I am completing a NR S216 tax return for a client. Are the rules of deductibility for the expenses on rental property the same as for a resident? Specifically I am wondering about being able to claim depreciation on the building. I can’t find anything online to indicate that it isn’t allowed but I am having a hard time getting through to the CRA to discuss. Thanks!
I don’t think there is any difference for deductibility of expenses for non-residents. My recollection, though, is that there are limitations on the ability to carry losses forward or apply them to prior returns.
Pretty much the same except you can’t carry losses forwards or backwards and if you claim any depreciation you can’t also claim principal residence deductions upon sale (watch for 45(2) elections). I tend not to claim depreciation on any house that was a principal residence at any point in time just to be on the safe side. Watch filing deadlines as well. If an NR6 was filed for 2019 you can not claim any expenses at all since it is past the deadline. If no NR6 was filed you are still okay to claim expenses for 2019 but not for a 2018 return.
I believe that if there was not NR6 was filed with CRA and advance tax (%25 of gross rent) was remitted to CRA, then we are still fine to file 2018 tax return. The standard period is 2 years and we are still in this period.
Akhlaq Khokhar, CPA, CGA
AKHLAQ KHOKHAR PROFESSIONAL CORPORATION
It isn’t 2 years. It’s the June 30th in the second year. So 2018 S216 's are now barred from claiming expenses. I got caught with one client on this so I am sure.
If NO NR6 filed and approved, then “within two years after the end of the year”.
If NR6 filed and approved, then "within six months after the end of the year"
The rest of S216 goes on to state how it shall be taxed.
" S 216 (1) If an amount has been paid during a taxation year to a non-resident person or to a partnership of which that person was a member as, on account of, in lieu of payment of or in satisfaction of, rent on real or immovable property in Canada or a timber royalty, that person may, within two years (or, if that person has filed an undertaking described in subsection (4) in respect of the year, within six months) after the end of the year, file a return of income under Part I for that year in prescribed form"
Thanks for all your responses! That is helpful. As the home was a principle residence I think it’s best to not claim the CCA but it’s good to know we could in a different situation.
Follow up question - does anyone who has experience know if you need to send in all receipts with the S216 return? Or would a p&l summary suffice?
You don’t need to send in either - just fill out the T776 and attach that.
Apologies - I suspect that the one I got caught on was past the two years but I thought I filed in July or August of the second year. It mustt have been July or August of the third year as that particular client went off to Dubai I think and I lost track of him for a while so I couldn’t remind him that the forms had to be filed. This was almost ten years ago I think. He was the only one I have ever had hit with this penalty.