Non residents who receive rental income may choose to file a section 216 election return to save tax. There are specific rules regarding when the tax return is due in order for the election to be valid.
Withholding tax on gross rental income
If you withhold non-resident tax at the rate of 25% on the gross rental income, you don’t have to file a section 216 election. However, if you choose to file the election return to save tax, the return has to be filed within 2 years from the end of the year in which you received the rental income. For example, if you receive rental income in 2015, you have until December 31, 2017 to file your election return.
Withholding tax on net rental income
If the Canada Revenue Agency (CRA) approves your Form NR6 and you withhold non-resident tax on net rental income for a certain year, you must file a section 216 return for that year (even if you had a net rental loss). The return has to be filed on or before June 30 next year. If you have a balance owing, you should pay it on or before April 30. Interest charge starts from May 1.
Disposal of rental property
Whether or not you completed Form NR6, you must file a section 216 return by April 30, if both the following conditions apply:
- You disposed of rental property for which you had previously claimed capital cost allowance (CCA);
- and You are including the recapture of CCA on your return.