How Non-Residents Can Reduce Canadian Rental Income Tax Through Section 216 Filing

Understanding Why Non-Residents Often Overpay Rental Income Tax

Many Canadians who move abroad are surprised to learn that earning rental income from a property back home triggers very specific tax rules. What’s even more surprising is how many non-resident landlords unknowingly overpay thousands of dollars to the Canada Revenue Agency (CRA) every year because their rental income is taxed at the default non-resident rate. The CRA requires a 25 percent withholding tax on gross rent collected, not the profit. For example, collecting $2,000 per month in rent results in $500 of mandatory withholding tax, even if the property barely breaks even after mortgage payments, insurance, and maintenance costs.

How Section 216 Filing Changes the Way Rental Income Is Taxed

Most non-residents assume this expensive withholding tax is final, but the CRA offers a powerful option that can dramatically reduce how much tax is actually owed. A Section 216 return allows non-residents to pay tax only on their net rental income rather than the gross rent collected throughout the year. This means all property-related expenses — mortgage interest, condo fees, repairs, utilities, insurance, advertising, and more — can be deducted from the rental income before tax is calculated. Once these deductions are applied, many non-residents discover that their taxable income is far lower than expected, and in some cases entirely eliminated.

How Much Non-Residents Can Save by Filing Section 216

The savings can be substantial. A non-resident who pays $6,000 in withholding tax over the year on a property that actually earns only $3,000 in net income is likely entitled to a refund of the difference. Because the CRA recalculates the tax based on profitability rather than gross revenue, a Section 216 return often results in a significant refund. This is especially true for non-residents with high mortgage interest costs, ongoing repairs, or properties that generate modest cash flow. For many, filing Section 216 becomes one of the most effective ways to keep rental income from being eaten up by unnecessary taxes.

Why Filing Section 216 Also Helps With CRA Compliance

Filing a Section 216 return is also important for maintaining accurate CRA records. Many non-residents assume that once withholding tax is submitted each month, nothing else is required. However, the withholding is only the first step. A Section 216 return ensures the CRA receives a full breakdown of income and expenses, preventing penalties, reassessments, or compliance issues later on. It also creates a complete tax history for the property, which is essential when calculating capital gains if the property is eventually sold.

Section 216 Filing Is Fully Accessible to Non-Residents Worldwide

Despite the financial benefits, many non-residents do not take advantage of Section 216 simply because they are unaware it exists. Others assume filing from abroad is complicated, but the CRA allows all required documents to be submitted electronically. Whether the property owner lives in the United States, the Middle East, Europe, Asia, or anywhere else in the world, the Section 216 return remains the most efficient and effective method for reducing Canadian rental income tax.

Why Every Non-Resident Landlord Should Consider Section 216

Non-residents looking to maximize the value of their Canadian rental property should always evaluate whether a Section 216 tax return applies to their situation. Filing ensures that rental income is taxed fairly, that all expenses are properly deducted, and that withholding tax is refunded where appropriate. With many property owners saving anywhere from a few hundred to several thousand dollars each year simply by filing, Section 216 is one of the most valuable — and often overlooked — tax options available to Canadians living abroad.

Don’t worry about sounding professional. Sound like you. There are over 1.5 billion websites out there, but your story is what’s going to separate this one from the rest. If you read the words back and don’t hear your own voice in your head, that’s a good sign you still have more work to do.

Be clear, be confident and don’t overthink it. The beauty of your story is that it’s going to continue to evolve and your site can evolve with it. Your goal should be to make it feel right for right now. Later will take care of itself. It always does.