Non Resident Income Tax Services Canada

Income tax return preparation for Non-Resident Individuals

Do you have to file a Canadian income tax return if you are a Non-Resident of Canada?

Some of the common situations where non-residents of Canada need to file tax returns include:

• If the CRA has requested or demanded a Non-Resident to file a tax return in Canada
• You own real estate in Canada and generate rental income. (Very common) 
• You are selling real estate or other Taxable Canadian Property (TCP) located in Canada
• You generate employment income from Canada
• You have other Canadian-sourced income 
• You performed services in Canada
• You received Canadian income subject to withholding but need a refund from CRA 

Withholding tax issues for payments to non-residents

Canadian payors are required to withhold taxes from the payments to non-residents (NR) of Canada. Withholding rates vary for different countries depending on the kind of income non-resident is generating from Canada. In some cases, withholding satisfies the tax obligation of NR in full. However, certain cases require the filing of an income tax return in Canada.

Canadian payors are held responsible for not withholding and remitting taxes from payments to NR. They are also required to file the information returns at end of the calendar year. This makes it even more important for Canadian payors to seek proper tax advice.

Rental income and real estate sale

There is a buzzing estate market offering lucrative returns in Canada. Many non-resident individuals and corporations invest in real estate.

Any rent payment to a non-resident of Canada requires a withholding of 25% of the gross amount. However, the non-resident can elect to file a tax return under section 216 of the Income Tax Act and request the withholding to be done at a reduced rate. Once approved, the payor can withhold taxes at a lower rate. This comes with an important caveat. If the non-resident does not file a tax return, the withholding agent is liable to pay the taxes at the applicable rate on gross amount.

You need to file the election to file the tax return under section 216.

Read: Rental income and taxes for non-residents of Canada

Underused Housing Tax (UHT) Returns 

Effective January 01, 2022, ‘affected owners’ of residential properties need to file and pay UHT every year.

UHT-2900 (UHT Tax returns) are due on April 30th of the following year for a given calendar year. There are steep penalties for late or missed filings. More information on UHT-2900 tax returns is available here. 

We can help you determine if you are an affected owner, possible exemptions available to you, and if needed filing of the UHT tax returns. 

Certificate of compliance for non-residents selling Canadian Real Estate

At the time of the sale of real estate property, the purchaser is required to withhold taxes from the gross amount of the sale. Further, a certificate of compliance is required as well.

Certificate of compliance can take significant time, so it’s better to start the process earlier. 

A certificate of compliance under Sec 116 can be requested even before the sale of the property as a ‘proposed disposition.’ We have prepared a useful article providing a high-level overview of the Certificate of compliance requirement for non-residents selling Canadian real properties. 

Do you need help with getting a clearance certificate from CRA? Do you need to file Sec 216 or 217 income tax returns? Get in touch today. 

Individual Income Tax Number (ITN) from CRA

If you have an income tax filing requirement and do not have a Social Insurance Number (SIN, you need to apply for an ITN from the Canada Revenue Agency. 

Please find more information on ITN for nonresidents here.

Carrying on business in Canada

If you are an individual or a corporation carrying on business in Canada, you are subject to requirements under both the Excise Tax Act (ETA) and Income Tax Act (ITA). You might be “carrying on business” in Canada even when you are not sure. 

The requirements under ETA and ITA become complex depending on the corporate structures, transactions between non-residents and residents, and tax treaties between Canada and other countries.

Voluntary Disclosure Program for Non-Residents of Canada

Sometimes, non-residents are in non-compliance with the tax laws of Canada, either intentionally or based on misguided advice. The Canada Revenue Agency runs a program Voluntary Disclosure Program (VDP) and gives an opportunity to taxpayers to come clean. The VDP offers protection from gross negligence and criminal prosecution. There is a possibility to reduce interest and penalties as well.