If you’re a non-resident of Canada, you only pay Canadian tax on Canadian-source income, but the usual withholding rate of 25% on income like dividends, rent, pensions, and RRSP withdrawals can be steep. Tax treaties with countries like the US and UK often reduce this to 0-15%. This guide covers that Part XIII withholding, which Canadian income non-residents are taxed on, and the returns and forms they file; it is part of the international and cross-border tax guides.
Are You a Non-Resident?
These rules apply only once you are a non-resident: someone without significant residential ties to Canada who lives outside it or stays here less than 183 days in the year, or a deemed non-resident under a treaty tie-breaker. How CRA decides, and why citizenship and day counts alone don’t settle it, is explained in am I a Canadian tax resident.
Non-Resident Withholding Tax (Part XIII)
| Income Type | Default Rate | US Treaty Rate | UK Treaty Rate | Notes |
|---|---|---|---|---|
| Dividends | 25% | 15% | 15% | Applied at source |
| Interest | 25% (arm’s length interest is exempt) | 0% | 0% (10% if not at arm’s length) | Arm’s length interest is exempt under Canadian law as well |
| Rental income (gross) | 25% | 25% (or elect net) | 25% (or elect net) | Can elect to file Section 216 return |
| Company pension income | 25% | 15% (periodic), 25% (lump sum) | 0–25% | Treaty-dependent; CPP and OAS paid to US or UK residents are taxable only in the country of residence |
| RRSP/RRIF withdrawal | 25% | 15% (periodic) | 0–25% | Lump sum vs periodic matters |
| Royalties | 25% | 0–10% | 0–10% | Depends on type |
| Management fees | 25% | Exempt (usually) | Exempt (usually) | If treaty applies |
| Estate/trust income | 25% | 15% | 15% | Depends on income type |
Rental Income and Property Sales
Rent from Canadian property faces 25% withholding on the gross amount unless the owner files an NR6 undertaking and a section 216 return to be taxed on net income instead. A non-resident who sells taxable Canadian property, such as Canadian real estate, requests a section 116 certificate of compliance (Form T2062), and the buyer may have to withhold part of the price if none is issued; both processes, with worked examples, are in the non-resident property tax guide.
Departure Tax (Leaving Canada)
People who become non-residents are first taxed as if they sold most of their assets at fair market value on the day they leave. That deemed disposition, the final return and the forms that defer the tax are covered in the leaving Canada tax checklist.
Common Non-Resident Situations
| Situation | Tax Treatment | Key Filing |
|---|---|---|
| Canadian working abroad | Likely non-resident if ties severed | File departure return |
| US citizen living in Canada | Canadian resident (taxed on worldwide) + US filing | Both returns; treaty credits |
| Snowbird (6 months in US) | Still a Canadian resident if significant residential ties remain | T1 return; US filing may be needed |
| Non-resident with rental property | 25% withholding or Section 216 election | NR4, Section 216 return |
| Non-resident selling taxable Canadian property | Buyer withholds 25% of the price unless a clearance certificate is issued (50% for depreciable property) | T2062, Section 116 |
| Non-resident receiving RRSP | 25% withholding (or treaty rate) | NR4 slip from institution |
| Emigrant with stock options | May defer; exercise triggers tax | T1 departure return |
US citizens who live in Canada with significant residential ties are residents here and are taxed on worldwide income; their US filing obligations are covered in the dual citizenship tax guide.
Filing Requirements for Non-Residents
| Form/Return | Who Files | Deadline |
|---|---|---|
| T1 (income tax return) | Non-residents with Canadian employment income or business income | April 30 (June 15 with business income) |
| Section 216 return | Non-residents with rental income (electing net income) | June 30 of the next year with an approved NR6, otherwise within 2 years after the year end |
| Section 217 election | Non-residents receiving pension/RRSP income (may reduce withholding) | June 30 (balance owing due April 30) |
| NR4 (information slip) | Canadian payers reporting amounts to non-residents | March 31 |
| NR6 (undertaking) | Non-residents requesting reduced withholding on rental | January 1 of the year or the date the first rental payment is due |
| T2062 (clearance certificate) | Non-residents selling taxable Canadian property | At least 30 days before the sale if possible; no later than 10 days after |
| NR73 (Determination of Residency) | Individuals leaving Canada (optional CRA ruling) | As soon as possible |
| NR74 (Determination of Residency) | Individuals entering Canada (optional CRA ruling) | When you need help with your status |
The Bottom Line
Non-residents pay Canadian tax only on Canadian-source income, with a usual 25% withholding on income such as dividends, rent and pensions that a treaty can reduce. For pension and RRSP income, the treaty with your country of residence sets the rate, and US residents often pay 15% on periodic payments. Property owners have their own elections and clearance rules, and a formal CRA view of your status is available through Form NR73 if you are leaving Canada, or Form NR74 if you are entering it.