If you are a non-resident in Canada but you have a rental property in Canada then it is extremely important that you understand the tax implications of your status. Most non-residents want to buy rental property in Canada because of the good real estate market which Canadians boast. If you are a non-resident and have rental property in Canada then you’ll want to keep on reading!
Let’s look at the tax implications and due dates which are important for you if you are a non-resident with rental property in Canada.
1. Non- Resident Account Number
The first thing you need to take care of is your non-resident account number. If you have a rental property in Canada then the first step is to get a non-resident account number by simply calling the CRA at –1-855-284-5946 or 613-940-8499. It is very important to get a Non-resident account number because you have to remit 25% of the rent amount collected to the CRA before the 15th of every month.
You need to get your non-resident account number as soon you get your rental property. Many individuals falsely believe that a social insurance number is enough for them but this couldn’t be further from the truth. Even if you already have a social insurance number, still you need to get your non-resident account number because the CRA needs to track your total remittance and filing.
2. Withholding Tax
The second very important point to keep in mind is withholding tax. You have to remit 25% of the gross rent you collect to the CRA. For example, if you collect $1000 rent for January, then you have to remit $250 to the CRA before February 15th.
3. NR4 Pro Forma
To apply this 25%, an accountant needs to prepare your NR4 Pro Forma and send it to the CRA Before March 31st of every year. Once the NR4 pro forma is prepared and sent out to CRA, the CRA will issue NR4 slip.
4. NR4 Slip
Basically, the NR4 slip contains the information of your total gross rent collected and total amount remitted to the CRA. Once the CRA issues the slip, then your tax return can be prepared and this NR4 slip will be filed with the return.
5. Annual Tax Return Filing
The last point to keep in mind is filing your tax return. This return is called section 216. You can deduct the following expenses related to property:
- Advertising
- Insurance
- Property tax
- Repairs and Maintenance
- Utilities
- Interest & Bank Charges
- Condominium Fee
- Fees paid to property Manager (If any)
- Professional Fee (Including Legal & Accounting fee)
The tax rate is almost 48% which is very high but do not forget you already remitted 25% of the gross rent to the CRA, which can be used to reduce the total payable amount.
Filing Due Dates
- Remitting 25% of your gross rent collected before the 15th of every month.
- NR4 Pro Form must be filed every year before March 31.
- I f you are remitting 25% of your gross rent then you can file the return in 2 years.
- If the CRA approves the NR6 then you need to file the tax return no later than June 30 of every year.