2018-0743891M4 Non-resident withholding tax

Principal Issues: Are Canadian payers required to withhold tax on payments to non-residents?

Position: Canadian payers have to withhold non-resident tax on certain types of income they pay or credit to non-residents of Canada.

Reasons: Legislation

Author: Carruthers, Lori
Section: 212, 217

April 12, 2018

XXXXXXXXXX

Dear XXXXXXXXXX:

The office of the Honourable Bill Morneau, Minister of Finance, sent me a copy of your correspondence about the tax withheld by a Canadian payer on pension benefits you receive from your XXXXXXXXXX pension plan. Thank you for your understanding regarding the delay of this response.

Canadian payers have to withhold non-resident tax on certain types of income they pay or credit to non-residents of Canada. This applies to Canadian payers of most pension benefits. The withheld tax is usually the non-resident’s final tax obligation to Canada on this income, and the non-resident does not have to file a Canadian tax return to report it.

A non-resident of Canada can, however, choose to file a Canadian return and report certain types of Canadian-source income that are subject to non-resident withholding tax, including most pension benefits. This is known as “electing under section 217 of the Income Tax Act.” By doing this, the non-resident can pay tax on the Canadian‑source income using an alternative method and may receive a refund of some or all of the withheld non-resident tax. You can find more information in Pamphlet T4145, Electing under Section 217 of the Income Tax Act, at canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/electing-under-section-217.html.

For information on the current non-resident withholding tax rates, go to the non-resident tax calculator at canada.ca/en/revenue-agency/services/e-services/non-resident-tax-calculator-disclaimer.html. You can also get the current tax rates by calling the International Tax Services Office of the Canada Revenue Agency (CRA) at 613‑940‑8499. Please note that the CRA accepts collect calls. To find the agreements between Canada and France, go to the Department of Finance Canada webpage at fin.gc.ca/treaties-conventions/in_force--eng.asp#France.

If you think an incorrect amount of non-resident withholding tax has been deducted from your income, you can call the CRA’s telephone enquiries line for non-resident withholding accounts at 613-940-8499 for assistance. The telephone service hours are 7:30 a.m. to 6:00 p.m., Eastern time, from Monday to Friday (except holidays).

I appreciate the opportunity to respond to your concerns and trust the information I have provided is helpful.

Sincerely,

The Honourable Diane Lebouthillier

Christopher Brennan/Lori Carruthers
613-670-0827
2018-074389

All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without the prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5.

© Her Majesty the Queen in Right of Canada, 2018

Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistribuer de l'information, sous quelque forme ou par quelque moyen que ce soit, de façon électronique, mécanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.

© Sa Majesté la Reine du Chef du Canada, 2018