Non-resident tax in Canada applies to individuals and businesses that receive Canadian-source income while being tax residents of another country. Whether you are a Canadian citizen living abroad, a foreign investor earning rental income from a Canadian property, or a newcomer in the year you became a resident, Canada’s non-resident tax rules under the Income Tax Act and bilateral tax treaties significantly affect how much of your Canadian income reaches you after CRA’s withholding tax. Pathak Professional Corporation in Mississauga specializes in non-resident and cross-border tax for individuals, immigrants, and foreign property owners in Ontario. Call 437-872-7399.

Who Is a Canadian Tax Non-Resident?

Your residency status for Canadian tax purposes is NOT the same as your immigration status. CRA determines tax residency based on a combination of residential ties — not your passport, visa, or citizenship:

• Primary residential ties: A home available for your use in Canada; a spouse or common-law partner in Canada; dependants in Canada
• Secondary residential ties: Canadian bank accounts, Canadian driver’s licence, Canadian provincial health coverage, personal property in Canada, Canadian social ties

You are generally a Canadian tax non-resident if you cut all primary residential ties with Canada and have been living abroad. However, the determination can be complex — CRA has challenged non-residency claims where Canadian ties were maintained. If you need a formal determination, request CRA Form NR73 (Determination of Residency Status on Departure). Pathak Professional Corporation provides Canadian residency status determinations for individuals leaving and entering Canada. Call 437-872-7399.

Canadian Withholding Tax on Non-Residents — Key Rates

Canada has tax treaties with over 90 countries that typically reduce or eliminate the 25% standard withholding rate. Canada’s treaty with the United States provides the most favourable treatment — most US residents earning Canadian income benefit from significantly reduced withholding. Check the specific treaty for your country of residence.

Non-Resident Rental Income — The NR4 and Section 216 Election

If you are a non-resident of Canada who receives rental income from Canadian property (a common situation for Canadians who emigrate but keep their property), your Canadian agent or tenant is required to withhold 25% of the GROSS rent and remit it to CRA every month. This is the default rule.

NR6 Election — Withhold on Net Income Instead

Form NR6 (Undertaking to File an Income Tax Return by a Non-Resident Receiving Rent from Real Property or Receiving a Timber Royalty) allows you to elect to have your agent withhold 25% on the net rental income (after expenses) rather than gross rent. This is a significant cash flow benefit:

• Property renting for $3,000/month gross; $2,000/month in expenses (mortgage interest, taxes, insurance, management)
• Default withholding: 25% × $3,000 = $750/month
• NR6 election withholding: 25% × ($3,000 − $2,000) = 25% × $1,000 = $250/month
• Monthly cash flow improvement: $500/month = $6,000/year

The NR6 must be filed before January 1 of the year or before rental payments begin. You must also file a Section 216 return (a non-resident income tax return for rental income) within 2 years after the end of the calendar year in which the rental was received.

Section 216 Election — Recover Overwithholding

Even without the NR6, you can file a Section 216 election (T1159 return) to be taxed on NET rental income at graduated rates rather than 25% on gross. This often results in a refund if the 25% gross withholding exceeded the actual tax on net income. Section 216 returns must be filed within 2 years of the end of the calendar year.

Departure Tax — What Happens When You Leave Canada

When you become a non-resident of Canada, CRA deems you to have disposed of most of your property at fair market value on the date you departed — triggering capital gains on any unrealized gains. This is the “departure tax.”

Property subject to deemed disposition on departure:

• Shares of private and public companies
• Foreign real estate
• Investment portfolio (stocks, bonds, mutual funds, ETFs)
• RRSP — NOT deemed disposed (remains tax-deferred)
• TFSA — NOT deemed disposed (growth is still tax-free)
• Canadian real estate — NOT deemed disposed on departure (but triggers withholding on sale later)
• Principal residence — EXEMPT if using the principal residence exemption

Filing Form T1161 (List of Properties by an Emigrant of Canada) is required at departure, listing all property subject to the deemed disposition rules. The departure year T1 return must be filed to report the deemed dispositions and any actual dispositions in the year.

Newcomers to Canada — Arrival Year Tax Return

In the year you become a Canadian tax resident (as a newcomer, returning Canadian, or permanent resident), you file a T1 return for the portion of the year you were a Canadian resident. Your Canadian-source income from before your arrival date is generally NOT taxable in Canada. However:

• You report worldwide income from your arrival date onward
• You may be eligible to claim Canadian non-refundable tax credits for the full year (even if you were a non-resident for part of the year) depending on your specific circumstances
• Foreign assets worth over $100,000 CAD that you brought to Canada when you arrived must be reported on Form T1135 (Foreign Income Verification Statement) from the year after your arrival
• If you received pension or investment income from your home country before arriving in Canada, that is generally NOT included on your Canadian return

Newcomers to Mississauga commonly receive incorrect tax advice about arrival year returns — our personal tax filing team specializes in first-year Canadian tax returns for newcomers from India, the Philippines, the UK, the UAE, and across Southeast Asia. Call 437-872-7399.

Sale of Canadian Real Estate by Non-Residents — Section 116 Certificate

When a non-resident sells Canadian real estate, the buyer is required to withhold 25% of the gross proceeds and remit to CRA (or 50% if the property is depreciable property). This withholding protects CRA’s ability to collect capital gains tax from the non-resident seller.

To avoid or reduce this withholding, the non-resident seller must apply for a Section 116 Certificate BEFORE closing:

• Apply to CRA using Form T2062 (non-depreciable property) or T2062A (depreciable property)
• CRA issues a certificate authorizing a reduced withholding amount based on the estimated tax owing
• With the certificate, the buyer withholds only the amount CRA specifies (which is typically the capital gains tax owing, not 25% of gross proceeds)
• After closing, the non-resident files a Section 116 election return and pays the actual tax

Without the Section 116 certificate, the full 25% is withheld — significantly impacting proceeds at closing. For a $900,000 Mississauga condo sale, 25% withholding = $225,000 held at closing until the non-resident’s Canadian tax return is processed. Processing can take 6–18 months. Our real estate accounting team applies for Section 116 certificates to ensure non-resident sellers receive their full proceeds on schedule.

Canadian T1135 Foreign Income Verification — Non-Residents and Newcomers

Canadian residents (NOT non-residents) who hold foreign assets with a cost of over $100,000 CAD at any time in the year must file Form T1135. Newcomers to Canada are exempt from T1135 for the year they arrive, but must file starting in the FOLLOWING year for foreign assets they held at the beginning of that year. T1135 covers:

• Foreign bank and investment accounts
• Foreign real estate (not personal use property)
• Shares of foreign corporations
• Foreign pension plans (may be separately reported)

Penalties for missing T1135: $25/day (minimum $100 per form) up to $2,500. For gross negligence: up to 5% of the highest cost amount of the foreign property during the year (maximum $500,000). Our voluntary disclosure team helps newcomers with missed T1135 filings.

Frequently Asked Questions

I left Canada 3 years ago but still own a condo there — what are my tax obligations?

As a non-resident who rents out a Canadian property, your agent or tenant must withhold 25% of gross rent monthly and remit to CRA. To improve cash flow, file Form NR6 to switch to net-income withholding. After each calendar year, file a Section 216 election (T1159) within 2 years to reconcile any over- or under-withholding. When you eventually sell the property, apply for a Section 116 Certificate before closing to avoid 25% gross proceeds withholding at closing. Pathak Professional Corporation manages the full compliance cycle for non-resident Canadian property owners. Call 437-872-7399.

I recently moved to Canada from India — do I need to report my Indian income on my Canadian return?

For income earned BEFORE your arrival date in Canada, you generally do NOT include it on your Canadian return. From your arrival date onward, you report your worldwide income (including foreign employment income, rental income, and investment income) on your T1 Canadian return. Foreign income tax paid to another country (like India) may reduce your Canadian tax through the foreign tax credit on Schedule T2209. However, in the year of arrival, the exact rules for credits and exemptions can be complex — different rules apply depending on whether you lived in Canada for more than 90% of the year. Our Mississauga accountant team specializes in newcomer and immigrant tax returns. Call 437-872-7399.

What is the difference between NR4 and T4 tax slips?

A T4 (Statement of Remuneration Paid) is issued by Canadian employers to Canadian residents (or non-residents working in Canada) for employment income. An NR4 (Statement of Amounts Paid or Credited to Non-Residents of Canada) is issued to non-residents who receive Canadian-source income such as dividends, rental income, pension payments, RRSP withdrawals, or royalties. The NR4 shows the gross income paid and the non-resident withholding tax deducted. The NR4 is issued by the Canadian payor (bank, company, property manager) and reported to CRA by the payor — you use it to reconcile your non-resident tax obligations and, if filing a Section 216 or other non-resident return, to support your Canadian filing.

Can I collect CPP and OAS as a non-resident of Canada?

Yes — Canadian citizens and permanent residents who contributed to CPP are entitled to CPP retirement benefits regardless of where they live. Similarly, OAS is available to Canadians who meet the residency requirement (40 years in Canada after age 18 for full OAS). As a non-resident receiving CPP and OAS, Service Canada withholds the non-resident withholding tax — typically 25%, or a reduced treaty rate (15% for US residents receiving periodic pension income). You should receive an NR4 slip annually from Service Canada showing the gross CPP/OAS paid and the tax withheld. If your treaty country has a lower withholding rate, you can apply for the reduced rate using Form NR5. Pathak CPA helps non-resident Canadians receive the correct treaty rate on their CPP and OAS.

Non-Resident Tax Help in Mississauga

Pathak Professional Corporation provides comprehensive non-resident tax services for Ontario: NR6 elections, Section 216 returns, Section 116 certificates for property sales, departure tax returns, newcomer arrival-year returns, T1135 foreign income reporting, treaty withholding rate applications, and CRA non-residency rulings.

Call 437-872-7399 or email info@pathakcpa.ca. 48 Village Centre Place, Mississauga, Ontario L4Z 1V9.