2023-0971841C6 STEP 2023 - Q11 - Non-Resident Owning Canadian Rental Real Estate

Principal Issues: Does CRA have an administrative approach to allow for late filing (for example a voluntary disclosure process) and what are the conditions?

Position: Yes.

Reasons: CRA maintains a late-filing policy regarding section 216 that allows Non-Residents a one time opportunity to late-file their section 216 returns and have them treated as though they were filed on time. However, the policy also provides certain situations in which a late-filed section 216 return will not be accepted.

Author: Girard, Pierre
Section: 216; 220(3)

2023 STEP CRA Roundtable – June 20, 2023
QUESTION 11. Non-Resident Owning Canadian Rental Real Estate

Where a non-resident owns Canadian real estate which is rented, a 25% withholding tax applies on the gross rental income. However, an election may be made to pay tax at the non-resident’s tax rate (graduated rates for an individual for example). This election under section 216 must be made by filing a special income tax form T1159 within either 6 months or 24 months of the end of the year (6 months if form NR6 is filed to reduce withholding tax remittances).

Failing timely filing, the election cannot be made.

Does CRA have an administrative approach to allow for late filing (for example a voluntary disclosure process) and what are the conditions?

CRA Response

The CRA maintains a late filing policy regarding section 216 that allows Non-Residents a one time opportunity to late-file their section 216 returns and have them treated as though they were filed on time.

A late-filed 216 income tax return will not be accepted under this policy if:

* we have already advised the taxpayer of their responsibilities under Part XIII with respect to rental income or timber royalties earned in Canada;

* we have already initiated action because of their failure to comply with Part XIII; or

* the taxpayer has submitted and we have approved Form NR6, Undertaking to File an Income Tax Return by a Non-Resident Receiving Rent From Real Property or Receiving a Timber Royalty.

This policy is intended to encourage affected non-resident taxpayers to voluntarily come forward and correct withholding and filing deficiencies under Part XIII.

Where a taxpayer is ineligible for relief under this policy, an extension to file a subsection 216 income tax return may still be approved where the taxpayer can sufficiently demonstrate that circumstances of an extraordinary manner existed such that the taxpayer was defeated in its good faith attempts to ensure the return was filed in a timely manner.

For a fuller description of the policy, please go to: https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/competent-authority-agreements-notices/subsection-216-1-late-filing-policy.html

Pierre Girard
2023-097184

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