Non-Resident Landlords in Ontario: 25% Withholding Tax, NR6 and Section 216

If you live outside Canada and rent out a property in Ontario, Canadian tax rules apply to that rent even though you are not a Canadian resident. The rules fall first on whoever pays you the rent, and then on you. Property managers who collect rent for a non-resident owner are directly affected.

This guide explains the basic withholding rule, how Form NR6 can change it, how the Section 216 return works, and what can go wrong if a deadline is missed. Your situation may have extra details, so an accountant or lawyer can confirm how the rules apply to you.

The 25% withholding tax on gross rent

The payer or agent, such as a property manager, must withhold non-resident tax of 25% on the gross rent paid or credited to a non-resident for Canadian real property. Gross rent means the rent before any expenses are taken off. That is why the withholding can feel heavy when the property has mortgage interest, taxes and repair costs.

The withheld tax must be remitted to the CRA by the 15th day of the month after the month the rent is paid or credited. The payer then gives the non-resident an NR4 slip showing the gross rent and the tax withheld.

Who has to withhold, and who does not

In most cases the duty sits with the person who pays the rent or the agent who handles it. Residential tenants are treated differently: the CRA does not expect residential renters to know their landlord's residency or to withhold 25% of rent. In practice this means a property manager or other agent often carries the obligation.

If the payer does not withhold and remit, the CRA charges compound daily interest on the amount not withheld and remitted, and may also charge a penalty.

Form NR6: withholding on net rent

A non-resident and their agent can file Form NR6 on or before January 1 of each year, or before the first rental payment is due. Once it is approved, 25% is withheld on net rent instead of gross. Until approval, withholding stays on the gross rent.

Timing matters, so do not wait until rent is already flowing. Filing early gives the CRA time to approve the form before payments begin.

The Section 216 return

A non-resident can file a separate Section 216 return. It reports gross rent, taxes only the net rental income, and claims the non-resident tax already withheld. Because it taxes net income, it can reduce the tax compared with withholding on gross rent alone.

A Section 216 return is separate from any other return the person files.

What a late or missed filing can cost

If the Section 216 return is not filed by the due date, the election is invalid. The CRA can then assess non-resident tax on the gross rent, and the agent may be liable for the shortfall. Separate interest and possible penalties apply where tax was not withheld and remitted.

Next steps to consider:

• Confirm whether you or your agent will pay the rent out and who will withhold.
• Decide whether to file Form NR6 before January 1 or before the first rent payment.
• Set a calendar reminder for the 15th of each month for remittances.
• Make sure the NR4 slip is issued and kept with your records.
• Note your Section 216 deadline, which depends on whether NR6 was approved.
• Speak with an accountant or lawyer if you are unsure which rules apply.

Frequently asked questions