Owning real estate in Canada while living abroad has tax consequences. Non-resident taxes on Canadian real estate apply whether you earn rent or sell the property at a profit. Canada taxes income sourced in the country, even if the owner lives in Malaysia, the U.S., or anywhere with a mailbox and Wi-Fi. The key factor is where the income is generated, not where the owner sleeps.
Let’s break this down:
Rental Income Rules for Non-Residents Owning Canadian Property
If you rent out your Canadian property, you’re making rental income in Canada. This income is taxed even if you live in another country.
- Withholding Tax (the default way)
- The default rule is that 25% of your gross rental income (the total amount before any expenses) must be sent to the Canada Revenue Agency (CRA).
For example, if you rent your condo for $2,000/month, 25% of that ($500) must be sent to CRA every month. This 25% is collected by the person who pays you rent (your tenant or property manager) and sent to CRA.
- The default rule is that 25% of your gross rental income (the total amount before any expenses) must be sent to the Canada Revenue Agency (CRA).
- Reduce Tax with Form NR6You might pay less tax if you use Form NR6.
- This form tells CRA that you want to be taxed on your net rental income (your income after expenses like mortgage interest, property repairs, and condo fees).
- If CRA approves it, the 25% withholding will apply only to the net income, not the full rent amount.
- To do this, you must:
- File Form NR6 before you collect rent. Have a Canadian agent (like an accountant or lawyer) help file. File a Section 216 tax return every year to report the income and expenses.
This way, you might get a refund if too much tax was taken off your rent.
Selling Canadian Real Estate as a Non-Resident
If you sell the property, you may owe tax on the profit, which is called a capital gain.
- Capital Gain = Selling Price – Purchase PriceLet’s say:
- You bought the home for $400,000.
- You sell it for $550,000.
- Our capital gain is $150,000.
In Canada, 50% of the capital gain is taxable. So you’d be taxed on $75,000 (half of $150,000).
- Certificate of Compliance (Form T2062)As a non-resident, you must:
- Tell CRA that you’re selling the property before or soon after the sale. File Form T2062 to ask for a Certificate of Compliance.
If you don’t do this:- The buyer of your property may have to hold back 25%–50% of the sale price and send it to CRA!CRA does this to make sure they get the taxes owed.
Once CRA is satisfied, they’ll send the certificate, and the buyer can release the rest of the money to you.
In some cases, the CRA will provide a “comfort letter” that instructs the lawyer acting on the transaction to hold the funds in trust rather than remitting them to the CRA. This will allow easier/quicker access to the funds once the CRA approves the forms that were filed.
Other Costs and Ontario’s Non-Resident Speculation Tax (NRST)
Even though you’re not living in Canada, you still have to pay the same property-related costs that Canadians do and sometimes more.
- Property Tax is a tax paid to the city or municipality where your property is located.
- Everyone pays it, residents or non-residents.
- It’s usually billed once or twice a year.
- Non-Resident Speculation Tax (NRST) – Ontario Only. If you buy a home in certain parts of Ontario (like Toronto or nearby areas), you may have to pay the NRST.
- This is a one-time tax when you buy the home.
- It’s 25% of the purchase price for non-residents.
- For example, if you buy a $600,000 home, NRST would be $150,000.
Some non-residents can get a refund of this tax later, like if they become a permanent resident, student, or worker in Canada.
Final Tip: File Your Taxes and Forms Properly
If you don’t file the right forms or pay the right taxes:
- You could face interest, penalties, or even legal trouble.
- The CRA might hold on to your money or not allow the sale to go through smoothly.
It’s always a good idea to work with a Canadian tax lawyer or accountant who understands the rules for non-residents. Canada’s tax system treats rent from property and profit from a sale differently, but both fall under non-resident taxes on Canadian real estate. Not filing forms like Form NR6 or the compliance certificate request can lead to withheld funds, penalties, or delays. It’s not dramatic, but it is expensive and avoidable.
For a full breakdown of Canadian tax basics, see “Introduction to Some Canadian Tax Basics.”
For the official rules on withholding tax, reporting requirements, and capital gains for non-residents, refer to the CRA’s guidance on non-resident real-estate compliance.