ACCOUNTING AND RENTAL RULES FOR REAL ESTATE FOR NON-RESIDENTS OF CANADA

http://www.cra-arc.gc.ca/E/pub/tp/ic72-17r6/README.html

Below you will find tax rules concerning disposition of your real estate in Canada.

Who is a non-resident of Canada

You are a non-resident for tax purposes if you:
•normally, customarily, or routinely live in another country and are not considered a resident of Canada; or
•do not have significant residential ties in Canada; and ◦you live outside Canada throughout the tax year; or
◦you stay in Canada for less than 183 days in the tax year.

Note
If you lived outside Canada during the tax year and you are a government employee, a member of the Canadian Forces or their overseas school staff, or working under a Canadian International Development Agency (CIDA) assistance program, see Government employees outside Canada for the rules that apply to you. These rules can also apply to your dependent children and other family members.

    Rental Property

If you purchase property that you rent out, you have to file an NR6 form before the first month’s rent is received. This form allows you or your agent to remit taxes on your net estimated rental income vs. remitting 25% of your gross rental income. The NR6 form is a joint election between yourself as the owner and your agent stating that you will file a Section 216 Canadian tax return by June 30th of the following year and pay any taxes due by April 30th of the same year. The following demonstrates this further:

No NR6 Election With an NR6 Election

Gross rental income $12,000 $12,000

Monthly expenses $15,000 $15,000

Monthly tax payment due $ 250 $nil

Tax refund due $ 3,000 $nil

As you can see, this is a cash flow issue more than anything so it is very important to file this form. You will need details of your anticipated expenses in order to complete it – see detailed list below – plus the name, address and phone number of your Canadian agent.

If you have no agent, you must remit 25% of your rental income to the government by the 15th of the month following the month in which the rent was received. In other words, January you collect $1000 in rent, then by February 15, you have to pay $250 to CRA.

Section 216 Return

This is a special rental income return that is due to be filed by June 30th of the following year. I.e. your 2008 return is due June 30, 2009. If taxes are payable, they are due April 30th and interest accumulates on the amount due after this date.

The return calculates taxes due on your rental profit. Allowable expenses include:
■Advertising
■Mortgage interest (not payments)
■Property taxes
■Repairs and maintenance
■Utilities
■Office supplies (receipt books etc)
■Travel (for you to do or supervise repairs at the unit but these are limited to airfare and rental car – no hotel)