NR6 Election and Section 216 Filings

Minimize your tax exposure for non-resident rental income

Why is NR6 election beneficial

The NR6 form in Canada is used by non resident investors who earn rental income and want to avoid remitting 25% of their gross rental income to CRA on a monthly basis. This form allows them to outline their projected expenses for the year and if approved only remit 25% of the net rental income as opposed to 25% of the gross on a monthly basis.

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white toy house on graph paper

What are the qualification requirements of NR6?

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Must elect a Canadian resident to act as Agent

Must file Section 216 income tax returns on time

Have projected Rental income and expenses for upcoming year

Issue an NR4 at each year end

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When is the NR6 Form Due?

The due date for the NR6 form in Canada is typically before the start of the tax year for which you are requesting the reduced withholding tax rate on rental income. This means you should submit the NR6 form to the Canada Revenue Agency (CRA) before the beginning of the tax year in which you will be receiving the rental income.

* We recommend applying 3 month before year end so CRA approves the application before the January Withholding tax is due.

Calendar with bunch of books and clock

Register ITN if you dont have a SIN #

Register an NR account with CRA

Elect a Canadian as your agent and apply for NR6- optional

NR4 Issue a NR4 slip at year end

File Section 216 personal income tax return

Is NR6 filing mandatory?

A non resident collecting rental income does not have to file a NR6 election. If you do not file an NR6 election the following will apply.

What are the requirements of an NR6 Application

Legal Name and Contact Information

In cases of blocked bank account access and frozen funds, we step in to engage with the CRA, providing a swift plan to unlock your accounts.

Rental Property Details

Provide information about Rental property.

Canadian Agents and NR Account

Details of Canadian agents and their NR account number.

Declaration of Rental Income

Disclose anticipated rental income for upcoming tax year.

Projected Expenses

Estimate all anticipated rental property expenses for upcoming year.

Sections 216

Timely Sections 216 Returns

Ensure prompt filing of Section 216 returns and submit any additional documentation requested by the CRA.

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FAQ

Non-resident property owners in Canada are subject to a 25% withholding tax (Part XIII tax) on gross rental income, unless a tax treaty between Canada and your home country lowers this rate. The Canadian tenant is supposed to release 75% of gross rent to you and the Part XIII tax to Revenue Canada.

rental income from Canada? 

Rental income is a common type of income subject to Part XIII tax. You do not file an income tax return to report the rental earnings, unleash you made an NR6 election. The Part XIII tax (25% of gross rent) is your final tax obligation. However, you can elect under section 216 to file an income tax return for your Canadian rent income to claim any over payments back.

By default, you cannot. For non-residents, Canadian rent income is subject to Part XIII tax. The 25% of gross rent is your final tax obligation. Therefore you cannot get a refund if you end up with a rental loss. However, if you elect under section 216 to file rental income return, it is possible to get back any excess tax withheld.

When you elect under section 216, you can also elect to have tax withheld from your net rental income, instead of from your gross rental income. This reduces cash flow pressure throughout the year. You will also be entitled to a refund if the taxes withheld exceeds the actual tax payable when you file your rental income tax return.

As a non-resident with Canadian rental income, use Form NR6 to elect under Section 216 of the Canadian Income Tax Act. This form allows you to request withholding tax on net rental income (considering estimated rent expenses) instead of on gross rent and commit to filing a Canadian income tax return. Submit NR6 before January 1 of each year or before the first rental payment date.

If CRA approves the NR6 request for the Canadian payer to withhold tax from net rental income, you must file a Section 216 return. This return reports your actual rental income and expenses and reconciles actual tax payable with taxes withheld during the year.

CRA will invalidate the election and require tax to be withheld from your gross rental income (which is the default treatment). If insufficient tax was withheld during the year, you will need to pay the difference to CRA. Therefore it is crucial to file a section 216 return by the due date if you elect.

When filing a Section 216 return in Canada as a non-resident property owner, you can deduct specific expenses related to your rental property. These may include

  • maintenance and repairs
  • property taxes
  • home insurance 
  • mortgage interest
  • utilities
  • legal and accounting fees

Ensure expenses are directly related to earning rental income and maintain detailed records and receipts for CRA verification.

On the Section 216 return, you will calculate your net rental income after the rent expenses are claimed. The net rent income is then subject to a graduated tax rate table. The federal tax starts at 15% of income up to $50,197. You also need to pay a non-resident surtax equaling 48% of the federal tax. In the end, the actual tax payable is reconciled with taxes withheld at source. 

How much does TMP charge to have a Section 216 filed?

Basic

NR4 issuance and Section 216 filing

$600 

Expert

NR6 election, NR4 issuance and Section 216 filing

$1,100

Premium

Dual ownership, NR6 election, NR4 issuance and Section 216 filing

$1,900

Custom

Please fill in this questionnaire and we’ll get back to you with a quote

$1,500 +HST

Next Steps

Step 1

Please fill in this questionnaire

Step 2

Schedule a consultation with one of our CPAs to receive a final quote and a checklist of the required data

Step 3

Upload requested data onto cloud folder shared

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Have a question, an idea, or just want to learn more about Triple M Professional Corp.? We’re all ears. Fill out the form or Email us and we’ll connect with you soon.

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416-333-1116
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Markham Office
905-237-6424
675 Cochrane Dr East Tower 6th Floor, Markham, ON, L3R 0B6
Toronto Bay Street Office
416-333-1116
401 Bay Street, 16th Floor Toronto, ON, M5H 2Y4
San Francisco Office
415-366-5667
590 California Street 16th Floor, San Francisco, CA 94104
New York Office
212-651-9101
555 Madison Ave 5th Floor Manhattan,
NY 10022
Toronto King Street West Office
416-333-1116
100 King Street West, Suite 5600, Toronto, ON, M5X 1C9