landed in the US, the same rent also belongs on Schedule E of your 1040 — US depreciation rules apply whether or not you claim CCA in Canada — and the Canadian tax becomes a foreign tax credit on Form 1116. Prepared together, the two returns absorb most of the double tax; prepared separately, they rarely do. And if years are already missed, CRA's Voluntary Disclosures Program is usually far cheaper than being found — talk to us before anyone files anything.

Source: CRA — T4144, Income Tax Guide for Electing under Section 216.