Non-Resident Taxation in Canada

Any person or company who collects rent on behalf of a non-resident owner is required by Revenue Canada to withhold and remit non-resident taxes of 25% of the gross income on a monthly basis. In order to claim expenses against the rental income of the property, the non-resident owner can file a tax return to claim for a refund of the taxes paid.

In an effort to assist the clients to pay less taxes up front, Crosby Property Management Ltd. agreed to act as NR6 agents to allow the owner to only pay taxes on 25% of the net income (which means rental income less projected expenses). Revenue Canada's condition to accepting the NR6 form is that the owners promise to file a Canadian tax return by June 30th of the following year to prove they do not owe taxes and if they fail to file the tax return by June 30th, Revenue Canada will assess a penalty of 25% of the gross income which is what is owing in the first place. This is now a penalty, so even though you have no net income but did not file your return by June 30th, it will be too late and the penalty is payable immediately.

By acting as the NR6 agent, Crosby Property Management Ltd. assumes liability of the penalty, should the owner not pay for it. In order to protect ourselves before we agree to act as an NR6 agent, we require the owners to appoint a local tax accountant of our choice.

The NR6 form is filed annually before the first rental payment is due and before January 1st of every year so the onus is on the owners to ensure the signed forms are returned to us on time. At the end of each taxation year, we have to file NR4 slips with Revenue Canada, which breaks down the gross income and non-resident tax remitted. We will liase with the tax accountant and ensure that they receive the year end financial statements and NR4 slips. It is up to the owners to provide additional information such as mortgage interest, etc.

The tax accountant we choose will ensure that all tax returns are hand delivered to the Revenue Canada office so that a receipt is issued.

Revenue Canada is very strict and are assessing penalties consistently for all tax returns not filed, thus to protect both the owners' and our liability we have to enforce very strict policies.

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