Whether you need to file a Canadian tax return as a non-resident depends on the type of Canadian income you received. Employment income earned in Canada, business income from a Canadian business, and gains from selling Taxable Canadian Property all require you to file a T1 return. Most passive income — dividends, interest, rent, pensions, royalties — is handled entirely through 25% withholding tax at source, and no return is required unless you choose to file one to lower your tax.
Are You Actually a Non-Resident?
You qualify as a non-resident if you don’t have significant residential ties in Canada and either lived outside Canada throughout the tax year or spent fewer than 183 days in the country.1Canada Revenue Agency (CRA). Non-Residents of Canada Non-residents pay Canadian tax only on Canadian-sourced income. Residents pay on their worldwide income.
The CRA looks at your residential ties. The primary ones carry the most weight: a home available for your use in Canada, a spouse or common-law partner living there, or dependents there. Even one primary tie can be enough to classify you as a resident. Secondary ties like Canadian bank accounts, personal property, or club memberships can tip a borderline case.
If you lack significant ties but spent 183 days or more in Canada during the tax year, you’re a deemed resident and taxed on worldwide income.1Canada Revenue Agency (CRA). Non-Residents of Canada Short stays add up.
Income That Requires You to File a T1 Return
Three categories of Canadian-sourced income create a mandatory filing obligation:
- Employment income. If you performed work in Canada during the year, you generally must file a T1 to report those earnings, even if your employer is based outside Canada.
- Business income. Operating a business in Canada, judged by where your operations, assets, and customers are located, creates a filing requirement.
- Capital gains from Taxable Canadian Property. Selling certain Canadian assets, most commonly real estate, triggers both a notification obligation and a T1 filing.
The property sale is the trigger that most often surprises non-residents, so it’s worth walking through separately.
Selling Taxable Canadian Property
Taxable Canadian Property (TCP) is defined under the Income Tax Act. It includes real estate situated in Canada, shares of private Canadian corporations, and capital property used in carrying on a business in Canada. Shares of Canadian public corporations also count if you (together with related persons) owned 25% or more of any class of shares at any point during the five years before the sale.2Canada Revenue Agency (CRA). Interests in and Options on Real Property and Shares
When you sell TCP, you must notify the CRA within 10 days by filing Form T2062, even if you didn’t make a profit. This form requests a Certificate of Compliance confirming you’ve paid the estimated tax on any gain or provided adequate security. Until the buyer receives that certificate, they’re required to withhold 25% of the gross sale proceeds (50% for certain property types) and remit it to the CRA on your behalf.3Canada.ca. Disposing of or Acquiring Certain Canadian Property That withholding comes off the price you’d otherwise receive at closing.
Even after obtaining the certificate, you still file a T1 for the year of sale to report the actual gain and calculate final tax. For 2026, the capital gains inclusion rate is one-half for individuals, meaning half the gain is added to taxable income and taxed at the applicable federal rates.4Canada.ca. Capital Gains Inclusion Rate Any tax already withheld through the certificate process is credited against your final liability.
Passive Income Handled by Withholding
Most passive Canadian income going to a non-resident is subject to Part XIII withholding tax, deducted automatically by the Canadian payer before the money reaches you. The standard rate is 25% of the gross payment, and it applies to dividends, certain interest payments, rental income, pension payments, and royalties.5Canada Revenue Agency. Rates for Part XIII Tax For these income types, the withholding is your final Canadian tax obligation. No return is required.6Canada Revenue Agency (CRA). Applicable Rate of Part XIII Tax on Amounts Paid or Credited to Persons in Countries With Which Canada Has a Tax Convention
If you live in a country with a Canadian tax treaty, the rate is often reduced well below 25%. Under the Canada-U.S. treaty, for example, dividends and pension payments are typically taxed at 15%.5Canada Revenue Agency. Rates for Part XIII Tax If your Canadian payer is withholding at the full 25% when a treaty gives you a lower rate, provide them with the treaty information so they can adjust going forward.
When Filing Is Optional but Worth It: Rental Income
Rental income from Canadian real estate is one Part XIII category where the 25% gross withholding hits hard. If a property produces $30,000 in rent but $22,000 in mortgage interest, property taxes, and repairs, the standard withholding taxes you on the full $30,000. That’s $7,500 in tax on $8,000 of actual net income.
The Section 216 election lets you file a separate return and be taxed on net rental income after deducting allowable expenses.7Canada Revenue Agency (CRA). Electing Under Section 216 You use Form T1159.8Canada Revenue Agency (CRA). T4144 – Income Tax Guide for Electing Under Section 216 For most non-residents with meaningful expenses, the result is a substantial refund of tax already withheld.
You can reduce the withholding during the year rather than waiting for a refund. Your Canadian agent files Form NR6 with the CRA before January 1 of the tax year (or before the first rental payment is due). Once approved, the agent withholds 25% only on net rental income after expenses.9Canada Revenue Agency (CRA). Filing and Reporting Requirements The agent remits the tax to the CRA by the 15th of the month after each rental payment.
The deadlines matter. If you filed Form NR6 for the year, your Section 216 return is due June 30 of the following year. Without an NR6 on file, you have two years from the end of the year the rental income was paid or credited.8Canada Revenue Agency (CRA). T4144 – Income Tax Guide for Electing Under Section 216
When Filing Is Optional but Worth It: Pensions
Canadian pension and retirement income runs into the same problem: 25% withheld on the gross amount with no deductions. The Section 217 election lets you file a T1 and be taxed more like a Canadian resident on that income, which means access to the basic personal amount and other non-refundable tax credits.
Eligible income is broad. It includes Old Age Security, Canada Pension Plan and Quebec Pension Plan benefits, most employer pension payments, RRSP and RRIF withdrawals, employment insurance benefits, retiring allowances, and deferred profit-sharing plan income.10Canada.ca. Electing Under Section 217 – Who Can File
Whether the election saves money depends on your Canadian income and your worldwide income. For 2026, the federal basic personal amount is $16,452, so roughly that much income is effectively tax-free if you qualify. If your Canadian pension income is modest, the credits can wipe out most of the tax, producing a significant refund of amounts withheld. If your worldwide income is high, the progressive rates applied to your Canadian income under this election could exceed the flat 25%. Run the numbers both ways.
The Section 217 return uses the standard T1 with Schedule C and must be filed by June 30 of the year following the tax year, or the election is invalid.
How to File From Outside Canada
Non-residents use a specific tax package: the T1 General Income Tax and Benefit Return for Non-Residents and Deemed Residents, with Schedule A (Statement of World Income) and Schedule B (Allowable Amount of Federal Non-Refundable Tax Credits).11Canada Revenue Agency (CRA). Income Tax Package for Non-Residents and Deemed Residents of Canada for 2025 Non-residents generally can’t use the CRA’s electronic filing services and must submit paper returns by mail.
Where you mail it depends on where you live. Filers in the United States, United Kingdom, France, Netherlands, or Denmark send returns to the Winnipeg Tax Centre. Non-residents in all other countries mail to the Sudbury Tax Centre.12Canada Revenue Agency (CRA). Where to Mail Your Paper T1 Return
To file, you need a Social Insurance Number or an Individual Tax Number (ITN). Non-residents who never lived or worked in Canada apply for an ITN using Form T1261, which takes six to eight weeks to process.13Canada.ca. Applying for an Individual Tax Number (ITN) Apply well ahead of a filing deadline.
If you don’t have a Canadian bank account, you can pay the CRA by wire transfer from a foreign bank. All wire transfers must be sent in Canadian dollars. Make sure your bank doesn’t deduct its transfer fee from the payment itself, because that leaves you short and the CRA treats it as an underpayment.14Government of Canada. Pay at a Foreign Bank or Credit Union Through Wire Transfer After the wire, fax the payment confirmation to the CRA’s Revenue Processing Section so the payment gets matched to your account. All amounts on the return must be reported in Canadian dollars, converted at the appropriate Bank of Canada exchange rate for the transaction date.
Key Deadlines
The standard filing deadline is April 30 of the year following the tax year.1Canada Revenue Agency (CRA). Non-Residents of Canada If you or your spouse carried on a business in Canada, the filing deadline extends to June 15, but any tax owing is still due April 30.15Canada Revenue Agency (CRA). Due Dates and Payment Dates – Personal Income Tax The gap between the filing extension and the payment deadline catches many self-employed filers.
Section 216 returns follow their own schedule: due June 30 if Form NR6 was filed, or within two years otherwise. Section 217 returns must be filed by June 30 of the following year, no exceptions.
Penalties for Filing Late
If you owe tax and file late, the CRA charges 5% of the balance owing, plus 1% for each full month the return is overdue, up to 12 months.16Canada.ca. Interest and Penalties on Late Taxes – Personal Income Tax A return filed a full year late costs 17% of the unpaid balance in penalties alone.
Compound daily interest applies on top. As of Q2 2026, the prescribed rate on overdue taxes is 7% annually.17Canada Revenue Agency (CRA). Interest Rates for the Second Calendar Quarter The rate is reset quarterly. Interest starts accruing the day after the payment deadline, which is not always the same as the filing deadline.
For the T2062 Certificate of Compliance on property sales, the 10-day notification window is the one to watch. Miss it and the buyer will have already sent 25% (or 50%) of the gross proceeds to the CRA, and unwinding that adds months of paperwork on top of any penalties.