If you’re a non-resident earning rental income from Canadian property, you may be eligible to file a Section 216 return with the Canada Revenue Agency (CRA). This type of return allows you to report your rental income and claim deductions on expenses, potentially reducing your overall tax liability. To help you navigate this process, GTA Accounting has prepared a comprehensive checklist that outlines the information and documents we need to file your Section 216 return.
What is a Section 216 Return?
A Section 216 return is a tax return for non-residents earning rental income from Canadian properties. By filing this return, non-residents can:
- Report their net rental income (gross rental income minus eligible expenses).
- Potentially receive a tax refund if the withholding tax on gross rental income exceeds the calculated tax on net income.
Filing this return can significantly benefit non-residents, as it allows for the deduction of property-related expenses, providing substantial relief from the standard 25% withholding tax on gross rental income. This can result in a lower tax burden, ensuring you keep more of your hard-earned income.
For more information, visit the CRA’s page on Section 216 returns for non-residents.
Checklist for Filing a Section 216 Return
To file a Section 216 return for your rental property income, we need the following information and documents:
1. Proof of Non-Residency
To qualify for a Section 216 return, you must confirm your non-residency status with the CRA. Provide:
- A Certificate of Residency from your home country's tax authority indicates that you are a country resident for tax purposes.
- A copy of your passport or national ID card to establish your identity.
These documents ensure you meet the eligibility requirements for filing as a non-resident.
2. Details of Rental Property
Provide information about the Canadian rental property, including:
- The full address of the property.
- The date of purchase and the purchase price.
- Details about any joint ownership, if applicable, including the co-owner’s information and ownership percentage.
Accurate property details help calculate depreciation and other property-specific expenses.
3. Gross Rental Income
You must provide documentation of the gross rental income received during the tax year. This includes:
- Monthly or annual rental statements from property managers.
- Bank statements showing rental deposits.
- T4A-NR or NR4 slips (if issued) detailing the total income earned and taxes withheld.
These documents allow us to determine your total rental income for the tax year.
4. Property Expenses for Deduction
To calculate your net rental income, we need information about eligible expenses related to the property. Common expenses include:
- Property management fees
- Maintenance and repair costs
- Utilities and property taxes
- Mortgage interest
- Insurance premiums
- Advertising and tenant acquisition costs
Provide copies of invoices, receipts, and bank statements as proof of these expenses. Proper documentation ensures we claim all eligible deductions and reduce your taxable rental income.
5. NR4 Slips
The NR4 slip reports amounts paid or credited to non-residents of Canada and the withholding tax deducted. You should receive an NR4 slip from your property manager or tenant. Ensure that you provide:
- The original NR4 slip shows the total income and tax withheld.
- Any relevant correspondence from the CRA regarding the slip.
If you have not received an NR4 slip, inform us so we can assist with obtaining a copy.
6. Authorization to Represent (Form T1013)
You must complete Form T1013 to allow GTA Accounting to represent you during the Section 216 filing process. This authorization authorizes us to communicate directly with the CRA on your behalf, ensuring smooth handling of your tax return.
7. Banking Information for Refunds
If you are entitled to a tax refund after filing the Section 216 return, we need your banking information to process the refund. Provide:
- Your bank name and branch address.
- Your account number and institution number.
- Any relevant routing information for international transfers, if applicable.
This information ensures that any refund is deposited directly into your bank account.
How GTA Accounting Helps with Section 216 Returns
At GTA Accounting, we offer comprehensive support for non-residents filing Section 216 returns. Our services include:
- Reviewing rental income and expenses: We claim all eligible expenses, maximizing your potential refund.
- Filing accurate returns: We handle all paperwork and submissions to the CRA, reducing the risk of errors.
- Managing communication with the CRA: As your authorized representative, we handle any CRA inquiries related to your return.
Benefits of Filing a Section 216 Return
Filing a Section 216 return offers several benefits for non-resident landlords, providing you with confidence in your financial decisions:
- Reduced tax liability: By claiming property-related expenses, you pay tax only on net rental income rather than gross income.
- Potential tax refund: If the tax withheld exceeds the tax on net income, you may be eligible for a refund.
- Full compliance with CRA requirements: Filing ensures you meet all Canadian tax obligations, avoiding penalties or enforcement actions.
Conclusion
Filing a Section 216 return is a valuable opportunity for non-residents to minimize taxes on Canadian rental income. Failure to file this return can result in penalties and enforcement actions from the CRA. By following GTA Accounting’s checklist and providing the necessary information, you can ensure your return is filed accurately and on time, avoiding these consequences. Let us help you maximize your tax savings and ensure compliance with the CRA.
If you’re a non-resident with Canadian rental income and need help filing a Section 216 return, contact GTA Accounting today for expert guidance. Our team of professionals is ready to assist you in navigating the complex tax filing process and ensuring compliance with the CRA.