Canadian Rental Property for Non-Residents: What You Need to Know When You Leave Canada

This guide is for people who have left Canada — or are planning to leave — and own Canadian rental property that they intend to keep while living outside the country. It covers your Canadian tax obligations from the year of departure onward, including the emigrant return, non-resident withholding requirements, and the options available to reduce your Canadian tax exposure on rental income.

If you are a U.S. citizen or green card holder who previously lived in Canada, your U.S. return is also affected by Canadian rental income — see the section on U.S. return implications below.

In the year you sever your residential ties with Canada, you are required to file a part-year emigrant return with the CRA’s International Tax Services Office. This return establishes your departure date and calculates your Canadian tax obligations for the period you were a Canadian resident.

The emigrant return covers:

• Your worldwide income from January 1 up to your date of departure
• Canadian-source employment, business, scholarship income, and gains from the sale of taxable Canadian property after your departure date
• Non-refundable tax credits, which are limited or prorated unless you meet the 90% rule — meaning 90% or more of your worldwide income for the year was Canadian-source income

Deemed dispositions on departure One of the most significant aspects of the emigrant return is the deemed disposition rules. When you leave Canada, most of your property is treated as if it were sold at fair market value on the day before your departure — this is Canada’s version of an exit tax, designed to capture any unrealized gains that accrued during the period you were a Canadian resident.

Rental property held in Canada is generally exempt from the deemed disposition rules — it is considered “taxable Canadian property” and remains subject to Canadian tax regardless of your residency status, so the CRA does not need to capture gains on departure. However, other assets — investments, foreign property, and certain other holdings — may be subject to deemed disposition. A tax professional should review your specific asset mix before you file your emigrant return.

As a general rule, expect a tax bill in the year you leave Canada. The combination of prorated credits, potential deemed disposition gains, and the treatment of income in the year of departure typically results in a balance owing rather than a refund.

Once you have left Canada, you are required to notify any Canadian payer — including your tenant, property management company, or financial institution — that you are no longer a resident of Canada. This is not optional and it is not satisfied by simply changing your mailing address.

You must explicitly notify each payer — preferably in writing — that you are a non-resident of Canada. The recommended way to do this is by providing each payer with a completed Form NR301 (Declaration of Eligibility for Benefits Under a Tax Treaty for a Non-Resident Person). This form notifies the payer of your non-resident status and, where applicable, your eligibility for reduced withholding under a tax treaty.

Why this matters: once a payer knows you are a non-resident, they are legally obligated to withhold Part XIII tax on payments made to you. If you do not notify them and they pay you without withholding, the liability for the unwithheld tax falls on the payer — which creates significant problems for your tenant or property manager and potential penalties for you.

Under the default rules, once your tenant or property management company knows you are a non-resident, they are required to withhold 25% of all gross rent paid to you and remit that amount to the CRA under a Part XIII withholding account. This withholding happens on the gross rent — before any expenses are deducted.

At the end of each year, your property management company or tenant will provide you with an NR4 slip. This slip reports the gross rent paid to you during the year and the total Part XIII tax withheld and remitted to the CRA on your behalf. You will use this slip to claim a foreign tax credit on your return in your country of residence.

If this is where you stop — withholding at 25% of gross, receiving an NR4, no further Canadian filing — your Canadian tax obligations for the rental property are complete for the year. No Section 216 return is required unless you choose to file one.

However, for most non-residents with rental property, stopping here means overpaying Canadian tax. The default withholding is calculated on gross rent — not net income after expenses. If your rental property has significant expenses (mortgage interest, property taxes, insurance, repairs, management fees), filing a Section 216 return almost always results in a meaningful refund.

The Section 216 election allows you to file a Canadian non-resident return and pay tax on your net rental income — gross rents minus allowable expenses — rather than on gross rents. The tax withheld by your property manager or tenant throughout the year is credited against the tax calculated on the Section 216 return, and the difference is refunded.

In practical terms: if you received $24,000 in gross rent and had $10,000 in allowable expenses, your net income is $14,000. Tax at the applicable rate on $14,000 is significantly less than 25% of $24,000 — and the difference is refunded to you. In effect, the Section 216 election allows you to recover 25% of your allowable rental expenses as a refund.

What expenses are deductible on a Section 216 return? Allowable rental expenses generally include:

• Property management fees
• Mortgage interest (not principal)
• Property taxes
• Insurance
• Repairs and maintenance
• Advertising
• Professional fees (accounting, legal) related to the rental property
• Depreciation (Capital Cost Allowance) — though claiming CCA has implications for recapture on eventual sale and should be discussed with your Tax Specialist

When is the Section 216 return due? The Section 216 return is due by June 30 of the year following the tax year — for example, the Section 216 return for 2025 rental income is due June 30, 2026. This is a later deadline than the standard Canadian personal return (April 30) and applies specifically to non-residents filing under Section 216.

Is the Section 216 return worth filing? For most non-residents with rental expenses, yes — meaningfully so. The refund from a Section 216 return typically exceeds the cost of preparing it. Your AET Tax Specialist can provide a quick estimate of whether filing makes sense based on your gross rents and expenses.

See our Canadian Tax Returns page for Section 216 pricing →

Rather than having 25% withheld on gross rents all year and waiting for a Section 216 refund, there is an alternative: filing Form NR6 with the CRA before the start of the rental year. The NR6 allows your property manager or tenant to withhold tax on your estimated net income rather than gross rents — meaning less tax is withheld each month and you retain more cash throughout the year.

How the NR6 works You submit Form NR6 to the CRA, estimating your gross rents and allowable expenses for the coming year. If approved, the CRA authorizes your payer to withhold at a reduced rate based on your estimated net income rather than gross rents.

The tradeoff Filing an NR6 obligates you to file a Section 216 return by June 30 of the following year — this becomes mandatory rather than optional. Some property management companies are reluctant to participate in the NR6 arrangement because they are responsible for ensuring the Section 216 return is filed each year, and they face penalties if it is not. If you are considering the NR6 route, confirm with your property manager before proceeding.

For most non-residents, the Section 216 election in Step 4 achieves the same result as the NR6 — just with a delay. The NR6 is primarily a cash flow tool for those who prefer not to have the CRA holding 25% of gross rents throughout the year.

If you are a U.S. citizen or green card holder, your Canadian rental income must also be reported on your U.S. tax return. The interaction between the Canadian and U.S. treatment of rental income involves several considerations:

Foreign Tax Credit: Canadian Part XIII tax withheld, or tax paid on a Section 216 return, can generally be claimed as a Foreign Tax Credit on your U.S. return — reducing your U.S. tax liability on the same rental income. Your NR4 slip or Section 216 return provides the documentation needed to support the credit.

Expense treatment: The U.S. and Canadian rules for deductible rental expenses are similar but not identical. Your U.S. return will report the rental income and expenses under U.S. rules, which may differ from the Section 216 return in terms of depreciation method, expense timing, and other details.

Currency conversion: All amounts must be converted to U.S. dollars for your U.S. return. Use the applicable exchange rate for each transaction or the annual average rate, depending on your accounting method.

Coordination: If AET is preparing both your Canadian Section 216 return and your U.S. return, we will coordinate the treatment of rental income and foreign tax credits across both filings. If you are using separate preparers for each return, ensure they are aware of each other’s filings to avoid double-counting or missed credits.