How to File a Section 216 Tax Return: The Step-by-Step Guide for Non-Resident Landlords
Filing a Section 216 return is how non-resident landlords recover the difference between the 25% withholding tax and what they actually owe on net rental income. This guide walks through every step of the process, from gathering your NR4 slip to calculating your refund.
What Is a Section 216 Return and Why Does It Matter?
Section 216 of the Income Tax Act gives non-resident landlords the right to file a Canadian income tax return that reports rental income on a net basis rather than accepting the flat 25% withholding on gross rent as their final tax liability. Without this election, the Canada Revenue Agency treats the 25% withheld under Part XIII as the non-resident's complete Canadian tax obligation, with no recognition of the mortgage interest, property taxes, insurance, strata fees, management fees, or maintenance costs that reduce the property's actual profitability. For most non-resident landlords with typical expenses, the effective tax rate on net rental income is far lower than 25% of gross rent, which means the withholding collected throughout the year significantly exceeds the tax actually owed. The Section 216 return is the mechanism for recovering that overpayment. It is filed using Form T1159, a specialized income tax return designed specifically for non-residents electing under Section 216. The return is separate from a standard T1 General return and is processed by the CRA's International Tax Services Office in Ottawa. If you have already read our <a href='/blog/cra-withholding-tax-non-resident-landlords-canada'>complete guide to CRA withholding tax</a>, you know that the NR6 form reduces withholding during the year by allowing it to be calculated on estimated net income. The Section 216 return is the year-end reconciliation: it compares what was actually withheld against the tax owed on actual net income, and the CRA refunds the difference.
Filing Deadlines: The Dates You Cannot Afford to Miss
The filing deadline for a Section 216 return depends on whether an NR6 form was in place during the tax year. If you filed an NR6 and the CRA approved it, you are legally obligated to file your Section 216 return by June 30th of the year following the taxation year. For example, rental income earned during 2025 must be reported on a Section 216 return filed no later than June 30, 2026. This is not optional: the NR6 approval letter explicitly states that filing the Section 216 return is a condition of the reduced withholding arrangement. If you fail to file by June 30th, the CRA can void the NR6 retroactively and reassess the withholding at 25% of gross rent for the entire year, creating a substantial tax bill plus interest and penalties. If you did not have an NR6 in place, you still have the right to elect under Section 216, but the deadline is more generous. Under Section 216(4) of the Act, a non-resident can file a Section 216 return within two years of the end of the taxation year. For 2025 income, that means December 31, 2027. However, there is an important distinction between the filing deadline and the payment deadline. Regardless of whether you had an NR6, any balance owing on your Section 216 return is due by April 30th of the year following the taxation year. If you file after April 30th but before your applicable deadline, you will owe interest on any unpaid balance from April 30th onward. The practical takeaway is straightforward: aim to file as early as possible after receiving your NR4 slip from your property manager, which should arrive by the end of March.
Documents You Need Before You Start
Before you or your accountant can prepare the Section 216 return, you need to assemble a specific set of documents. The most important is the NR4 slip, which your Canadian property manager or agent files with the CRA and provides to you by March 31st of the following year. The NR4 reports the total gross rental income paid to you during the year and the total tax withheld and remitted to the CRA on your behalf. Income code 26 on the NR4 identifies the payment as rental income from real property. You will also need a detailed income and expense statement for each rental property, which your property manager should provide as part of their year-end reporting. This statement should itemize every category of expense: property taxes, insurance premiums, mortgage interest, strata or condo fees, management fees, maintenance and repair costs, advertising, legal fees, and any other deductible amounts. Supporting receipts and documents are essential: your mortgage interest statement from the lender, property tax notices from the municipality, insurance policy renewal showing the premium, strata fee statements, and invoices or receipts for all repairs and maintenance work. You will need your Social Insurance Number, Individual Tax Number, or Temporary Tax Number for identification on the return. If you do not have a Canadian tax number, you can apply for an Individual Tax Number using CRA Form T1261. Finally, if you want your refund deposited directly to a Canadian bank account, have the institution number, transit number, and account number ready. For refunds sent internationally, your property manager or accountant can arrange for the cheque to be mailed to your foreign address.
Eligible Deductions: What You Can Claim on Form T776
The Section 216 return allows you to deduct the same rental expenses that a Canadian resident landlord would claim. These expenses are reported on Form T776, Statement of Real Estate Rentals, which is attached to your T1159 return. Property taxes are fully deductible for the portion of the year the property was rented or available for rent. Mortgage interest is deductible, but only the interest component of your mortgage payments, not the principal repayment. Your lender provides an annual mortgage interest statement that separates these amounts. Insurance premiums for the rental property, including landlord insurance and any umbrella liability coverage, are deductible in full. Strata or condominium fees are deductible as a current expense, though any portion of strata fees that funds a special levy for capital improvements may need to be treated differently. Property management fees charged by your management company are fully deductible, as are any leasing or tenant placement fees. Maintenance and repair costs are deductible as current expenses provided they restore the property to its original condition rather than improving it beyond its original state. Replacing a broken appliance with a comparable model is a repair; upgrading to a premium model may be partly a capital expenditure. Advertising costs for finding tenants, legal fees related to the rental operation, accounting fees for preparing the Section 216 return itself, and utilities paid by the landlord are all deductible. Capital Cost Allowance, the Canadian equivalent of depreciation, is available but optional. CCA allows you to claim a portion of the building's cost as an annual deduction, typically at a rate of 4% per year on a declining balance for most residential buildings. While CCA can reduce your taxable income to zero, it cannot create or increase a rental loss, and claiming CCA reduces your adjusted cost base, which increases the capital gain when you eventually sell the property. Most cross-border tax advisors recommend careful consideration before claiming CCA, as the tax deferral benefit must be weighed against the increased capital gains tax on disposition. For a deeper look at all available rental deductions, see our <a href='/blog/tax-deductions-rental-property-owners-canada'>guide to tax deductions for rental property owners</a>.
How the Tax Is Calculated: Federal Rates and the Non-Resident Surtax
The tax calculation on a Section 216 return differs from a standard Canadian tax return in one important way: instead of paying provincial tax, non-residents pay a federal surtax equal to 48% of basic federal tax. This surtax replaces the provincial tax component because non-residents do not reside in any Canadian province. The calculation begins with your net rental income after all deductions on Form T776. Federal tax is calculated at the graduated rates that apply to all Canadian taxpayers. For 2025, the first $57,375 of taxable income is taxed at 15%, the next portion up to $114,750 at 20.5%, and higher brackets apply above that. Most non-resident landlords with a single rental property will fall entirely within the 15% bracket. You are entitled to claim the basic personal amount as a non-refundable tax credit, which for 2025 is $16,129, reducing your federal tax by approximately $2,419. After calculating basic federal tax, the 48% non-resident surtax is added. The total of basic federal tax plus the surtax is your total tax payable. Against this amount, you credit the tax already withheld as shown on your NR4 slip. If the withholding exceeds the tax payable, the CRA refunds the difference. To illustrate with a simple example: if your net rental income is $12,000, your federal tax at 15% would be $1,800. The basic personal amount credit reduces this by $2,419, bringing federal tax to zero. With zero federal tax, the 48% surtax is also zero. Your total tax payable is zero, and the entire amount withheld during the year is refunded. This scenario is common for properties with significant mortgage interest and expenses. Use our <a href='/tools/non-resident-withholding-calculator'>Non-Resident Withholding Calculator</a> to estimate your withholding and potential refund before filing.
A Worked Example: From NR4 to Refund Cheque
Consider David, a non-resident landlord who lives in the United Kingdom and owns a townhouse in Burnaby, BC that rents for $3,200 per month. His property manager, acting as his Canadian agent, collected $38,400 in gross rent during 2025. David had an approved NR6 in place, so withholding was calculated on estimated net income. His estimated annual expenses on the NR6 were $26,400, making his estimated net income $12,000. The agent withheld 25% of $12,000 divided over 12 months, remitting $250 per month to the CRA for a total of $3,000 withheld during the year. At year-end, David's actual expenses came in at $27,600, broken down as follows: mortgage interest of $14,400, property taxes of $4,200, strata fees of $4,800, insurance of $1,500, property management fees at 8% totalling $3,072, and maintenance and repairs of $1,628 including a plumbing repair and appliance service. His actual net rental income was $38,400 minus $27,600, which equals $10,800. On his Section 216 return, David reports $38,400 in gross rental income on Form T776, deducts $27,600 in expenses, and arrives at net rental income of $10,800. Federal tax at 15% is $1,620. The basic personal amount credit of $2,419 reduces this to zero. The 48% non-resident surtax on zero federal tax is also zero. David's total tax payable is zero. Since $3,000 was withheld during the year, David receives a full refund of $3,000. His effective tax rate on $38,400 of gross rent is 0%. Had David not filed the NR6 or the Section 216 return, his withholding would have been $9,600 (25% of $38,400), and that amount would have been his final Canadian tax liability. The Section 216 return saved him $9,600 in tax on a property that produced only $10,800 in net income.
Late Filing: The Two-Year Window Under Section 216(4)
If you missed the June 30th deadline for a year in which you had an NR6, or if you simply did not know about the Section 216 election, there is still an opportunity to file. Section 216(4) of the Income Tax Act provides a two-year window from the end of the taxation year during which a non-resident can file a late Section 216 return. For the 2025 tax year, this means you have until December 31, 2027 to file. However, this late-filing provision comes with important caveats. First, the CRA's administrative policy on late filing is not automatic. If the CRA has already begun enforcement action, such as issuing a notice of assessment based on the gross withholding, the late-filing window may be more difficult to use. Second, interest charges accumulate on any balance owing from April 30th of the year following the tax year, regardless of when you actually file. Third, if you had an NR6 in place and failed to file by June 30th, the CRA may have already voided the NR6 and reassessed your withholding at 25% of gross. Filing the late Section 216 return can reverse this reassessment, but the process involves additional correspondence with the International Tax Services Office and can take several months to resolve. The practical lesson is clear: file on time whenever possible. If you have missed a deadline for a prior year, consult a cross-border tax professional immediately. The potential refund from filing a late Section 216 return almost always justifies the accounting fees, especially for properties with substantial mortgage interest and expenses.
When Filing Section 216 May Not Help
While the Section 216 election benefits the vast majority of non-resident landlords, there are uncommon situations where it may not produce a meaningful refund or could even result in additional tax owing. The most obvious case is a mortgage-free property with minimal expenses. If you own a condominium outright with no mortgage and your only expenses are strata fees, insurance, and property taxes, your net rental income will be relatively close to your gross income. In this scenario, the tax calculated on the Section 216 return at graduated rates plus the 48% non-resident surtax could approach or even exceed the 25% withholding already collected. For example, a property generating $30,000 in gross rent with only $8,000 in expenses has net income of $22,000. Federal tax at 15% is $3,300, minus the basic personal amount credit of approximately $2,419, leaving $881 in basic federal tax. The 48% surtax adds $423, for a total of $1,304. If the withholding was $7,500 (25% of gross), you would still receive a refund of $6,196, so the Section 216 return is still beneficial. It is only in the rare case of very high net income relative to gross, or where the landlord has multiple high-income Canadian properties, that the graduated rates plus surtax could approach the 25% flat rate. Another consideration is the cost of preparation. A cross-border accountant typically charges between $500 and $1,500 to prepare a Section 216 return, depending on complexity. If your expected refund is smaller than the preparation cost, the filing may not be worthwhile from a purely financial standpoint, though you should still file if you had an NR6 in place, as failure to file triggers reassessment penalties.
What Happens After You File: Processing Times and Refunds
Once your Section 216 return is submitted to the CRA's International Tax Services Office, processing typically takes eight to sixteen weeks. The CRA will issue a Notice of Assessment confirming the tax calculated, any refund owing, or any balance due. Refunds can be issued by cheque mailed to your address on file, including a foreign address, or by direct deposit to a Canadian bank account if you have set up direct deposit with the CRA. If your return is selected for review, the CRA may request supporting documentation such as copies of expense receipts, your NR4 slip, mortgage interest statements, or proof of property ownership. Responding promptly to these requests is important, as delays can extend the processing time significantly. Your property manager should be able to provide most of the requested documents from their records. If you disagree with the Notice of Assessment, you have 90 days to file a Notice of Objection. Common reasons for disagreement include the CRA disallowing certain deductions or adjusting the income amount. Having organized records and a knowledgeable accountant makes the objection process much smoother. One important note: the CRA may apply your refund against any other outstanding tax balances you have in Canada before issuing the remaining amount. If you have unfiled returns or unpaid balances from prior years, address those issues before expecting a clean refund on your Section 216 return.
Working with a Cross-Border Tax Professional
While it is technically possible to prepare a Section 216 return yourself, the interaction between Canadian tax law, non-resident surtax rules, and your home country's tax obligations makes professional assistance strongly advisable. A cross-border tax professional, typically a Chartered Professional Accountant with experience in international tax, understands how to optimize deductions on the Canadian side while ensuring you claim the appropriate foreign tax credits in your country of residence to avoid double taxation. When selecting a tax professional, look for someone who specifically advertises experience with non-resident Canadian tax returns and Section 216 filings. Ask whether they are familiar with the tax treaty between Canada and your country of residence, as this affects how your Canadian rental income and taxes paid are reported on your home country return. Preparation fees for a Section 216 return typically range from $500 to $1,500 depending on the complexity of your situation, the number of properties, and whether the accountant is also preparing your home country return. These fees are themselves tax-deductible on the following year's Section 216 return. At Prela Property Management, we maintain referral relationships with cross-border tax professionals in Metro Vancouver who specialize in non-resident landlord returns. We provide your accountant with a comprehensive year-end package including your NR4 slip, a detailed income and expense summary broken down by month, copies of all major expense receipts, mortgage interest confirmation, property tax receipts, and a record of all CRA remittances made on your behalf during the year. This documentation package is designed to give your accountant everything they need to prepare your Section 216 return efficiently and accurately. Contact us at (604) 355-5408 or visit our <a href='/non-resident'>non-resident landlord services page</a> to learn how we support the full tax compliance cycle for non-resident property owners.
Frequently Asked Questions
What form do I use to file a Section 216 return?
You file using Form T1159, Income Tax Return for Electing Under Section 216. This is a specialized return for non-residents, not the standard T1 General return used by Canadian residents. You also attach Form T776, Statement of Real Estate Rentals, to report your rental income and expenses. Both forms are available on the CRA website.
What is the deadline to file a Section 216 return?
If you had an approved NR6 form during the tax year, the deadline is June 30th of the following year. Without an NR6, you have two years from the end of the tax year to file. However, any tax balance owing is due by April 30th of the following year regardless of the filing deadline, and interest accrues on unpaid amounts after that date.
Can I file a Section 216 return if I missed the deadline?
Yes, under Section 216(4) of the Income Tax Act, you can file a late return within two years of the end of the taxation year. However, interest charges will apply on any balance owing from April 30th, and if the CRA has already begun enforcement action, the process may be more complex. Consult a cross-border tax professional if you have missed a deadline.
How much does it cost to have a Section 216 return prepared?
Cross-border accountants typically charge between $500 and $1,500 to prepare a Section 216 return, depending on the complexity of your situation and the number of properties. These preparation fees are tax-deductible on the following year's return. For most non-resident landlords, the refund received significantly exceeds the preparation cost.
How long does it take to receive a refund after filing?
The CRA's International Tax Services Office typically processes Section 216 returns within eight to sixteen weeks. Refunds can be issued by cheque to your foreign address or by direct deposit to a Canadian bank account. If your return is selected for review, processing may take longer, and the CRA may request supporting documentation.
Free Tools for BC Landlords
Try these free calculators to help with your rental property decisions:
Non-Resident Withholding Calculator
Calculate your CRA withholding tax with and without an NR6 form and estimate your potential Section 216 refund.
Cashflow Calculator
Run a full cashflow analysis on your rental property to understand your true net income after all expenses.
Cap Rate Calculator
Calculate the capitalization rate on any investment property to evaluate and compare returns.
Sources & Further Reading
The following authoritative resources were referenced in preparing this article:
- CRA - T4144 Income Tax Guide for Electing Under Section 216(Government of Canada)
- CRA - Form T1159(Government of Canada)
- CRA - Form T776 Statement of Real Estate Rentals(Government of Canada)
- CRA - Electing Under Section 216(Government of Canada)
Amir Shojaee
Founder & Managing Director
Licensed Property Manager & REALTOR • MEng, UBC
With over 9 years of experience managing rental properties across Greater Vancouver, Amir brings an analytical, investor-minded approach to property management. Every recommendation is backed by data, every process is documented, and every interaction is handled with the care your investment demands.
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