Section 216

Subsection 216(1) - Alternatives re rents and timber royalties


Pechet v. Canada, 2009 DTC 5189, 2009 FCA 341

The non-resident taxpayer received rents from Canada in 1997 to 2001 without withholding of Part XIII tax, and in 2002 filed returns under s. 216(1) in respect of those years in which she showed no Part I tax owing due to the claiming of expenses. The taxpayer was assessed for her joint liability under s. 227(8.1) for interest that had accrued, up to the date she filed her returns, on the Part XIII tax on the rents that the resident Canadian payor thereof had failed to withhold and remit.

Trudel, J.A. rejected the taxpayer's submission that, in light of the "in lieu of" wording of s. 216(1), the filing of the s. 216(1) returns displaced the withholding and remittance obligations of the resident tenant ab initio.

Words and Phrases
in lieu of

The Queen v. Merali, 88 DTC 6173, [1988] 1 CTC 320 (FCA)

The taxpayer computed his income from a rental property during the 1978-1980 taxation years, while he was a non-resident of Canada, in accordance with s. 216(1). It was held that s. 216(1)(c) did not prohibit him from carrying forward 1978 and 1979 losses on the property to his 1981 taxation year during which he had become a resident of Canada. Desjardins, J. stated: "The legal nature of the losses, as non-capital losses, was the same, before and after 1981. The non-capital losses incurred by the respondent in 1978 and 1979 were not deductible because of the bar pertaining to his election under subsection 216(1), but they still were in the nature of non-capital losses."

Arnos v. The Queen, 81 DTC 5126 (FCTD)

Before going on to find that a non-resident trust (established by a U.S. REIT) was subject to tax with respect to recapture of depreciation realized on the disposition of a Canadian rental property because the non-resident trust had not made the election under section 216, Jerome A.C.J. noted (at p. 5127) the proposition that recapture of capital cost allowance takes its character from the nature of the business income from which the capital cost allowance was deducted.

MNR v. Bessemer Trust Co., 73 DTC 5045, [1973] CTC 12 (FCA)

Income of a non-resident trust from its interest in real property in Canada, in respect of which it previously had made a s. 216 election, included recapture of depreciation on a subsequent disposition of the property.

See Also

Pechet v. The Queen, 2008 DTC 3381, 2008 TCC 208, aff'd 2009 FCA 341

The taxpayer was assessed for interest on withholding tax that a tenant of a rental property in Edmonton, Alberta owned by a partnership of which the taxpayer had a 50% partnership interest had failed to withhold from rents paid to the partnership, notwithstanding that subsequent to the taxation years in question (1997 to 2001) the taxpayer had filed income tax returns under s. 216(1) for those taxation years which showed that no Part I tax was owed by the taxpayer in respect of those years. Campbell J. stated (at para. 27):

"The legislative intent is that the resident/payor must withhold and remit amounts forthwith without taking into account or referencing in any manner the tax position of the recipient non-resident of those amounts. If the resident/payor does not withhold and remit, the non-resident will clearly be jointly and severally liable for interest in those amounts."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 227 - Subsection 227(8.1) interest accrued on retroactively eliminated s. 215 remittance amounts 142

Administrative Policy

13 February 2017 External T.I. 2015-0570011E5 - Compensation by non-resident-loss of rental income

damages can be eligible for a s. 216 election

Consistently with the surrogatum principle (or the broad meaning of "in lieu of" per Transocean), CRA found that annual compensation paid pursuant to a court order by a Canadian utility to a non-resident lessor, to compensate the lessor for lost rental income resulting from the utility’s construction of power lines on the rented lands, should be treated for Part XIII purposes as rent (subject to 25% withholding). However, CRA indicted that, by the same token, the compensation amounts also would be eligible for the s. 216 election provided that the usual tests were satisfied.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Paragraph 212(1)(d) compensation paid for lost rent subject to Pt. XIII tax 155

20 June 2005 External T.I. 2004-0095441E5 - subsection 216(1) election on rent receivable

election only available for rents received in year

Is a non-resident person that has accrued rental income at the end of a taxation year able to file an s. 216(1) election in that year for that amount or is it required to wait until the subsequent taxation year? CRA responded:

The election…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. …[A] return under that subsection…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) subject instead to Part I tax on the net rental income received for that year.

20 September 2002 Internal T.I. 2002-0146627 - Statute barred limits, Section 216S. 216; S. 152(8)

216 and normal Part I returns give rise to separate statute-barring periods

After leaving Canada, an individual filed a Part I return under s. 216(1) reporting only rental income. Assessment of that s. 216 return is now statute-barred. However, the TSO has now determined that the individual in fact was always resident in Canada and proposes to assess him for unreported employment income. Does the fact that the Part I assessment resulting from the section 216 election is statute-barred prevent the assessment of the individual on his employment income for the same taxation year? In finding that the normal reassessment period for assessing the employment income had not yet begun to run, the Agency stated:

Since the Act contemplates a return filed under subsection 216(1) being separate and distinct from any other return under Part I..., an assessment in respect of a return filed under subsection 216(1)...should be regarded as an assessment separate and distinct from any other assessment under Part respect of income from sources other than those referred to in paragraph 216(1)(b)… .

Accordingly…the normal reassessment period for an assessment in respect of a return filed under subsection 216(1)...should be separate and distinct from the normal reassessment period for any return in respect of other sources of income taxable under Part I… .

23 July 1997 T.I. 963894

Where a non-resident corporation has elected under s. 216(1), the calculation of its "outstanding debts to specified non-residents" and of its retained earnings, contributed surplus and paid-up capital will be made from the perspective of the corporation as a whole rather than taking into account the portion of the above items that relate only to the Canadian rental property.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(4) 58

8 November 1996 Memorandum 963552

"The filing of a return of income pursuant to section 216 cannot have any impact on whether or not an individual meets the 'all or substantially all' test in section 118.94. Consequently, the income which has been reported on a return of income pursuant to section 216 is not included in the non-resident's taxable income earned in Canada."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 118.94 57

14 July 1994 Memorandum 940737 (C.T.O. "Non-Resident Partner & 216 Election (7558-3)")

Brief discussion of application of s. 216 election where there is a non-resident partner in a partnership receiving rents from a MURB property.

5 January 1993 T.I. 9225705

election by partners in upper-tier partnership

Two non-resident individuals (A and B) are each a 50% partner of a non-resident general partnership (AB) which, in turn is a 50% partner in a general partnership (ABC) governed by provincial law and holding a Canadian office building generating income from property. A Canadian resident (C) is the other partner of ABC holding a 50% interest. Revenue Canada stated:

Mr. A and B would be permitted to make an election under subsection 216(1) of the Act with respect to the rental income which is allocated to them through the two-tiered partnership... .

16 July 1991 T.I. (Tax Window, No. 6, p. 14, ¶1350)

Where a non-resident trust which has made the s. 216(1) election receives a lump sum as payment of the entire three-year rent for Canadian premises, the entire amount must be included in its income in the year of receipt with no deduction as a reserve for prepaid rent.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 9 - Timing 51

9 February 1990 T.I. (July 1990 Access Letter, ¶1341)

The thin capitalization rule in s. 18(4) will have application to a non-resident corporation which makes a s. 216(1) election.

IT-393R "Election re Tax on Rents and Timber Royalties - Non-Residents"

Separate return

3. ...A subsection 216(1) return must include all Canadian source real property rent and timber royalty income that would otherwise be taxable under Part XIII for the taxation year (or part of the year in which the person was a non-resident). ... [T]he subsection 216(1) return is separate from any other return required for the year.

No carryforward of losses

4. ...[A]n election under subsection 216(1) permits a non-resident to claim those Part I deductions available to a resident in computing income under section 3. ...By virtue of paragraph 216(1)(c), no deductions are allowable in computing taxable income on a non-resident's subsection 216(1) return. Thus, Division C amounts such as non-capital losses are not deductible. ...

25% corporate rate

6. ...[R]ent reported under section 216 by a corporation is not eligible for the deduction from tax provided by subsection 124(1) and is not subject to tax by any province or territory whose corporate income taxes are collected by the Government of Canada. Income reported under section 216 by a corporation is also not subject to "branch tax" under section 219 ...

Subsection 216(4) - Optional method of payment

See Also

Stellwaag v. The Queen, 2013 DTC 1106 [at 573], 2013 TCC 111

deadline not extended

The taxpayers filed s. 216(4) undertakings in respect of their 2007 taxation year, but did not file returns until 21 July 2013. D'Auray J found that the taxpayers were late for the six-month deadline period, and that the Minister was entitled to refuse to process their returns (although the Minister did have the discretion under s. 220(3) to extend the deadlines). The wording in s. 216(4) does not allow for a "liberal interpretation" of the deadline.

Curragh Inc. v. The Queen, 94 DTC 1894 (TCC)

s. 216 does not relieve payor of liability

In response to a submission that s. 216(4) seems to assume that a Canadian agent of a non-resident will receive rents or royalties on behalf of the non-resident free of withholding tax, Mogan TCJ. stated (p. 1898) that:

"... if the Canadian agent is required to pay certain expenses and, his non-resident principal exercises the option in section 216 to pay Part I tax, there is nothing in section 216 which relieves the initial Canadian payor of his obligation to withhold and remit under subsection 215(1). The possibility that the agent may have a cash shortfall in paying expenses is a problem which must be solved with his principal."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 215 - Subsection 215(1) agent's s. 215(3) liability does not relieve taxpayer's s. 215(1) liability 139
Tax Topics - Income Tax Act - Section 215 - Subsection 215(3) 139

Administrative Policy

22 July 2014 External T.I. 2014-0520701E5 - Meaning of "any amount" in subsection 216(4)

deductible expenses include financing expenses not paid by agent

A Canadian agent remits rent to a non-resident who owns rental property in Canada. They have filed an NR6. Rental property expenses are paid both by the agent and the non-resident. Is withholding calculated based on: the gross rental income less any expenses paid directly by the agent; or the non-resident's net rental income, taking into account rental expenses that have been paid by either the agent or the non-resident? CRA stated:

[T]he phrase "any amount …available out of the rent or royalty received for remittance to the non-resident person" refers to the amount of rent or royalty collected, less any allowable expenses paid by the agent. Such expenses would include items such as repairs and maintenance, property taxes, property management fees, and interest and service charges relating to the financing of the property in question. However, as noted in Guide T4144…once a Form NR6 has been approved, [CRA] will allow the agent to withhold and remit tax based on the amount that is the non-resident's net rental income. Thus…the agent could take into account allowable expenses paid by the non-resident. …[T]he agent will need to ensure that it has received all the necessary information from the non-resident... .

…[T]he agent would remit the tax by the 15th day of the month following the month an amount is paid or credited to the agent or other person on behalf of the person entitled to the payment.

7 February 2014 Internal T.I. 2013-0506151I7 - Section 216 returns and interest

accrual of interest until filing of s. 216(4) return

After an agent of a non-resident was assessed for failing to withhold and remit Part XIII tax on rental collections paid to the non-resident as required by s. 215, the non-resident and agent submitted a s. 216(4) undertaking within six months of the year end. The timely-filed return showed nil taxes. The Part XIII tax was then reassessed to remove the initial amount that was not withheld. How much interest should be removed?

In finding that interest on the withholding amount accrued only up to the time at which the s. 216 elective filing was made (but with interest continuing to accrue on any arrears interest), CRA stated (after discussing Pechet, 2008 TCC 208, aff'd 2009 FCA 341):

For purposes of calculating Part XIII interest, the day upon which the subsection 216(4) filing was made is effectively the "the day of payment of the amount to the Receiver General" as per subsection 227(8.3). Such an interpretation is coherent with the purpose of section 215, as it recognizes the obligation to withhold and remit is not extinguished retroactively and thus the accrued interest on the Part XIII tax remains payable.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 227 - Subsection 227(8.3) accrual of interest until filing of s. 216(4) return 179

T4061 NR4 - Non-Resident Tax Withholding, Remitting, and Reporting - 2015

effective date

Although we accept Form NR6 throughout the year, the effective date for withholding on the net amount will be the first day of the month in which we receive the form. You have to withhold tax on any gross rental income paid or credited to a non-resident before that date. In all situations, when Form NR6 is filed, you still have to report the gross amount of rental income for the entire year on an NR4 slip and use exemption code "H."

T4144 "Income Tax Guide for Electing Under Section 216 - 2015"

withholding reduction after NR6 approval/no loss utilization

You should send us Form NR6 on or before January 1, of each year, or before the first rental payment is due. Your agent must continue to withhold non-resident tax on the gross rental income until we approve, in writing, your Form NR6. ...

After we approve your Form NR6, your agent can withhold non-resident tax at the rate of 25% on your net rental income (that is the amount of rental income available after the rental expenses have been paid). ...

If we approved your Form NR6 for the year and you do not file your section 216 return by the due date, you will be subject to non-resident tax on your gross rental income. If the correct amount of this tax was not withheld at source, we will issue a non-resident tax assessment to your agent. ...

You cannot use a loss you report on your section 216 return to reduce income on another Canadian return for 2015 or any prior or future tax year. As well, you cannot apply this loss to a section 216 return for any prior or future year.

27 March 2013 External T.I. 2012-0450491E5 - Election under s. 216

tenant not generally expected to withhold

Where a Canadian-resident tenant pays rent to a partnership having one or more non-resident partners, those non-residents may elect under s. 216(4), so that "upon the Form NR6 being approved, the agent shall collect the gross rent from the tenant and remit the necessary amount from the rent on behalf of the non-resident," i.e., "withhold non-resident tax at the rate of 25% on the net rental income (i.e. the amount of rental income available after rental expenses have been paid)." CRA further stated:

Notwithstanding the appointment of the agent, the Act technically does not release the tenant from the requirement to withhold Part XIII tax. However…CRA would not expect a tenant to withhold Part XIII tax except in limited situations (e.g., where the tenant is aware…that the agent may not withhold and remit the required tax).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 212 - Subsection 212(13.1) - Paragraph 212(13.1)(b) full withholding on rents paid to non-Canadian partnership with some resident partners 44

19 January 2012 External T.I. 2011-0414341E5 F - Déf revenu brut location Partie XIII

election permits withholding only on net amount remitted by agent-manager to NR owner

A Canadian-resident "Manager" agrees to provide rental management services to the non-resident owner (the "Owner") of an immovable located in Canada. Under the terms of the agreement, the payments to the Owner are set at 50% of the rental income from the building less commissions paid to travel agencies. Is Part XIII tax applicable to such sums actually paid by the Manager to the Owner (which are property income rather than business income to it) or to the gross rents received by the Manager on behalf of the Owner (i.e. 100% of the amounts collected from the lessees)?

Where … an amount on which an income tax is payable under Part XIII was paid to an agent for or on behalf of the non-resident person who is entitled to payment without the tax having been deducted or withheld, subsection 215(3) provides that it is then the responsibility of the agent to deduct or withhold the Part XIII tax payable in respect of the amount received on behalf of the non-resident. Since the requirements imposed by subsection 214(1) remain applicable in such a case, it follows that the amount from which the agent is required to withhold 25% is the gross amount of the rents collected by the agent for or on behalf of the non-resident. In such a case, the non-resident person and the agent may, however, make the election under subsection 216(4) so ​​that the Part XIII withholding tax applies only to the amount available out of the rent for remittance to the non-resident (i.e. the gross amount of the rent received by the agent less the related expenses).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Paragraph 212(1)(d) agent-manager required to withhold on gross rent rather than net rent remitted absent s. 216(4) election 238

90 C.R. - Q60

The Canadian agent must undertake to file a return and pay the balance of tax should the non-resident fail to do so, but there is no requirement for the agent to hold back additional monies in excess of the undertaking on the NR6 form.

89 C.M.TC - Q.18

no CCA deduction/timing

Non-cash items such as CCA are not eligible deductions. The reduction in withholding will only take effect from the date the NR6 is received.

87 C.R. - Q.89

cash expenses recognized

Non-cash expenses, such as CCA, are not eligible deductions, whereas normal non-capitalized expenses relating to repairs, property taxes, management fees and interest and service charges respecting the financing of the property, are deductible.

86 C.R. - Q.83

deductions determined on month-by-month basis

The required deductions and remittances may not necessarily be based on 1/12 of the net rental, but may depend on the amount available to the non-resident on each payment date.

81 C.R. - Q.48

Cdn lessee itself the agent

Where the Canadian lessee signs the form NR6 as agent of the non-resident, thereby agreeing to pay any tax liability should the non-resident not fulfill his undertaking, RC will normally not challenge such an arrangement.


Jack Bernstein, "Nonresident Investment in Canadian Real Estate", Tax Notes International, Vol. 31, No. 3, 21 July 2003, p. 249.


NR6 - Undertaking to File and Income Tax Return by a Non-Resident Receiving Rent from Real or Immovable Property or Receiving a Timber Royalty for tax year

  • Your agent must continue to withhold and remit non-resident tax based on the gross rental income until we approve a valid undertaking in writing. If a valid NR6 is approved, the non-resident withholding tax must be determined when the actual rental payment is made taking into account expenses (excluding CCA).
  • The non-resident undertakes to file an income tax return, whether there is a profit or a loss situation, under subsection 216(4) of the Canadian Income Tax Act within six months of the end of the tax year for which the undertaking is filed. Each non-resident member of a partnership who files a valid undertaking must file a separate income tax return. ...
  • The agent has to file an NR4 return before March 31 of the year after the year in which the rental income was paid or credited, or within 90 days of the fiscal year end for estates and trusts.

Subsection 216(5) - Disposition by non-resident


Deitcher v. The Queen, 79 DTC 5415, [1979] CTC 500 (FCTD)

The recapture of depreciation that is included in income under what is now s. 216(5) includes depreciation that was claimed by the non-resident person in years in which he was a resident.