Canadian Withholding Tax for Non-Residents: Rates, Treaties and Filing Rules

Canadian withholding tax for non-residents is the tax Canada collects at source on passive income leaving the country. Under Part XIII of the Income Tax Act, a Canadian corporation, tenant, trust or pension plan that pays a dividend, rent, royalty, management fee or pension to a non-resident must hold back 25% of the gross amount and send it to the CRA. A tax treaty usually lowers that rate. This guide covers the payments it applies to, the treaty rates, the payer's deadlines and penalties, and how a non-resident claims money back.

What is Canadian withholding tax for non-residents?

Part XIII tax is a flat, final tax on the gross payment. CRA guide T4061 puts it in one sentence: non-residents have to pay a 25% tax on amounts that are taxable under Part XIII, and this rate can be reduced, or an exemption given, under the Income Tax Act or a bilateral tax treaty. Three features set it apart:

• It is charged on the gross amount. A $10,000 dividend attracts $2,500 at 25%, with no deductions.
• The payer is the collector. The Canadian payer withholds, remits and reports, and is assessed if it fails.
• It is normally final. Once the right amount is withheld, the non-resident files nothing in Canada on that income, apart from the section 216 (rents) and section 217 (pensions) elections covered below.

A non-resident that carries on business in Canada faces a different regime, covered in our guide to non-resident corporations in Canada.

Which payments are subject to Part XIII tax?

Guide T4061 lists the amounts a payer must withhold on: pensions, annuities, management fees, interest, dividends, rents, royalties, estate or trust income, and payments for film or video acting services. The CRA's non-residents page adds Old Age Security, CPP and QPP benefits, retiring allowances, RRSP and RRIF payments.

Payment to a non-resident	Statutory Part XIII rate	Typical Canada-US treaty rate
Dividends	25%	15%, or 5% for a company owning at least 10% of the voting stock
Interest, arm's length	Exempt under the Act (unless participating interest)	0%
Interest, non-arm's length	25%	0% (up to 15% if the interest is contingent on profits or revenue)
Rents on Canadian real property	25% of gross rent	25%, no treaty reduction; section 216 election available
Royalties	25%	10%, and 0% on copyright (other than film and television), computer software, patents and know-how
Management or administration fees	25%	Usually 0% as business profits where there is no permanent establishment in Canada
Pensions, RRSP, RRIF, annuities	25%	Periodic pension payments 15%; section 217 election available
Acting services in film or video	23% of gross	Special rules; outside this guide

Two notes. Interest paid to an arm's-length lender is exempt under the Act itself, so a Canadian company borrowing from an unrelated foreign bank withholds nothing regardless of treaty. Related-party interest stays at 25% unless a treaty cuts it. Rent has no treaty relief anywhere, because every Canadian treaty lets Canada tax income from real property situated here; the only reduction is the section 216 net-income election.

What is the withholding tax rate on dividends paid to non-residents?

The statutory rate on dividends is 25%, and it applies to every dividend a Canadian corporation pays to a non-resident shareholder. There is no eligible or non-eligible distinction; the gross-up and credit system that applies to dividends received by Canadian residents does not exist under Part XIII.

Most of Canada's treaties bring the rate down to 15% for portfolio holders and 5% for a company holding at least 10% of the voting stock or voting power. The Canada-US treaty (Article X, paragraph 2) uses exactly that split: 5% if the beneficial owner is a company which owns at least 10% of the voting stock of the payer, and 15% in all other cases. An individual shareholder never gets the 5% rate.

The reduced rate is not automatic. The payer may apply it only if it holds enough recent information to show that the payee is the beneficial owner, resident in the treaty country and eligible for treaty benefits: in practice a signed Form NR301 (non-resident persons), NR302 (partnerships with non-resident partners) or NR303 (hybrid entities such as US LLCs) on file before the dividend is paid. It lasts three years from the end of the calendar year it is signed, or until eligibility changes. Without it, the payer withholds 25% and the shareholder chases the difference through a refund claim.

How do tax treaties reduce Canadian withholding tax?

A treaty caps the rate Canada may charge a resident of the other country; where the Act already exempts the payment, the exemption stands. The rates below come from the treaty texts published by the Department of Finance and read on the day this article was written; they assume the recipient is the beneficial owner and passes the treaty's anti-avoidance tests (for the United States, the limitation-on-benefits article).

Country of the recipient	Dividends, portfolio	Dividends, company with at least 10% voting	Interest (non-arm's length)	Royalties
United States	15%	5%	0% (15% on participating interest)	10%; 0% for copyright, software, patents, know-how
United Kingdom	15%	5%	10% (arm's-length interest exempt since the 2014 protocol)	10%; 0% for copyright, software, patents
France	15%	5%	10%	10%; 0% for copyright, software, patents, know-how
Australia	15%	5%	10%	10%
Hong Kong	15%	5%	10%	10%
China	15%	10%	10%	10%
No treaty	25%	25%	25%	25%

Canada has treaties in force with more than 90 countries, and the CRA's Information Circular IC76-12R8 tells payers to check the Act first, then the treaty article, rather than rely on a summary. For a country not in this table, read that treaty's dividend, interest and royalty articles before withholding at anything other than 25%. For the US treaty beyond withholding, see our Canada-US tax treaty guide.

Worked example: a US shareholder receiving a $10,000 dividend

A Canadian corporation declares a $10,000 dividend to its US shareholder in March.

Shareholder	Rate applied	Tax withheld	Cash received
US individual, NR301 on file	15% (Article X(2)(b))	$1,500	$8,500
US corporation owning 100% of the voting stock, NR301 on file	5% (Article X(2)(a))	$500	$9,500
Either shareholder, no NR301 on file	25% statutory	$2,500	$7,500

In every row the corporation remits the tax to the CRA by April 15 and reports it on an NR4 slip by the following March 31; the shareholder's copy is its proof of Canadian tax paid for a foreign tax credit at home. In the third row, a shareholder entitled to 15% or 5% files Form NR7-R to recover the $1,000 or $2,000 over-withheld.

Who has to withhold and remit, and when?

The obligation falls on whoever pays or credits the amount: the corporation paying the dividend, the tenant or property manager paying the rent, the licensee paying the royalty. Guide T4061 extends it to any other person, including a non-resident, who pays or credits amounts taxable under Part XIII. The payer remits into a non-resident tax account (an NR number).

Obligation	Form	Deadline
Withhold the tax	None	When the amount is paid or credited
Remit to the CRA	NR76 remittance voucher or online	Received by the CRA on or before the 15th day of the month following the month of payment
Report the year's payments	NR4 slips and NR4 Summary	Last day of March following the calendar year (90 days after year end for an estate or trust)
Support a treaty rate	NR301, NR302 or NR303 from the payee	Before the first payment at the reduced rate; valid three years from the end of the year signed
Withhold on net rent instead of gross	NR6, filed by the non-resident and agent	Before January 1 or before the first rental payment of the year
Reduce withholding on pensions	NR5, filed by the non-resident	On or before October 1 or before the first payment; approval covers five tax years

An NR4 slip is required for every non-resident recipient even where a treaty exempted the payment. It is the recipient's only Canadian evidence of tax paid, which is why getting the right slip, NR4 versus T4A-NR, matters for a foreign tax credit.

What are the penalties for failing to withhold?

The CRA does not chase the non-resident for tax the payer failed to withhold; it assesses the payer. Guide T4061 sets out the consequences:

• The tax itself. The payer owes the full amount it should have withheld, whether or not it can recover it from the non-resident.
• A 10% penalty on the amount that should have been withheld, and 20% on a second or later failure in the same calendar year made knowingly or through gross negligence.
• Late-remitting penalties when the tax was withheld but sent late: 3% at one to three days, 5% at four or five, 7% at six or seven, 10% beyond seven days or where nothing was remitted.
• Late NR4 penalties starting at a flat $100 for one to five slips and rising on a per-day scale to a maximum of $7,500. Failing to give recipients their slips is a separate $25 per day, minimum $100, maximum $2,500.
• Interest at the prescribed rate, compounded daily, from the day the remittance was due.

How does a non-resident get a refund of Canadian withholding tax?

Part XIII tax is not refundable by filing an ordinary Canadian return. There are three routes.

Form NR7-R for over-withheld tax

Where the payer withheld more than the treaty allowed, usually because no NR301 was on file, the non-resident (or the payer on its behalf) files Form NR7-R, Application for Refund of Part XIII Tax Withheld. The CRA must receive it no later than two years from the end of the calendar year in which the tax was sent to the CRA, so tax remitted in 2026 is claimable until December 31, 2028. Attach the NR4 slip and proof of treaty residence.

The section 216 election for rental income

A non-resident earning rent from Canadian real property can elect under section 216 to file a separate return (Form T1159) and pay tax on net rental income after mortgage interest, property tax and other expenses, instead of 25% on the gross. The return is due within two years after the end of the year. If an NR6 was approved so withholding already ran on net rent, the return is due by June 30 of the following year, and missing that date puts the 25% on gross back on the table.

The section 217 election for pensions and similar income

Section 217 covers Old Age Security, CPP and QPP benefits, most pension and superannuation benefits, most RRSP, PRPP and RRIF income and certain retiring allowances. The non-resident is taxed on that income at the same graduated rates as a Canadian resident and gets back any excess withheld. The section 217 return must be filed by June 30 of the following year, and the CRA cannot accept a late one. To stop the over-withholding in advance, file Form NR5 by October 1 or before the first payment; an approved NR5 covers five tax years.

How is Regulation 105 different from Part XIII withholding?

Two regimes get mixed up under the name withholding tax. Regulation 105 requires anyone paying a non-resident a fee, commission or other amount for services rendered in Canada to withhold 15%, remit it by the 15th of the following month and report it on a T4A-NR slip by the last day of February. Where the services are performed in Québec, Revenu Québec adds a further 9%, covered in our Québec non-resident withholding guide.

The difference is what the money represents. Part XIII tax is final; Regulation 105 withholding is a payment on account of whatever Canadian tax the non-resident actually owes. A US company with no permanent establishment in Canada usually owes nothing, so the 15% comes back on a treaty-based T2 return with Schedules 91 and 97. Better, it can apply for a Regulation 105 waiver at least 30 days before the work starts so nothing is withheld. Management fees sit under Part XIII only when no services are performed in Canada for them; if the work is done here, Regulation 105 applies instead.

Frequently asked questions

What is the Canadian withholding tax rate for non-residents?

25% of the gross amount under Part XIII of the Income Tax Act, on dividends, rents, royalties, management fees, pensions, RRSP and RRIF payments and non-arm's-length interest. A tax treaty usually reduces it, but only if the payer holds a signed NR301, NR302 or NR303 from the recipient.

What is the Canadian dividend withholding tax for non-residents?

25% by statute. Under the Canada-US treaty it falls to 15%, or 5% when the recipient is a company owning at least 10% of the voting stock. The UK, France, Australia and Hong Kong treaties use the same 15% and 5% split; China's is 15% and 10%. Individuals never qualify for the 5% rate.

Is interest paid to a non-resident subject to Canadian withholding tax?

Generally no, when the lender deals at arm's length with the Canadian borrower and the interest is not tied to profits or revenue; the exemption is in the Act, so it applies to every country. Related-party interest is taxed at 25%, reduced to 0% for a US lender and to 10% under most other treaties.

Who withholds and remits Part XIII tax, and by when?

The person paying or crediting the amount withholds at the time of payment and remits so the CRA receives it by the 15th day of the following month. The same payer files NR4 slips and an NR4 Summary by the last day of March after the calendar year and gives each non-resident a copy.

What happens if a Canadian company does not withhold tax on payments to a non-resident?

The CRA assesses the company for the tax it should have withheld, plus a 10% penalty, rising to 20% for a second failure in the same year made knowingly or through gross negligence, plus daily compound interest. Late remittances attract 3% to 10%, and a late NR4 return starts at $100.

How does a non-resident get a refund of Canadian withholding tax?

For tax withheld above the treaty rate, file Form NR7-R within two years from the end of the calendar year the tax was remitted. For rental income, file a section 216 return within two years to be taxed on net rent. For pensions, CPP, OAS, RRSP and RRIF income, file a section 217 return by June 30 of the following year. Regulation 105 withholding on service fees is recovered through a T2 or T1 return instead.

Is Regulation 105 the same as Part XIII withholding?

No. Regulation 105 is a 15% withholding on fees for services performed in Canada, reported on a T4A-NR, and it is a prepayment rather than a final tax, so it is refundable when a treaty exempts the income. Part XIII is a final 25% tax on passive income such as dividends, rent and royalties, reported on an NR4.