If you're a non-resident earning rental income from Canadian property, your first question is probably: "How much tax do I actually owe?" The answer isn't as straightforward as a single percentage.
The Default: 25% Withholding Tax
Under Canada's Income Tax Act, rental payments to non-residents are subject to a 25% withholding tax on gross rent.
The 25% Gross Problem
"Gross" means before any expenses. Mortgage interest, property tax, repairs—none of it matters. CRA takes 25% off the top.
But That's Not Your "Real" Tax Rate
The 25% withholding is essentially a prepayment, not necessarily your final tax bill. Canada actually taxes non-residents on rental income using graduated rates—IF you file the right forms.
Canada's Tax Rates on Net Rental Income
Non-residents who elect to file under Section 216 are taxed on NET income at these federal rates (2026):
| Taxable Income (CAD) | Federal Rate |
|---|---|
| $0 – $55,867 | 15% |
| $55,867 – $111,733 | 20.5% |
| $111,733 – $173,205 | 26% |
| $173,205 – $246,752 | 29% |
| Over $246,752 | 33% |
Real Example: The Math
Toronto condo, owner lives in Hong Kong
Income
- Annual rent: $36,000
Expenses
- Mortgage interest: $12,000
- Property tax: $4,000
- Condo fees: $6,000
- Insurance: $1,200
- Repairs: $800
- Total: $24,000
Net Income
- $36,000 - $24,000
- = $12,000
Without NR6/216
25% × $36,000 = $9,000 tax
With NR6/216
15% × $12,000 = $1,800 tax
Annual Tax Savings
$7,200
The Bottom Line
As a non-resident, you'll pay somewhere between 15-33% on your net Canadian rental income—much less than the default 25% of gross. The key is filing NR6 and Section 216.
