Non-Resident Overview
There are a few things you will need to know to navigate owning rental property while being a non-resident of Canada. This video will guide you through the process.
Non-Resident Timeline
Power Properties will send you an online form and you can decide whether or not to sign an NR6.
If you sign an NR6, we will help you create and submit a budget by December 31st.
Each year, Power Properties will send you an NR4 by March 31st.
You must decide how you want to file your Non-Resident Tax Return - Through Power Properties, your accountant or yourself.
If you file your Tax Return with your accountant or by yourself, you must file it and send proof to Power Properties by May 31st, otherwise, Power Properties will file it on your behalf to meet the June 30th deadline and your filling fee will become non-refundable.
The Process
1. Decide whether or not you want to sign an NR6 Tax Form
The first decision you will need to make is whether to sign an NR6 (Non Resident Tax Form) or not. In simple terms you have two options: One, sign an NR6 or two, not sign an NR6.
If you do not sign an NR6, Power Properties is legally required to withhold and remit to Canada Revenue Agency 25% of the gross or total rental income each month. So if your rent is $2000 a month, we will withhold and remit $500 to CRA each month. At the end of the year, you will then file a non-resident tax return and claim all of your expenses. So you will likely get a refund.
If you sign an NR6 Power Properties only has to withhold and remit 25% of the net rental income or 25% of the rent after the expenses are paid. So if your rent is $2000 a month, but you have $1600 a month in expenses, we would withhold and remit to CRA $100 each month. At the end of the year, you will file a non-resident tax return and record all of your actual expenses, and you probably won’t get much of a refund.
In both options you will pay the same amount of tax each year, it just changes when you pay the taxes and changes your monthly cash flow.
For most clients, if they have a mortgage it makes sense to sign an NR6 as they need as much cash as possible to be able to make the mortgage payments, and mortgage interest, which is tax deductible is usually the largest single expense. If you don’t have a mortgage and don’t mind giving the Government of Canada your money early, then you don’t need to sign an NR6.
2. If you sign an NR6, create and submit a budget
If you sign an NR6 you will need to work with Power Properties to create a list of expected expenses for your property. Power Properties will submit this budget to the Canada Revenue Agency for approval. The signed NR6 and budget must be submitted to the CRA by December 31st, of each year. Failure to do so will result in a late filing fee and we will be required to withhold 25% of gross rent by default.
3. Power Properties will send you an NR4 Tax Form
Each year, regardless of whether you sign an NR6 or not Power Properties will issue an NR4 by March 31st. An NR4 is the non-resident equivalent of a T4 slip, it shows how much rental income you earned. The information on your NR4 is used to complete your non-resident tax return.
4. Decide how you want to file your Tax Return
Non-resident tax returns must be filed by June 30th, of each year for the previous year’s rental income. You have the option of filing this yourself, through your own accountant, or Power Properties can file this on your behalf.
5. File your Tax Return and send proof to Power Properties by May 31st
If you sign an NR6, Power Properties will withhold a refundable filing fee. The fee is refunded to you when you send Power Properties proof that you filed your non-resident tax return by May 31st of each year. If you fail to provide proof of filing by May 31st, Power Properties will file a non-resident tax return on your behalf and keep the filing fee. The reason for this is if you sign an NR6 and you fail to file a non-resident tax return, Canada Revenue Agency assesses Power Properties, not you, 25% of your gross rental income. To avoid this penalty, Power Properties files on your behalf. The May 31st deadline to provide proof of filing is non-negotiable as it provides Power Properties enough time to prepare and ensure your return is filed before the June 30th deadline. There are almost no avenues for appeal for non-residents of Canada, and Canada Revenue Agency is very strict in its application of deadlines.
The Next Steps
Power Properties will send you a form to ask whether you would like to sign an NR6 or not, and then based on your answer, you will receive an NR6 and a budget to complete as well. Additionally, Power Properties will confirm whether you would like to have Power Properties complete your non-resident tax return or if you will complete it yourself.
Once we have collected all of your answers and information, we will begin to withhold the tax each month, and you will see this on your monthly financial statements as “non-resident withholding tax”.
Congratulations again on your decision to start a new adventure in a new country, should you have any questions please don’t hesitate to reach out to our team!
