How is a section 216 election different from just paying the 25% non-resident withholding tax on rent?

The default rule for a non-resident who earns Canadian rental income is a flat withholding tax collected on the gross rent, the full amount received, with no deduction for expenses, remitted to CRA by whoever pays you the rent or manages the property on your behalf. A section 216 election changes what actually gets taxed, not just how it's collected: instead of gross rent, you're taxed on net rental income, calculated the same way a resident landlord would calculate it, after deducting legitimate expenses like repairs, property management fees, insurance, and mortgage interest.

Simply accepting the flat withholding on gross rent is the path of least resistance, nothing extra needs to be filed, but it usually costs more in real terms if the property has meaningful expenses, since tax is being paid on revenue rather than profit. Electing under section 216 requires filing a Canadian return for the year, and the resulting tax bill, calculated on net income at graduated rates, is often significantly lower than the amount already withheld, which can mean a refund.

For most non-resident landlords with an actual mortgage or ongoing carrying costs, the extra filing involved in the election is worth it compared to leaving money on the table under the default withholding approach.