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ONE OF MY NON RESIDENT CLIENT WISHS TO USE VDP ROUTE TO DECLARE CANADIAN SOURCE RENTAL INCOME SINCE YEAR 1995 TILL 2025 TAX YEAR .I TOLD HIM HE HAS TO PAY TAX @ 25% OF GROSS RENTAL INCOME PLUS SOME PENALTIES.IS IT OK TO FILE FORM 199 FOR ALL 31 YEARS OR ONLY FOR LAST 10 YEARS WILL BE SUFFICENT
SINCE 2017 HE HAS NR4 FOR CANADIAN PENSION WILL THAT BE PART OF VDP PROPOSAL ?
THANKS FOR YOUR REPLY
Response:
You are correct to be cautious here — Section 216 returns cannot be filed “through” the VDP, because Section 216 is an election, and elections are generally excluded from VDP relief.
A few key points to clarify the process:
1.VDP vs. Section 216 elections
The Voluntary Disclosures Program is intended to correct failures to report income or file required returns. It does not allow taxpayers to retroactively make or change elections under the Income Tax Act.
Since Section 216 is an elective regime (net taxation instead of 25% gross withholding), CRA does not permit a Section 216 election to be made as part of a VDP application.
2.Late-filed Section 216 returns
CRA has a separate administrative policy for accepting late-filed Section 216(1) returns, outside of VDP. This policy allows CRA, at its discretion, to accept late Section 216 filings and assess tax on net rental income, subject to conditions.
See CRA policy here:
https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/competent-authority-agreements-notices/subsection-216-1-late-filing-policy.html
Importantly:
3.How many years to file
While the rental activity dates back to 1995, in practice:
Filing Form 199 for all 31 years would generally be unnecessary and impractical.
4.NR4 pension income since 2017
Canadian pension income reported on NR4 slips is already disclosed to CRA. Provided withholding was done correctly and no Part I filing (e.g. Section 217) was required, that income is typically outside the scope of the VDP.
Bottom line:
VDP can be used to disclose unreported rental income and obtain penalty relief, but Section 216 elections must be handled separately under CRA’s late-filing policy, not within the VDP itself.
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