Canadian · Cross-border compliance
Non-resident withholding tax, Part XIII.
If your business pays a dividend, interest, rent, royalty or management fee to someone who does not live in Canada, the Income Tax Act usually makes you — the Canadian payer — responsible for withholding tax at source, not the recipient.
The statutory rate is 25% of the gross amount (23% for a non-resident actor's services). Interest paid to an arm's-length non-resident is generally exempt. A tax treaty can reduce the rate further, sometimes to 0%.
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How Part XIII works
Part XIII of the Income Tax Act imposes a 25% tax on the gross amount Canada pays or credits to a non-resident for certain kinds of passive income: dividends, most interest, rents, royalties, management/administration fees, and certain pension-type income. The Canadian payer is legally responsible for withholding it and remitting it to CRA — generally by the 15th of the month after the payment — and reporting it on an NR4 slip. A separate, narrower 23% rate applies specifically to a non-resident actor's acting-services income.
One real, commonly missed carve-out: interest paid to a non-resident is generally exempt from Part XIII tax when the Canadian payer deals at arm's length with the recipient (in force since 2008). Interest paid to a related, non-arm's-length non-resident — a foreign parent company or majority shareholder, for example — remains fully taxable at 25%.
A bilateral tax treaty between Canada and the recipient's country of residence can reduce the statutory rate, sometimes to 0%. This calculator computes the statutory rate only — it does not assert a country-by-country treaty rate, since those vary by country, payment type, and sometimes ownership percentage. A recipient relying on a treaty rate must file the correct NR301, NR302 or NR303 form with the payer.
Sources, last verified 25 September 2026: Canada.ca — Rates for Part XIII tax (page dated 2025-11-14), CRA T4058 — Non-Residents and Income Tax (arm's-length interest exemption).
Frequently asked questions
Who actually has to withhold this — me or the non-resident?
You, the Canadian resident making the payment. Part XIII places the withholding and remittance obligation on the payer, not the non-resident recipient. Failing to withhold can make the payer liable for the tax that should have been withheld.
Can a tax treaty reduce this?
Often, yes — sometimes to 0%. CRA's Information Circular IC76-12R8 lists the treaty rate for each treaty country by payment type. This tool intentionally does not assert those country-specific rates; check IC76-12R8 or a cross-border tax advisor for the recipient's specific country.
Is this the same as regular income tax withholding on an employee?
No. Payroll withholding for employees (CPP/EI/income tax) is an entirely different mechanism under different parts of the Act. Part XIII applies specifically to certain passive-income-type payments made to non-residents.
Estimate only — not tax advice
Computes the statutory Part XIII rate only; does not model tax-treaty-reduced rates for any specific country, which vary by country, payment type and sometimes ownership percentage. Does not model the NR301/NR302/NR303 treaty-benefit certification process. Confirm your exact withholding obligation, and any applicable treaty rate, with a cross-border tax advisor or CRA directly.