CRA forms
The NR4 Slip Explained: Paying Non Residents
25%the Part XIII tax a Canadian payer withholds from dividends, rents, royalties and other passive payments to non residents, unless a treaty lowers it.
Sources checked October 20263 min read
What Part XIII tax is
Part XIII tax is a withholding tax on certain amounts a Canadian resident pays or credits to non residents: dividends, rents, royalties, pensions and annuities, management fees, estate or trust income and some interest among them. The rate in the Income Tax Act is 25%. A tax treaty between Canada and the recipient's country often lowers it, and some payments are exempt.
The payer carries the responsibility. A Canadian company paying dividends to a shareholder abroad, or a tenant paying rent to a landlord who lives outside Canada, has to withhold the tax, remit it and report it. If the tax is not withheld, the CRA can assess the payer for it, plus a penalty of 10%, even where the money cannot be recovered from the non resident.
Key points
- Covers dividends, rents, royalties, pensions, management fees and some interest paid to non residents
- 25% withholding unless a treaty or the Act reduces it
- Remit by the 15th of the month after the payment
- NR4 slips and summary due by the end of March
Applying a treaty rate
To withhold at a reduced treaty rate, the payer needs enough recent information to be satisfied that the recipient is the beneficial owner of the income, is resident in a treaty country and is entitled to the treaty benefit. The usual way to get it is a declaration from the recipient on Form NR301, or Form NR302 for a partnership and Form NR303 for a hybrid entity.
Remitting and reporting
Late remittances draw penalties from 3% to 10% depending on how late they are, and late slips are penalized by the number of slips and the days late.
| Step | When |
|---|---|
| Withhold the tax | When the amount is paid or credited to the non resident |
| Remit it | So the CRA receives it by the 15th day of the following month |
| File NR4 slips and the summary | By the last day of March after the calendar year, or 90 days after the year end for an estate or trust |
| Give recipients their slips | By the same deadline |
Rent from Canadian property
Non resident landlords are a common case. The 25% applies to the gross rent, but the landlord can choose under section 216 to file a Canadian return and pay tax on net rental income instead, and can apply on Form NR6 to have tax withheld on the net amount through the year.
Quick answers
Do I withhold tax on rent paid to a landlord who lives abroad?
Yes. Unless the landlord has an approved Form NR6, 25% of the gross rent is withheld and remitted by the 15th of the following month.
Can the 25% be reduced?
Often. Tax treaties lower the rate for many types of income, but the payer needs a declaration such as Form NR301 to apply the treaty rate.
When are NR4 slips due?
By the last day of March after the calendar year, or 90 days after the year end for an estate or trust.
Related pages
Official sources
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Important. This article provides general educational information, not legal or tax advice for a specific business. Rules, administrative policies, rates and deadlines can change. Confirm your facts and current obligations with the responsible government agency and a qualified adviser.