Non-Resident Tax in Canada: A Toronto Guide

Non-resident tax in Canada works on one principle: residency, not citizenship, decides what Canada can tax. A non-resident pays Canadian tax only on Canadian-source income — rent from a Toronto condo, employment carried out here, a gain on Canadian real property — usually through withholding at source rather than a return.

A Canadian resident reports worldwide income to the CRA. A non-resident reports Canadian-source income only. That single distinction drives every form, rate and deadline in this guide, and it has nothing to do with the passport you hold: a Canadian citizen living in Dubai can be a non-resident, and a foreign national who has settled in downtown Toronto is very likely a resident.

The practical consequence is that most non-residents never see a Canadian tax return at all. Canada collects its tax by making the Canadian payer withhold it before the money leaves the country — the tenant's property manager, the pension administrator, the bank, the purchaser's lawyer. The money arrives net, the obligation is already discharged, and there is nothing to file.

The exceptions are the reason this guide runs long. Some Canadian income is taxed on a return at graduated rates instead of a flat withholding. Some withholding is deliberately set too high, so a return is the only way to get the difference back. And a handful of Canadian taxes attach to the property rather than the income, which means a foreign owner of a Toronto condo can owe money in a year when the unit produced no income whatsoever.

Two more points worth settling early. A tax treaty sits on top of all of this and can reduce or eliminate a Canadian tax, but only if the payer holds the paperwork proving you qualify — most commonly a Form NR301 declaration. And provincial and municipal governments run their own taxes on non-resident ownership that the CRA has no part in, which is where Toronto buyers get the largest and least expected bills.

Residency for Canadian tax is a question of fact, not an election. The CRA weighs your residential ties to Canada, and it treats three of them as significant: a dwelling place available to you here, a spouse or common-law partner in Canada, and dependants in Canada. Any one of the three usually settles the matter on its own.

Below those sit the secondary ties, which count in combination rather than individually: personal property such as a car or furniture, social and economic connections, a provincial driver's licence, provincial health coverage, Canadian bank accounts and credit cards, memberships in Canadian clubs or professional bodies. Nobody is expected to sever all of them. The question is whether the pattern still looks like a life based in Canada.

There is one bright-line rule alongside the ties test. Someone who is not otherwise a resident but who stays in Canada for 183 days or more in a calendar year is deemed to have been a resident for the whole year. Days count as whole days regardless of the hours involved, which surprises people who commute across the border or spend a long series of short trips here.

Where two countries both claim you, the tie-breaker rules in the relevant treaty decide which one wins, working through permanent home, centre of vital interests, habitual abode and nationality in that order. If your own position is genuinely unclear, Form NR73 asks the CRA for its opinion on the date you stopped being a resident — an opinion based entirely on the facts you disclose, so it is worth having someone review the disclosure before it goes in. Our non-resident tax services for Canada start with exactly this determination, because getting it wrong makes every later filing wrong too.

Canadian-source income reaches you down one of two channels. The first is Part XIII withholding: a flat 25% deducted by the Canadian payer from passive amounts such as rent, dividends, royalties, pension payments and withdrawals from registered plans. It is a final tax. No return is filed, no expenses are deducted, and the rate applies to the gross amount.

The second is Part I tax on a return, at the same graduated federal and provincial rates a resident pays. It applies to employment income for work performed in Canada, business income earned through a Canadian permanent establishment, and taxable capital gains on taxable Canadian property — most importantly Canadian real estate.

A treaty can cut the 25% substantially, and for some payment types to nothing. The reduced rate depends on your country of residence and on what kind of payment it is, so the figure is specific to your situation rather than general. What matters procedurally is that the payer applies the treaty rate only when it holds a valid declaration of eligibility; without it, the payer is required to take the full statutory 25% and your only route to the difference is a refund claim afterwards.

This is the most common position a foreign owner of downtown Toronto real estate finds themselves in, and the default treatment is punishing. Rent paid to a non-resident is subject to 25% withholding on the gross amount, remitted by the tenant or the Canadian agent by the 15th day of the month after the rent was paid. Gross means gross: the mortgage interest, the condo fees, the property taxes and the repairs are all ignored.

On a unit renting for $3,000 a month, that is $750 a month leaving for the CRA out of rent that may be barely covering the carrying costs. The fix is a section 216 return, which taxes the net rental income at graduated rates instead and refunds the difference. Filed after the fact, it is a recovery exercise — the 25% still has to be funded through the year.

Form NR6 changes the cash flow rather than the final answer. Filed by the non-resident and a Canadian agent before the first rent payment of the year, and once the CRA approves it, withholding drops to 25% of estimated net rent. That usually turns a monthly haemorrhage into something close to nothing. The trade is a binding commitment: an approved NR6 makes the section 216 return mandatory, and it moves the deadline forward.

Two operational details decide whether this works. The agent has to be a real one: someone in Canada who receives the rent, remits the tax and answers for it, which is why most owners use a property manager or an accountant rather than a relative. And the NR6 has to be in before the year starts, because approval is not retroactive. We handle both sides through our section 216 non-resident rental return service, alongside the ordinary rental income tax return work for owners who have become residents.

Selling Canadian real property as a non-resident triggers the single most expensive procedural trap in this whole area, and it lands on the closing date. The purchaser is required to withhold 25% of the gross purchase price — not of the gain — unless the CRA has issued a certificate of compliance by then. For specified property, including depreciable property and real property that was not held as capital property, the rate is 50%.

The percentages are calculated on the sale price because, at that moment, nobody has established what the gain actually is. On a $900,000 condo bought years earlier for $600,000, the real tax on the gain might be in the region of $60,000, while the withholding is $225,000. The excess comes back, but only after a Canadian return for the year of sale is filed and assessed.

The way to avoid tying up that money is to start the clearance process before closing. You notify the CRA of the disposition — on Form T2062 for capital property, T2062A where recapture is in play — and pay or secure the tax on the estimated gain. The CRA then issues a certificate of compliance, and the purchaser's lawyer releases the holdback against it.

Certificates are not issued quickly, and the CRA's processing time has been the binding constraint on many Toronto closings. Start the file as soon as the agreement of purchase and sale is signed rather than when the lawyer asks. Our cross-border real estate tax team runs the T2062 package, the holdback correspondence and the final return as one engagement, and the real estate accounting practice covers the ownership years in between.

Employment income for duties performed in Canada is taxable here even if the employer is foreign, the contract was signed elsewhere and the pay never touches a Canadian bank. Regulation 102 requires the employer to run Canadian payroll withholding on the Canadian portion of the salary, and the employee then files a Canadian return that either recovers the excess or settles the balance.

A treaty often exempts short assignments from Canadian tax, but the exemption does not switch the withholding off by itself. Either the employee applies for a Regulation 102 waiver, or the employer obtains non-resident employer certification, which lets a qualifying foreign employer pay a qualifying non-resident employee without Canadian withholding at all. The certification route is the practical one for a company sending people here repeatedly. Our Regulation 102 payroll withholding waiver service covers both.

Independent contractors sit under a different rule. Regulation 105 requires anyone paying a non-resident for services rendered in Canada to withhold 15% of the fee. It applies to consultants, trainers, performers, engineers and speakers alike, and it applies whether or not the non-resident has any Canadian tax liability at the end of the day — the withholding is a payment on account, not a final tax.

Two related obligations catch non-resident businesses. Fees for services performed in Canada may also be a taxable supply for GST/HST purposes, which can force registration even without a Canadian presence. And a non-resident carrying on business through a Canadian permanent establishment files a corporate return regardless of whether a treaty ultimately exempts the profit — see non-resident corporation T2 returns for how that is handled.

Canadians who retire abroad usually leave Canadian retirement income behind them: Canada Pension Plan, Old Age Security, a company pension, an RRSP or a RRIF. All of it is subject to Part XIII withholding when it is paid to a non-resident, and the payer applies the reduced treaty rate only if a declaration of eligibility is on file.

For someone with modest Canadian retirement income and little else, the flat withholding can easily exceed what they would pay as a resident, because it ignores the personal credits entirely. Section 217 exists for exactly that case. The election lets a non-resident report eligible Canadian benefit payments on a Canadian return at graduated rates, and claim a refund where the calculated tax comes out below the tax withheld.

Eligible income under the election is a defined list: OAS, CPP and QPP benefits, most superannuation and pension benefits, most RRSP and RRIF payments, death benefits, employment insurance benefits, certain retiring allowances and some government assistance payments. Investment income such as dividends and interest is not on the list — the election is about benefit and pension income.

Worth checking before electing: because the election brings the income onto a return, it also brings in the surtax rules that apply to non-residents, so it does not always produce a refund. Run the numbers both ways for the year in question. The comparison is a standard part of a non-resident personal tax return, and it changes from year to year as the income mix changes.

Federal income tax is only part of the cost of owning downtown Toronto property from abroad. Ontario and the City of Toronto both run taxes aimed specifically at non-resident ownership, they are administered separately from the CRA, and they are levied on the property or the purchase rather than on income.

Ontario's Non-Resident Speculation Tax has been 25% of the purchase price since 25 October 2022 and applies across the whole province, not just the Greater Toronto Area. It hits foreign nationals, foreign corporations and taxable trustees buying residential property containing one to six family units. From 1 January 2025 the City of Toronto added a Municipal Non-Resident Speculation Tax of 10% on registrations within the city, on top of its existing municipal land transfer tax and Ontario's provincial land transfer tax.

Sitting over all of it is the federal prohibition on the purchase of residential property by non-Canadians, which currently runs to 1 January 2027 and covers census metropolitan areas — the entire GTA included. There are exceptions, and the interaction between an exception to the ban and the speculation taxes is a legal question to settle before an offer goes in, not after.

Then there is the annual charge. Toronto's Vacant Home Tax is 3% of a property's current value assessment, and the declaration is due by 30 April for the preceding year. The trap is procedural rather than financial: every owner has to declare each year even when the home is a principal residence or fully tenanted, and a property with no declaration on file is deemed vacant and billed accordingly. For an owner living overseas, a missed piece of mail is enough. The property tax picture in Toronto's downtown core goes through the assessment side in more detail.

The Underused Housing Tax was a federal annual tax aimed largely at non-resident, non-Canadian owners of vacant or underused Canadian residential property, and it obliged a great many owners to file a return even when no tax was payable. It has now been wound down: legislation implementing the change received royal assent on 26 March 2026, and affected owners do not have to file a UHT return or pay UHT for 2025 or any later calendar year.

The past is a different matter, and this is where the wind-down creates a trap rather than closing one. The filing obligation and the tax still stand for the 2022, 2023 and 2024 calendar years. An owner who never filed for those years still has outstanding returns, and the UHT's late-filing penalties for an individual owner were far larger than the tax on most properties.

If you owned Canadian residential property through any of those three years and are not certain whether returns were filed, treat it as an open item now rather than assuming the repeal cleaned it up. Voluntary correction before the CRA makes contact is materially cheaper than the alternative.

Non-residents deal with more filing deadlines than residents do, and they do not all follow the familiar 30 April date. The elections in particular have their own deadlines, and two of them cannot be extended or filed late at all.

Alongside the deadlines, two practical points. A non-resident return usually cannot be filed through the CRA's ordinary online channels and takes considerably longer to process — up to sixteen weeks, against about two weeks for a resident's online return — so a refund from over-withholding is not fast money. And a Canadian tax number is a prerequisite for most of this: an individual without a SIN needs an individual tax number, and applying for it is often the first task in the file rather than an afterthought. Our Toronto tax accountants work with non-resident owners across the city, remotely, wherever the owner happens to live.

Becoming a non-resident is itself a taxable event. On the day residency ends, most property is treated as though it had been sold at fair market value and immediately reacquired, and the resulting gain is taxed on the final Canadian return. It is known as departure tax, and it is charged on a gain nobody has received in cash.

Not everything is caught. Canadian real property, Canadian business property, registered plans such as RRSPs, TFSAs and RRIFs, and certain pension rights are excluded from the deemed disposition. What is caught is the portfolio: shares, mutual funds, foreign real estate and, for many people, shares of a private company. Where the deemed gain is large, an election allows the payment to be deferred until the property is genuinely sold, on posting acceptable security with the CRA.

The return for the year of departure is a hybrid. It reports worldwide income up to the departure date and Canadian-source income after it, prorates the credits that depend on residency, and reports the deemed dispositions. It also fixes the departure date itself, which is what every later filing depends on.

Emigration also changes the treatment of accounts you keep. A TFSA stops accruing contribution room and a contribution made while non-resident attracts a monthly penalty tax; RRSP withdrawals become subject to Part XIII withholding. Our cross-border personal tax service covers the departure year and the first non-resident years together, because the decisions in the first affect the second.

In practice, non-resident tax in Canada rarely goes wrong because someone misread a rate. It goes wrong because an obligation sat with a party who did not know they had it, and by the time it surfaced the cheap fix had expired.

The most common failure is rent collected gross for years. A tenant paying a foreign landlord directly is legally required to withhold and remit the 25%, and almost none of them do. When the CRA reconstructs the position, it assesses the tax on gross rent for every open year, plus interest, and the section 216 returns that would have taxed net rent instead may be outside the two-year window.

The second is a sale that closed without a certificate of compliance, leaving 25% or 50% of the sale price with the CRA until a return is assessed. The third is a residency position nobody documented — a departure return never filed, so on the CRA's records the person remained a resident and their worldwide income remained reportable. The fourth is a treaty rate applied by a payer who never held the declaration supporting it.

All four are fixable, and the voluntary route is consistently cheaper than the assessed one. Late section 216 returns can be filed within the window; unfiled departure returns can be filed with the deemed dispositions computed properly; the CRA's voluntary disclosures programme can address the older years. What all of that needs is an accurate residency history first, which is the starting point of any cross-border tax and accounting engagement.

Nothing in non-resident tax in Canada is complicated in isolation. The difficulty is that the pieces are held by different people — a tenant, a property manager, a purchaser's lawyer, a pension administrator, a city — and each of them acts on a default that is expensive for you. Withholding on gross rent, 25% of a sale price held back, a vacancy tax billed because a declaration was never made: all of them are defaults, and all of them are avoidable with paperwork filed before the event rather than after it.

Which means the order of operations matters more than the rates. Establish the residency position and document it. File the NR6 before the year starts. Start the certificate of compliance when the sale agreement is signed. Get the treaty declaration to the payer before the first payment. Then the returns are a formality.

We work with non-resident owners, emigrants and foreign businesses across Canada, entirely remotely, with a fixed fee agreed before any work begins and payment only after the work is done. Our personal tax filing prices cover the ordinary returns; a non-resident file is quoted once we know which of these filings applies. If you own, rent out or are selling Canadian property from abroad, or you are leaving Canada this year, speak to a professional tax accountant about your position and we will tell you exactly what you owe and when.