Owning Canadian rental property while living outside the country creates a set of tax obligations that many non-resident landlords — and their Calgary tenants — do not fully understand. Under Part XIII of the Income Tax Act, Canadian tenants who pay rent to a non-resident landlord are legally required to withhold 25% of the gross rent and remit it to CRA. This withholding obligation falls on the tenant, not the landlord — and failure to withhold can make the tenant personally liable for the unremitted tax. For Alberta real estate investors who are considering relocating abroad while retaining their Calgary rental portfolio, our rental income tax guide for Calgary landlords covers the full picture of your ongoing Canadian obligations.
A landlord is a non-resident of Canada for tax purposes if they do not have significant residential ties to Canada and are not ordinarily resident in Canada. This includes Canadian citizens who have emigrated, permanent residents who have left, and foreign nationals who own Canadian property.
The determination of residency is factual and sometimes contested. Factors include: maintenance of a Canadian home, family ties, social connections, length of time in Canada, and availability of accommodation. For practical purposes, if your landlord has told you they live abroad, or if their mailing address is a foreign country, you should assume the withholding obligation applies unless you confirm otherwise.
Under section 212 of the ITA, rents paid to non-residents are subject to a 25% withholding tax on the gross amount. The tenant must:
For a $2,000/month rent payment, the tenant would remit $500 to CRA and pay $1,500 to the landlord. The landlord would then file a Canadian tax return (Section 216 election) to claim deductions against the rental income and potentially receive a refund of some of the withheld tax.
Non-resident landlords who wish to pay tax on their net rental income (after expenses) rather than gross rents can file a Section 216 return. This is a Canadian non-resident income tax return that allows deductions for:
If the allowable deductions reduce the tax below the amount withheld at source, the landlord receives a refund. Section 216 returns are due by June 30 of the year following the rental year.
Non-resident landlords who expect their net rental income to be much lower than gross rents can apply to CRA for a Regulation 105 waiver or an authorized reduced withholding rate. This requires filing Form NR6 — an undertaking to file a Section 216 return — before the first rental payment of the year. If approved, the tenant can withhold at the net income rate rather than the full 25% gross rate.
| Approach | Withholding Base | Application Required? |
|---|---|---|
| Standard Part XIII | 25% of gross rent | No |
| NR6 Election | Net income rate (estimated) | Yes — Form NR6 before year start |
| Section 216 return | Net rental income at graduated rates | Filed annually by June 30 |
When a Canadian property manager collects rents on behalf of a non-resident landlord, the withholding obligation shifts to the property manager. The manager must withhold 25% before remitting funds to the non-resident. This is an important compliance point for property management companies — failure to withhold from non-resident landlords creates personal liability for the management firm.
Non-resident rental tax involves multiple filings, withholding remittances, NR4 slips, and potentially Section 216 returns — all with strict deadlines. Calgary real estate investors who hold property through a corporation should also explore whether a proper corporate structure in Alberta can reduce withholding friction and simplify cross-border tax compliance — and our corporate tax team can advise on the optimal ownership structure before you relocate. As an accountant for real estate investors in Calgary, Swift Accounting handles CRA registration, NR6 elections, Section 216 filings, and advises tenants and property managers on their withholding obligations. The penalties for getting this wrong fall on the tenant — book a free consultation before the problem lands in your lap.