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Nobody ever withheld the 25% on my Canadian rental. How bad is it?

It is a solvable problem, but act before the CRA finds you. The arrears of withholding, compound daily interest and any penalties are real, but filing the outstanding Section 216 returns re-bases the liability from 25% of gross onto net income at graduated rates, which frequently reduces the number substantially.

Who this applies to: Non-resident owners whose Canadian rent has gone unwithheld for one or more years.

Key facts
Interest runs from
The 15th of each month originally due
Relief route
Voluntary Disclosures Program
Penalty / interest relief
Form RC4288
Relief window
10 calendar years

How it works

There are two separate failures to fix: the unremitted Part XIII tax, and the missing NR4 slips and summaries that should have been filed by March 31 each year.

The CRA's Voluntary Disclosures Program exists precisely for this. Coming forward before the CRA contacts you about the issue is what preserves access to relief; once they reach you first, that route generally closes.

Separately, taxpayer relief under Form RC4288 gives the CRA discretion to cancel or waive penalties and interest. The window is limited to the ten calendar years before the year the request is made.

Where people get caught

Filing a Section 216 that shows a refund does not retroactively cure the remittance failure. Interest runs from the 15th of each month the tax was originally due, not from the date you eventually file. The two obligations are assessed separately and the non-resident tax account has to be brought current either way.

Source: CRA Guide T4144; CRA taxpayer relief provisions (Form RC4288).

Terms used here

Part XIII taxNR4Section 216

Related questions

My tenant pays me rent directly. Do I still owe non-resident withholding tax?
Yes — and the legal obligation to withhold and remit sits with whoever pays you, which usually means your tenant.
How do I get the 25% non-resident withholding tax back?
File a Section 216 return. It taxes you on net rental income at graduated rates and the CRA refunds the difference.
Who can act as my Canadian withholding agent?
Any Canadian resident. But the agent is personally liable for withholding that does not happen, so this is not a small favour to ask.

Frequently asked questions

Will the CRA waive the interest if I come forward?
It is discretionary, not automatic. The Voluntary Disclosures Program and taxpayer relief under Form RC4288 both allow the CRA to cancel or waive penalties and interest, but each request is assessed on its facts and the tax itself remains payable.
How many years back do I need to fix?
That depends on how long the property has been rented and which years remain open. Because the Section 216 election has its own time limit, some older years may no longer be electable even where the withholding liability still stands — which is a reason to get advice rather than work through it alone.

This is general information, not tax or legal advice. Rules change and your situation is specific — verify with the CRA or IRS, or with a cross-border advisor, before acting. ← All answers

BorderBird helps cross-border landlords track rent and prepare CRA NR4 and IRS Schedule E filings — see how it works.