Part XIII Withholding Explained: Canada's Non-Resident Tax
The 25 percent default, the treaty rates for U.S. residents, NR301, NR4 slips, and the elections that replace it
Reviewed by the Fairlight Accounting cross-border tax team — U.S. & Canadian Tax Desks
Part XIII tax is Canada's flat withholding tax on certain income paid to non-residents — dividends, rents, pensions, RRSP and RRIF withdrawals, and royalties. The default rate is 25 percent of the gross amount; the treaty reduces it for U.S. residents who provide Form NR301. The payer reports it on an NR4 slip, and it's usually the final Canadian tax.
On this page
Rates for U.S. residents under the treaty
| Income | Default | Treaty rate |
|---|---|---|
| Dividends (portfolio) | 25% | 15% |
| Dividends (company owning 10%+ of voting stock) | 25% | 5% |
| Arm's-length interest | Exempt domestically | Exempt |
| Related-party interest | 25% | 0% (participating interest: 15%) |
| Periodic pension and RRIF payments | 25% | 15% |
| Lump-sum RRSP or RRIF withdrawals | 25% | 25% |
| Rent (gross) | 25% | 25% — use the section 216 election for net |
| Royalties | 25% | 10%; 0% for copyright (not film/TV), software, and patent or know-how payments |
| CPP and OAS | 25% | 0% (taxed only in the U.S.) |
| Estate or trust income distributions | 25% | 15% |
| Management or administration fees | 25% | 0% if no Canadian permanent establishment (business profits) |
How it works
The non-resident files Form NR301 with each payer (bank, broker, RRIF administrator, property manager) to claim the treaty rate; without it or equivalent residence information, the payer generally withholds the full 25 percent. The payer withholds, remits by the 15th of the month after the payment, and files the NR4 slips and NR4 Summary — giving the recipient a copy — by March 31 of the following year. The U.S. resident claims the Canadian tax as a foreign tax credit on Form 1116.
When a Canadian return changes it
| Election | Effect |
|---|---|
| Section 216 | Rental income taxed on the net instead of 25 percent of gross (the T776 guide) |
| Section 217 | Pension-type income taxed at graduated rates if that's lower (the section 217 guide) |
| Refund request (NR7-R) | Recovers excess or incorrectly withheld Part XIII tax; the CRA must receive it within two years after the end of the calendar year the tax was remitted |
Frequently asked questions
What is Canada's withholding rate for non-residents?
25 percent by default; reduced by the treaty for U.S. residents with Form NR301 on file.
How much is withheld on my RRIF payments if I live in the U.S.?
15 percent on periodic payments; 25 percent on lump sums.
Can I get back Part XIII tax that was over-withheld?
Yes — through an NR7-R refund application for the wrong rate, or a section 216 or 217 return where those apply.
Is Part XIII tax creditable in the U.S.?
Yes, as a foreign tax credit on Form 1116.
Official sources
The Canada Revenue Agency explains: “As the Canadian payer or withholding agent, you are responsible for withholding and remitting Part XIII tax, and for reporting the income and withholding tax on an NR4 information return.” — Canada Revenue Agency, NR4 – Non-Resident Tax Withholding, Remitting, and Reporting, https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4061/nr4-non-resident-tax-withholding-remitting-reporting.html
The Canada Revenue Agency explains: “Completing Form NR301 is not mandatory. However, if a non-resident refuses to provide certification of beneficial ownership, residency, or eligibility for treaty benefits after being asked to do so by a payer, the full statutory rate should be withheld, under the assumption that treaty benefits do not apply.” — Canada Revenue Agency, More information on forms NR301, NR302, and NR303, https://www.canada.ca/en/revenue-agency/services/forms-publications/information-on-forms-nr301-nr302-nr303.html
Next step
Fairlight Accounting is a cross-border accounting and tax practice with a U.S. Tax Desk and a Canadian Tax Desk. Our Canadian Tax Desk handles Part XIII withholding reviews, NR301 documentation, NR7-R refund applications, and section 216 and 217 returns. See pricing or book a call.
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