Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Whether the election under subsection 216(1) of the Act will be available for rental income receivable by a non-resident person. Will a non-resident person that has rent receivable at the end of a taxation year be allowed to file an election under subsection 216(1) of the Act for that year or be required to wait until the subsequent taxation year in which the rent is actually received to file the election?
Position: No, an election under subsection 216(1) is not available for rental income accrued at the end of the year.
Reasons: Contrary to the intent and wording of subsection 216(1).
2004-009544
XXXXXXXXXX Catherine Bowen
(613) 957-8284
June 20, 2005
Dear Sir:
Re: Subsection 216(1)
This is in response to your letter dated September 15, 2004, wherein you requested our comments on whether the election under subsection 216(1) of the Income Tax Act (the "Act") is available for rental income receivable by a non-resident of Canada. We apologize for the delay in responding to your letter.
You question whether a non-resident person that has accrued rental income at the end of a taxation year will be able to file an election under subsection 216(1) of the Act in that year for that amount or will be required to wait until the subsequent taxation year in which the rent is actually received to file the election.
Written confirmation of the income tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request as described in Information Circular IC 70-6R5 dated May 17, 2002 issued by the Canada Revenue Agency. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we can provide the following general comments that may be of assistance.
The election to file a return under subsection 216(1) of the Act is only available where an amount has been paid during a taxation year to a non-resident as, on account of, in lieu of payment of or in satisfaction of, rent on real property in Canada. Since it is our view that no such amount will have been paid in respect of an amount accrued at the end of the year as rental income receivable, a return under that subsection cannot be filed for the amount accrued in the year. It can only be filed for the year in which the amount is paid. This result is consistent with the fact that the election provides a non-resident with the option of having the payments of gross rental income received in a taxation year upon which Canadian withholding tax has been withheld under paragraph 212(1)(d) of the Act be subject instead to Part I tax on the net rental income received for that year.
Our comments are provided in accordance with the practice outlined in paragraph 22 of IC 70-6R5. We trust our comments are of assistance.
Yours truly,
for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Planning Branch
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