While various Canadian tax filing deadlines have been extended due to COVID-19, the tax filing deadline of June 30th, 2020 for non-resident rental property owners remains the same. This deadline is fast approaching and it is critical to file on time to avoid hefty non-resident tax assessments on rental income.
For most non-resident rental property owners, the T1159 Income Tax Returns for Electing Under Section 216 (Section 216 Non-Resident Return) for the 2019 tax year are due to the Canada Revenue Agency (CRA) by June 30th, 2020. The (CRA) has two different tax filing deadlines for non-resident rental property owners – June 30th, 2020 and December 31st, 2021.
The first deadline of June 30th, 2020 is strictly imposed by the CRA for taxpayers who were approved to remit non-resident tax withholdings on their estimated net rental income. If Form NR6 was approved by the CRA for 2019, allowing you to remit reduced non-resident tax at a rate of 25% of your estimated net income, then you must file the Section 216 Tax Return by June 30th, 2020. Failing to submit the Section 216 return by the June 30th deadline results in a hefty assessment of 25% of your gross rental income being issued to your ‘Canadian Agent’ for tax purposes– even if you file the tax return late by only one day. Ultimately, your ‘Canadian Agent’ for tax withholding purposes would receive a penalty due to your non-compliance with the return filing requirements and then you’d be obligated to pay the penalty as well as associated arrears interest.
If non-resident tax withholdings were remitted to the CRA at a rate of 25% of your gross rental income then the CRA allows up to 2 years from the end of the tax year in which you earned rental income to submit your final Section 216 Tax Return, for example: for rental income earned in 2019 where 25% of gross rental income was withheld as tax you have until December 31st, 2021 to file your return.
If you are left unsure as to whether an expense is deductible on your Section 216 Tax Return, you can simply include receipts for these expenses when uploading your documents to Trowbridge’s secure portal. Upon preparation of your return, we will review to determine if this expense is allowed as a deductible item on your Section 216 return. We can then include these expenses to help reduce your overall taxable income.
Following these guidelines and adhering to the tax filing deadlines that apply to your specific situation will ensure a seamless return process and will help you avoid unexpected penalties. If you need solutions to your more complex questions on Section 216 Non-Resident Tax Returns, contact the Trowbridge team at firstname.lastname@example.org