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, [1981] CTC 176 (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 148

Administrative Policy

8 October 2021 APFF Roundtable, Q.3

delegation of performance of landlord’s servicing responsibilities does not affect whether its rents are from a business or property

A personal trust resident in Canada (the “Trust”) has a stand-alone operation of renting out Canadian residential and commercial buildings owned by it. Its services include taking care of electricity, heating and water, and maintenance services. For the commercial buildings, it also offers cleaning and security services. Is the Trust considered to carry on a business where all the property management services are provided by an external manager dealing at arm’s length with it and its beneficiaries?

Regarding the relevance of the external manager, CRA stated that even though in general the Trust and the Manager deal with each other at arm's length, it seems reasonable to consider that the Manager, in providing its management and services, is acting on behalf of the Trust.”

CRA then referred to IT-434R, including the statements in para. 4 that “the renting of real property by an individual … will be regarded as a business operation only when the landlord supplies or makes available to tenants services of one kind or another to such an extent that the rental operation has gone beyond the mere rental of real property,” and that, accordingly, other factors such as “[t]he size or number of properties being rented” and “the extent to which their management or supervision occupies the owner's time” are not “to be taken into account in determining if the operation is a business.” Furthermore, CRA here noted that the “Bulletin list[s] the basic services (e.g. heating, parking, laundry room, etc.) that are generally considered to be an inherent part of the rental activity,” but also referred “for example, to cleaning and protective services in respect of rented accommodation” as being additional services that may indicate that “it is possible that the landlord is carrying on a business rather than simply renting out real estate.”

Accordingly, based on the brief factual description “it would therefore be possible to consider that the Trust is carrying on a business because of the number and nature of the services offered.” CRA also stated:

[T]he fact that the Trust entrusts an external manager with the responsibility of providing some of the services it offers as a landlord will not in itself have any impact on the nature of its income.

26 November 2020 STEP Roundtable Q. 13, 2020-0847201C6 - GRE & section 216 election

a non-resident estate (using GRE graduated rates), then its residuary beneficiaries, could file under s. 216 respecting a Canadian rental property

A non-resident individual owning a Canadian rental property had filed T1 returns pursuant to the s. 216 rules. On her death, that property was deemed to be transferred to her non-resident estate (the “Estate”) at FMV, which did not distribute the rental income thereon, and the property was then distributed to her two non-resident children (Y and Z) as equal residuary capital beneficiaries, who became equal co-owners. The non-resident executors wish to designate the Estate as a graduated rate estate (“GRE”).

Can the Estate file a T3 return under s. 216; and after such distribution, can Y and Z each file a s. 216 return on 50% of the property’s rental income?

After making various assumptions, including that s. 94 does not apply to the Estate, that the Estate will not use the optional method of payment provided under s. 216(4), and that the executors would hold legal and beneficial ownership of the estate property until its distribution, and after further noting that "[t]here is no provision in the Act prohibiting an estate filing under section 216 from qualifying as a GRE [graduated rate estate]." CRA stated:

A non-resident estate could file its return of income under Part I pursuant to a section 216 election by the filing due date set out under section 216 and make the GRE designation in the return. While the Estate is a GRE, the Estate will be taxed at the graduated rates in respect of the net rental income. ...

… Provided that the section 216 requirements are satisfied, from the time they acquire beneficial ownership of the property, Y and Z could elect to file under Part I pursuant to section 216 in respect of their share of income derived from the rental property. …

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Graduated Rate Estate non-resident estate can be GRE and file s. 216 returns 222
Tax Topics - Income Tax Act - 101-110 - Section 107 - Subsection 107(2) s. 107(2) applicable to distribution by NR estate of Canadian rental property NR residuary beneficiaries 197

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 167

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… .

29 July 1997 External T.I. 9638945 - INTERACTION OF SUBSECTIONS 18(4) AND 216(1)

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.

8 November 1996 Internal T.I. 9635527 - INTERACTION SECTION 216 & SECTION 188.94

"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 61

14 July 1994 Internal T.I. 9407377 - 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.

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 805 106

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 53

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 ...


Michel Ranger, Rhonda Rudick, "Federal and Provincial Tax Considerations Relating to Non-Resident Investment in Canadian Real Estate", 2019 Conference Report (Canadian Tax Foundation), 32:1 – 39

Tax computation where s. 216(1) election (p. 32-6)

Where a section 216 election is made, income is computed as it is (in the manner set out above) to determine taxable income for business property, with one exception: losses of other years may not be applied in determining the taxable income. In such circumstances, a corporate investor should avoid claiming capital cost allowance (depreciation) in excess of the amounts required to reduce rental income to nil. It may also be possible to match revenues and expenses by filing on a cash basis. In addition, expenses that would otherwise result in a loss should be capitalized where possible. In the case of non-business property owned by a non-resident investor that makes a section 216 election, taxes arise under the Act at the statutory federal rate of 25 percent (on the basis that the 10 percent provincial abatement is not available, but the section 123.4 rate reduction applies) applicable to the taxable income in the case of corporations, and at rates up to roughly 49 percent in the case of individuals. There is no liability for provincial tax (except in Quebec), and there is no application of branch tax for corporations.

Potential preference for using a Canadian corporation where business income (p. 32-13)

[A] non-resident investor that anticipates earning business income from an investment in Canadian real estate should consider making the investment through a Canadian-resident corporation to avoid having the non-resident itself file annual Canadian income tax returns (particularly where multiple non-resident investors are involved in making the investment, either as joint venturers or through a fiscally transparent entity, such as a partnership), and pay Canadian withholding tax on dividend distributions at a predetermined reduced tax treaty rate instead of branch tax (where the non-resident is a foreign corporation), which applies whether distributions are made or not and, in certain cases, may not benefit from an otherwise available reduced tax treaty rate (such as, for example, for USLLCs with individual members).

Potential advantage of s 116 election (p. 32:14)

If the non-resident investor makes a section 216 election for the non-resident corporation to be taxed under part I as if it were a resident of Canada, the applicable income tax rate to the non-resident corporation’s net rental income (and taxable capital gains) will be the same as that which would apply to a resident of a tax treaty jurisdiction and, unlike when a Canadian corporation is used to make the investment, distributions made by the non-resident corporation will generally not be subject to Canadian dividend withholding tax or branch tax, nor will any interest paid on intercompany debt be subject to Canadian withholding tax.

Potential double taxation re rental properties in Quebec (p. 32:17-18)

[T]he deeming rule in section 12(2) of the Q TA does not have an equivalent provision in the federal regulations. Section 12(2) deems a corporation to have “an establishment in each province of Canada in which an immovable owned by the corporation and used principally for the purpose of earning or producing gross revenue that is rent is situated.” This rule [applies] … whether such income is passive in nature or constitutes business income. …

If a non-resident corporation earning passive rental income were to make an election under subsection 216(1), the rental income would become subject to federal income tax under part I as though the non-resident corporation were a resident of Canada. However, the fact that the Act does not contain a deeming provision that is equivalent to section 12(2) of the QTA results in the non-resident corporation not being considered to have any “taxable income earned in a province” for the purposes of subsection 124(1) of the Act, and therefore the non-resident corporation will not be entitled to the 10 percent federal abatement. This generally is not problematic for rental income earned from real property situated in provinces other than Quebec, since there is not any provincial income tax applicable to such income, and therefore the federal abatement is not necessary to avoid double taxation. However, since a non-resident corporation earning rental income from real property situated in Quebec will be deemed to have an establishment in Quebec under section 12(2) of the QTA, it is subject to income tax in Quebec at a rate of 11.6 percent. Since the aforementioned federal abatement under subsection 124(1) of the Act is not available, the result is that the non-resident corporation is subject to a 36.6 percent tax rate. …

[W]here a non-resident disposes of real estate situated in Quebec, which constitutes “taxable Quebec property” (TQP) (as defined in section 1094 of the QTA) as well as “taxable Canadian property” … the absence of an equivalent provision to section 12(2) of the QTA in the Income Tax Regulations results in a certain degree of double taxation … .

Use of headlease structure where underlying Canadian income is business income (pp. 32:29-30)

[I]f instead of operating the hotel or the assisted-living facility directly, the non-resident investor leased the property to a separate Canadian operating corporation (which may or may not be a wholly owned subsidiary of the non-resident investor) on a triple net basis (that is, under a “head lease”), the non-resident investor would effectively be earning passive property income under the head lease instead of income from the operation of a business. This would allow the non-resident investor to make an election pursuant to section 216 for the rental income to be taxed under part I, as though the non-resident investor were a Canadian resident, at a rate of 25 percent. Also, distributions of net after-tax income would not be subject to Canadian withholding tax or branch tax, and interest on intercompany debt should, in most circumstances, also be free of Canadian withholding tax. The business income earned by the Canadian operating corporation would, however, be taxed as business income in the manner described above, but in many cases the amount of net business income earned by the operating corporation would be significantly less than the amount of net rent earned under the head lease. Where the operating company is a Canadian-resident corporation and a wholly owned subsidiary of the non-resident investor, the terms and conditions of the head lease will need to respect the arm’s-length principle … .

This structure is also often used for other types of commercial properties (for example, office space or shopping centres) where there is some uncertainty as to whether the income generated from the properties is passive rental income or business income … .

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, [1995] 1 CTC 2163 (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 151
Tax Topics - Income Tax Act - Section 215 - Subsection 215(3) agent liability under s. 215(3) does not relieve principal of laibility under s. 215(1) 151

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 189

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 50

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 246

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.