Non-Resident Rental Income in Canada: The Section 216 Election
If you live abroad and rent out a Canadian property, the default rule is severe: 25% of the gross rent is withheld and sent to the Canada Revenue Agency — before your mortgage interest, property tax, insurance, or repairs are counted at all. On $30,000 of rent that is $7,500, which can be most of what the property actually earns. The section 216 election is how you get taxed on the profit instead.
Non-resident rental income from Canadian real property is subject to 25% Part XIII withholding on the gross rent, remitted by your payer or agent, and that withholding is normally your final Canadian tax obligation. By electing under section 216 you file a Canadian return (Form T1159) and pay tax on net rental income instead, usually producing a refund. Filing Form NR6 in advance lets your agent withhold on net during the year — but it shortens your filing deadline from two years to June 30.
| Non-resident rental income in Canada | The rule |
|---|---|
| Default withholding | 25% of gross rent |
| Who withholds | The payer or agent (for example, your property manager) |
| Remittance deadline | 15th day of the month after the rent is paid or credited |
| Slip you receive | Two copies of the NR4 |
| Section 216 election | Tax on net rental income, filed on Form T1159 |
| Standard filing deadline | Within 2 years from the end of the year |
| Deadline if Form NR6 was approved | June 30 of the following year |
| Form NR6 deadline | On or before January 1, or before the first rental payment is due |
| Multiple properties | All reported together in one section 216 return |
Source: Canada Revenue Agency, Rental income and non-resident tax — filing and reporting requirements. Verified August 2026.
Why 25% of gross rent hurts so much
The withholding on non-resident rental income in Canada ignores the cost of owning the property. It is applied to the rent cheque, not to the profit. Take a property earning $30,000 a year in rent with $18,000 of deductible expenses — mortgage interest, property tax, insurance, repairs, and management fees:
| Amount | |
|---|---|
| Gross rent | $30,000 |
| Rental expenses | $18,000 |
| Actual net rental income | $12,000 |
| Withheld at 25% of gross | $7,500 |
| Withheld at 25% of net (with an approved NR6) | $3,000 |
The $7,500 taken under the default rule is 62.5% of what the property actually earned. That is the gap the section 216 election exists to close, and on a leveraged property with a large mortgage the arithmetic gets worse, not better — a property that barely breaks even can still have thousands withheld.
How the default withholding works
The CRA places the obligation on the Canadian side of the transaction. Your payer or agent — typically a property manager, but potentially anyone paying you rent — must withhold 25% of the gross rental income paid or credited to you, and must remit it on or before the 15th day of the month after the month the rent was paid or credited.
If they fail to withhold and remit, the CRA charges compound daily interest on the amount and may charge a penalty as well. That exposure sits with the payer, which is why professional property managers are strict about it and why an informal arrangement with a friend or family member collecting your rent is a genuine risk to them.
One clarification worth knowing, because it circulates as a myth: the CRA states plainly that Canadian residential renters paying rent for their own home are not expected to know the residency of their landlord nor to withhold 25% of their rent payments. The obligation is not designed to fall on an ordinary tenant.
By the end of the year your payer must give you two copies of the NR4 slip showing gross rental income and tax withheld, and file the corresponding information return with the CRA. Our guide to the NR4 slip explains what each box means — boxes 16 and 17 are the two numbers your section 216 return is built from.
What the section 216 election changes
Without an election, the 25% withheld is generally your final Canadian tax obligation on the rental income and there is nothing more to do. Electing under section 216 replaces that outcome: you file a Canadian return reporting rental income and expenses, tax is calculated on the net amount, and the tax already withheld is credited against it. Where the withholding exceeded the real liability — which is the usual case for a property with a mortgage — the CRA refunds the difference.
Three mechanics matter:
- The return is Form T1159, Income Tax Return for Electing Under Section 216. It is a separate return from any other Canadian filing you make.
- If you own more than one Canadian rental property, you must report all of them together in one section 216 return. You cannot elect for the profitable one and leave the others under gross withholding.
- The standard deadline is generous: within two years from the end of the year in which the rental income was paid or credited. Non-residents who discover this late can often still recover past withholding.
The same idea applies to pensions and RRSP income under a different election.
Form NR6: better cash flow, tighter deadline
Waiting until after year end to recover over-withheld tax is a cash-flow problem, not just a paperwork one. Form NR6 is the fix. You and a Canadian-resident agent acting on your behalf complete it and send it to the CRA for approval, on or before January 1 of each year or before the first rental payment is due. Once approved, your agent withholds 25% on net rental income during the year instead of gross — $3,000 rather than $7,500 in the example above.
An approved NR6 does not only improve your cash flow — it also changes your filing deadline. Without it, a section 216 return is generally due within two years of the year end. With an approved NR6 for the year, the T1159 return is due on or before June 30 of the following year. You are trading roughly eighteen months of filing slack for the cash you keep during the year. That is usually a good trade, but only if you actually file on time — the NR6 is an undertaking to file, and the reduced withholding was granted on that basis.
The NR6 route also requires an agent who is a resident of Canada and willing to take on the withholding and remittance responsibility. For owners without a property manager, finding that agent is often the practical obstacle rather than the form itself.
What counts as a rental expense
Because the whole benefit of a section 216 election is being taxed on net rather than gross, the expense side is where the money is. The ordinary Canadian rental deductions apply — mortgage interest (not principal), property taxes, insurance, utilities you pay, repairs and maintenance, advertising, property management fees, and professional fees related to the rental.
Capital cost allowance on the building is a more complicated question for non-resident filers and interacts with what happens when you sell, so it is worth specific advice rather than a rule of thumb. Keep every receipt: a section 216 return claiming expenses you cannot document is a weak filing, and the CRA is assessing it from outside your country. The CRA sets out the full rules in Guide T4144, Income Tax Guide for Electing Under Section 216.
How this fits with the rest of the non-resident rules
Renting out Canadian property sits in the middle of a sequence, and the pieces on either side are governed separately.
Whether you are a non-resident at all is a factual test based on residential ties rather than where you live — see how to become a non-resident of Canada for tax purposes. Renting out your former home is itself one of the classic fact patterns, because a property kept available for your own use is a significant tie while one on a genuine long-term arm’s-length lease is not.
When you eventually sell, an entirely different regime takes over: a 10-day notification, a certificate of compliance, and withholding of 25% of the gross sale price — covered in selling property in Canada as a non-resident. If the property was ever your principal residence, the designation rules in capital gains tax on selling property in Canada matter too. And the slips that document all of this are NR4s. More tools are in our free financial calculators hub.
Frequently asked questions
By default, the payer or agent withholds 25% of the gross rental income and remits it to the CRA by the 15th day of the following month. That withholding is generally your final Canadian tax obligation on the rent, unless you elect under section 216 to be taxed on net rental income instead.
It is an election to file a Canadian tax return, Form T1159, reporting your Canadian rental income and expenses so that tax is calculated on the net amount rather than 25% of gross rent. Tax already withheld is credited against the result, and the excess is refunded. All of your Canadian rental properties must be reported together in one return.
Generally within two years from the end of the year in which the rental income was paid or credited. However, if the CRA approved a Form NR6 for that year, the return is due on or before June 30 of the following year.
Form NR6 is an undertaking, filed by you and a Canadian-resident agent, that lets the agent withhold 25% on your net rental income during the year instead of on gross rent. Send it to the CRA on or before January 1 each year or before the first rental payment is due. Approval also moves your filing deadline to June 30 of the following year.
The obligation falls on the payer or agent, and the CRA states that Canadian residential renters paying rent for their own home are not expected to know their landlord’s residency or to withhold 25% of their rent payments. In practice the withholding is handled by a property manager or an appointed Canadian agent.
The CRA charges compound daily interest on amounts that were not withheld and remitted, and may also charge a penalty. That liability sits with the payer or agent, which is why informal arrangements are risky for whoever is collecting the rent on your behalf.
Last updated: August 2026. Rules verified against Canada Revenue Agency guidance.
This article is general information, not tax advice. Section 216 filings interact with capital cost allowance, the eventual sale of the property, treaty provisions, and your residency status in ways that depend on your circumstances. Deadlines differ depending on whether a Form NR6 was approved. Confirm current rules with the Canada Revenue Agency, and use Guide T4144 or a cross-border tax professional for a live filing.
