Glossary
Section 216
§216 election
A Section 216 election lets a non-resident landlord file a Canadian tax return on their NET rental income — deducting expenses and paying tax at graduated rates — instead of the flat 25% on gross. Because 25% of gross is usually more than the real tax owed, electing often produces a refund.
Who it applies to: Non-residents who had 25% withheld but have deductible expenses (mortgage interest, property tax, etc.).
Key facts
- Taxed on
- Net rental income, graduated rates
- Due (with NR6)
- June 30 of the following year
- Due (without NR6)
- Within 2 years of year-end
- Result
- Usually a refund of over-withheld tax
How it works
- You file a Canadian return electing under Section 216, reporting gross rent and deductible expenses on a T776.
- Tax is computed on net income at graduated rates; the Part XIII tax already withheld is credited against it.
- If more was withheld than owed (the usual case with a mortgage), CRA refunds the difference.
Related terms
NR6
An application by a non-resident landlord and their agent to withhold Part XIII tax on NET rent instead of 25% of gross. Must be approved before the year.
Part XIII tax
Canada's flat 25% withholding tax on certain amounts paid to non-residents, including gross rent. Remitted by the payer by the 15th of the next month.
NR4
The Canadian information slip a payer or agent files each year to report gross rent paid to a non-resident and the Part XIII tax withheld on it. Due March 31.
Frequently asked questions
When is a Section 216 return due?
If you had an approved NR6 in place, the Section 216 return is due within six months of year-end (June 30). Without an NR6, you generally have two years from the end of the tax year to file and recover over-withheld tax.
Does Section 216 produce a refund?
Usually, yes. Because 25% of gross rent is typically far more than the actual tax on net income, filing a Section 216 return (after deducting expenses) commonly refunds the difference.
This definition is general information, not tax advice. See the full guide above and verify current rules with the CRA or IRS. ← Back to the glossary
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