If you rent out a Canadian property but live outside of Canada, the income you generate from rent may be subject to a Canadian non-resident withholding tax at a rate of 25%.
This tax will be calculated on gross rental income before expenses such as mortgage interest, repairs, or property management fees are deducted by default, unless you make a Section 216 election, as will be outlined below.
Here is a short explanation of how the non-resident withholding tax works.
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Note: This article addresses Canadian tax rules for rental income at a general level. Specific residency, ownership structure, the type of rental activity, and applicable treaty provisions will change the analysis. For information about your particular situation, feel free to get in touch with me.
Non-residents for tax purposes
Note that moving abroad does not, in itself, settle your tax residency.
The CRA will evaluate your situation holistically, according to whether you have retained significant residential ties to Canada, including (among other factors):
- A home available to you in Canada;
- A spouse, partner or dependents remaining in Canada; and/or
- Personal, economic and social ties to Canada.
Do confirm your status before making any changes to your reporting of rental income. See the CRA guidance on determining residency status for more information.
The starting rule: 25% of gross rent
As a default rule, Canadian rental income received by a non-resident is subject to a 25% tax on gross rent. If your tenant’s monthly rent is $2,000, for example, you would be required to remit $500 per month to the CRA, regardless of what expenses you may have from the rental property.
The CRA’s current guidance draws an important distinction:
- If a Canadian agent, such as a property manager, receives the rent, the agent is responsible for withholding and remittance of this tax obligation; whereas
- If you receive the rent directly, you must remit the 25% tax yourself.
The payer must pay the tax on or before the 15th day of the month after the month the rental income is paid or credited to you.
Note that an ordinary residential tenant is not expected to determine whether their landlord is a non-resident or withhold 25% of the rent themself. The recipient of the rental payments is responsible, as detailed above.
Can you pay tax on net rental income instead?
Section 216 of the Income Tax Act allows a non-resident landlord to file a Canadian return reporting rental income and eligible expenses, and have tax withheld on net rental income as opposed to the gross amount. This may amount to a lower tax burden through a refund.
You can make a Section 216 election even if your tax was previously remitted on gross rent. Generally, this return – Form NR6 – must be filed within two years after the end of the relevant tax year, subject to certain exceptions.
Note that if the CRA approved your Form NR6 for 2025, you will have to file Form T1159, Income Tax Return for Electing Under Section 216 return on or before June 30, 2026, and include the income and expenses from all of your Canadian rental properties, if you have more than one, together in one Section 216 return.
The practical takeaway
For a non-resident landlord, there are two separate decisions:
- Who will collect and remit tax on rent; and
- Whether to file a Section 216 return.
If cash flow is an issue, think about whether appointing a Canadian property manager makes sense for you. An accountant or tax lawyer in your home jurisdiction can assess how your rental income and Canadian tax payments should be reported in your country of residence.
For the tenancy side of owning and managing Ontario property from abroad, see my guide for foreign landlords.
