Non-resident withholding tax.
Tax withheld
—
Net to non-resident
—
Your breakdown
Updates live as you type| Item | Amount |
|---|
Part XIII tax is withheld at source, not filed
When a non-resident receives certain Canadian-source income, Canada collects its tax up front through withholding under Part XIII of the Income Tax Act. The default rate is 25 percent, and the Canadian payer is legally responsible for holding it back and remitting it to the CRA, then issuing an NR4 slip. This applies to passive income like dividends, rents, royalties, and pension payments. For most recipients the withholding is final: there is no Canadian return to file and no further tax to pay. This tool takes the gross Canadian-source amount and the applicable rate and returns both the tax withheld and the net that reaches the non-resident.
Tax treaties usually cut the 25 percent down
The 25 percent statutory rate is the starting point, not the typical outcome. Canada has tax treaties with most major countries, and these reduce the withholding on many income types, frequently to 10 or 15 percent. To claim the lower treaty rate the recipient generally provides the payer with a completed declaration of eligibility, after which the payer withholds at the treaty rate rather than the full 25 percent. If the payer withholds the full amount because no treaty form was on file, the non-resident can sometimes recover the excess by filing with the CRA. This tool lets you enter whatever rate applies to your situation.
A $10,000 payment at a 15 percent treaty rate
Suppose a non-resident receives $10,000 of Canadian-source income and a treaty sets the rate at 15 percent. The arithmetic is direct, but the point is who does it: the payer, before any money leaves Canada.
At 15 percent the recipient keeps $8,500. Had no treaty form been filed, the default 25 percent would have withheld $2,500 and left only $7,500, a $1,000 difference on this single payment. Over a year of recurring rents or dividends, filing the treaty declaration is clearly worth the paperwork.
Who this is for, and why residency is about facts
This calculator is for non-residents receiving Canadian-source income and for the Canadian payers, employers, property managers, brokers, and pension administrators, who are responsible for getting the withholding right. The most important thing to understand is that residency for tax is about facts, not citizenship. A Canadian citizen who has genuinely severed ties and lives abroad is taxed as a non-resident on Canadian-source income, while someone who keeps a home, a spouse, or strong ties in Canada may still be a resident taxed on worldwide income, which is a completely different regime this tool does not cover. Get the residency determination right first, because everything downstream depends on it.
The payer carries the risk, so confirm before paying
The classic mistake is a payer who withholds nothing because the recipient says they live overseas. If the treaty form is not on file, the payer is on the hook for the full 25 percent and any penalties, not the recipient. When the income type or the treaty position is unclear, especially for pensions, capital gains on Canadian property, or business income that may not even be Part XIII income, the safe move is to confirm with the CRA or a cross-border advisor before any payment leaves Canada, rather than trying to claw back over-withheld tax later. Recovering an over-withholding means filing and waiting, so it is far cheaper to get the rate right at source.
Cross-border questions
Can a non-resident landlord pay tax on net rental income instead of gross?
Yes, by election. The default is 25 percent on gross rent, which can be punishing when expenses and mortgage interest are high. By filing the proper election, a non-resident can instead pay Canadian tax on net rental income at regular graduated rates by filing a Canadian return, which usually produces a far smaller bill. This is one of the most valuable planning moves for non-resident property owners, but it requires the election and an annual return, so it trades simplicity for tax savings.
Does the withholding rate depend on the type of income?
It can. Treaties often set different rates for different income streams: a dividend article might allow 15 percent while interest is exempt and royalties sit at 10 percent, all in the same treaty. The rate you enter should match the specific income type and the relevant treaty between Canada and the recipient’s country of residence. This tool stays general by letting you input the rate directly rather than guessing the article, which keeps it accurate without inventing treaty terms that vary country by country.