NR6 Form: What It Is, Who Needs It, and How to Submit It
Learn how the NR6 form helps non-resident landlords manage tax withholding in Canada, who needs to file it, and key steps for accurate submission.
Non-resident taxpayers earning rental income from Canadian properties have specific tax obligations, including filing an NR6 form. This form allows eligible individuals to request reduced withholding taxes on their rental income, improving cash flow throughout the year.
Understanding how the NR6 works and ensuring proper submission helps avoid penalties and compliance issues.
Who Must Complete the NR6
Non-residents earning rental income from Canadian properties must determine whether filing an NR6 is beneficial. By default, the Canada Revenue Agency (CRA) requires non-residents to have 25% of their gross rental income withheld at source. However, those with significant deductible expenses—such as property management fees, mortgage interest, and maintenance costs—can apply for reduced withholding based on projected net income.
Eligibility extends to non-resident individuals, corporations, and trusts receiving rental income from Canadian real estate. Co-owners must each file a separate NR6, even if they share the same property. A Canadian agent, typically a property manager or trusted representative, must be appointed to handle tax remittances. This agent must be a Canadian resident and is legally responsible for any shortfall in tax payments.
The NR6 must be submitted and approved before the first rental payment of the year for the reduced withholding rate to apply. If approval is delayed, the standard 25% withholding remains in effect until the CRA processes the request. Early submission is recommended to prevent unnecessary withholding.
Submission Steps
Filing an NR6 requires accurate estimates of rental income and expenses for the year. These projections should be based on historical data or market trends. Supporting documents, such as lease agreements and property management contracts, can help substantiate the estimates.
Both the non-resident taxpayer and their Canadian agent must sign the NR6, confirming responsibility for tax remittances. The completed form should be sent to the CRA’s non-resident tax services office. Processing times vary, so early submission is advisable.
Withholding Tax Calculations
An approved NR6 allows tax withholding based on estimated net rental income rather than gross revenue. This requires careful calculation of deductible expenses, including property management fees, mortgage interest, insurance, property taxes, and maintenance costs.
For example, if a non-resident landlord expects annual rental revenue of CAD 40,000 and deductible expenses total CAD 15,000, the projected net income is CAD 25,000. The withholding tax would then be 25% of CAD 25,000, resulting in CAD 6,250 in tax remittances instead of the standard CAD 10,000 (25% of gross revenue).
If actual income or expenses differ significantly from estimates, the taxpayer may owe additional taxes when filing the Section 216 return. Underreporting income or overestimating deductions can lead to reassessments and interest charges. Conversely, underestimating expenses may result in overpaid withholding tax, which can be refunded upon filing. Keeping detailed records and reviewing financial projections periodically can help avoid discrepancies.
Amending the NR6
If rental income or expenses change significantly after submitting an NR6, an amendment may be necessary. Unexpected vacancies, new lease agreements, or fluctuating costs can impact net income projections.
To update an NR6, a revised form must be completed with updated estimates and signed by both the non-resident taxpayer and their Canadian agent. The CRA must approve the amendment before the new withholding rate takes effect. Until approval is granted, the previously accepted withholding rate remains in place.
Potential Penalties
Failing to comply with NR6 requirements or miscalculating withholding tax can lead to financial penalties. The CRA imposes penalties for late or insufficient tax remittances, failure to obtain approval before applying reduced withholding rates, and inaccuracies in reported income and expenses.
If the required tax is not withheld and remitted on time, the CRA may impose a late payment penalty of 5% of the unpaid amount, plus 1% for each full month the payment remains outstanding, up to 12 months. Interest charges also accrue daily at prescribed rates. If the CRA finds that an NR6 was filed with misleading or inaccurate information, additional penalties may apply, including reassessments that increase tax liability. The Canadian agent is also liable for any shortfall, emphasizing the need for accurate reporting and timely payments.
Record-Keeping Essentials
Maintaining thorough records is essential for compliance and accurate tax filings. Proper documentation supports the estimates provided on the NR6 and serves as evidence in case of a CRA audit or reassessment.
Both the non-resident taxpayer and their Canadian agent should retain records of rental income, expense receipts, lease agreements, and tax remittance confirmations for at least six years, as required by the CRA. Well-organized records also simplify the annual Section 216 tax return, which reconciles actual rental income and expenses with the amounts reported on the NR6.
Using digital record-keeping solutions, such as cloud-based accounting software, can streamline expense tracking and generate reports that align with CRA requirements.