Part XIII tax (non-resident withholding)

Foreign buyers and sellers meet this when a Canadian company pays dividends, interest or similar amounts to a non-resident owner or lender. Section 212 of the Income Tax Act requires a non-resident person to pay the tax on listed amounts a person resident in Canada pays or credits to it, subject to exceptions in that section. Subsection 215(1) says the person who pays, credits or provides the amount shall deduct or withhold the tax despite any agreement or law to the contrary.

What the CRA says

The CRA’s NR4 guide is addressed to Canadian payers and withholding agents who make payments to non-residents for income such as interest, dividends, rents and royalties. It says the payer is responsible for withholding and remitting Part XIII tax and reporting it on an NR4 information return. The CRA also publishes guidance on applying a reduced treaty rate.

What to ask

• Is the recipient a non-resident, and what kind of payment is it?
• Does a tax treaty apply, and has the recipient provided what the CRA requires for a reduced rate?
• Who is the payer or agent responsible for withholding, remitting and filing the NR4?

See also whether buying through a holdco changes the non-resident tax rules.