Canadian Non-Resident with Rental Property

Lately I've been trying to figure out the process of renting my place out before I move to Paris. Ironically, finding a tenant is the easy part - the hardest part is actually trying to figure out how the income tax is going to work. After refusing to call Canadian Revenue and searching online, and then finally giving in and being transferred a billion times, I've finally figured it out (I think).

To begin, all Canadian-income generated by a non-resident is subjected to 25% tax withholding from your gross income. That means if you are receiving $1000/month, you must pay $250 of that to Federal Canada every month, regardless of your expenses. At the end of the year, I don't even know if you can claim it back - I'm not really sure how that works, because this entry is not about that, it's about paying taxes just from your Net Income.

Now, if you are poor like me, the alternative to that would be to pay 25% of your NET income. That is, your gross income, minus things like maintenance fee, utilities (if you're paying), things you've fixed in the home, interest from your mortgage, property tax, etc. If all of that totals to $300/month, you only need to pay 25% of $700, which is $175/month. A tiny bit better. Nevertheless, in order to do this, you have several things you must do before you start collecting rent, as listed below.

1. Get an Agent: What's an agent you ask? Basically anyone who is a Canadian resident and has a Non-Resident (NR) Tax account number. Their responsibility is as follows:
• Submit 25% of your net rental income to Canada Revenue every month
• Fill out an NR4 Slip and NR4 Summary and the end of the year (Dec) and submit it to Canada Revenue


2. Agent Open a Non-Resident Account: This must be done by your agent as it will be under his/her account. S/he will need to call 1-855-284-5946 with the following information:
• His/Her name and address
• His/Her SIN
• Non-resident's name and the property rental information 
Once the account has been opened, the agent will receive an NR75, which is a form that specifies all the information with regard to the account. If all the information is correct, the agent does not have to do anything. Along with the NR75 are remittance vouchers - these can be used to pay for the monthly taxes at a financial institution. If you are paying on behalf of the agent online, you will not need those vouchers.


3. File an NR6: The NR6 is known as the "Undertaking to File an Income Tax Return by a Non-Resident Receiving Rent from Real Property or Receiving a Timber Royalty." This must be done at the beginning of every year (before your first rental income received of the year). This is an optional form that would only be filed if you want to do 25% of your net income instead of gross. On this form you must specify:
• Your information
• You rental property information
• Your Agent information, including the NR account number.
• A statement that details your gross rental income, and the deductions that lead to the Net income.
Once you filed the NR6, you must wait for it to get approved.

After steps 1-3 are done, the next thing you must do is ensure that you pay the withholding to the government on-time.

4. Pay the Government Monthly: You must pay 25% of your net income (the amount as approved by the NR6) to Revenue Canada on a monthly basis (this is the actual withholding), within 15 days after receiving your rental income. If you overpay, you'd be able to claim it back when you file your yearly income tax (which you MUST DO or else they will make you pay the tax from the gross income). There are several ways to pay - but the easiest way is of course electronically. I am going to be using My Payment, which will require that you have either a TD, Scotia, RBC, or BMO bank account. All you will need is:
• The NR Account Number
• Your Bank Account Number
• The amount and the period for which you are paying

At the end of the year what you must do is the following:

5. Agent Submit NR4 and NR4 Summary: This process is essentially done by your agent before March 31st. The steps are as follows:
• The agent fills out one NR4 and makes 4 copies of it
• one copy s/he keeps
• two copies s/he provides to the non-resident
• one copy he/she must send to the Canada Revenue Agency along with the NR4 Summary
• The NR4 Summary is almost exactly like the NR4 except that it tells Canada Revenue how many NR4 slips were sent throughout the year.


6. File T-1159: You, or the Non-Resident who owns the property, must file a T-1159 "Income Tax Return for Electing under Section 216" before June 30th of the following year. This is the most important(!!!!!!) part of the process. If you do not file this before June 30th, everything you have done is nullified and the government will charge you tax on your GROSS INCOME TAX and ask you for more money. If you file this on time, you might even get some money back because more tax has been withheld (for example, you had to fix your dishwasher, which can be deducted from your income, or your maintenance fee has increased, etc.) than necessary. If you never filed the NR6 then you have two years to file this form. You will need to also submit:
• A rental statement
• The NR4(s)


You can send the package to:

International Tax Services Office
Post Office Box 9769, Station T
Ottawa ON K1G 3Y4
CANADA 

That's all you have to do. For references, you can check the following:

• Information on Non-Residents 
• Rental Income and Non-Resident Tax
• Information on NR4
• Landlord.net's Summary on Non-Resident Taxes