Do non-residents pay tax in Canada?

Yes, non-residents pay Canadian tax on Canadian-source income. This includes employment income earned in Canada, rental income from Canadian property, business income earned in Canada, and capital gains on taxable Canadian property. Withholding tax of 25% (or lower treaty rate) applies to passive income like dividends, interest, pensions, and RRSP withdrawals.

How do I know if I am a tax resident or non-resident of Canada?

You are a factual resident if you maintain significant residential ties to Canada (home, spouse/dependents, personal property, social ties). You are a deemed resident if you stay in Canada 183+ days in a year. You are a non-resident if you have severed residential ties and live permanently outside Canada. The CRA considers all factors holistically — there is no single test.

What is the non-resident withholding tax rate in Canada?

The default rate is 25% on passive Canadian-source income (Part XIII tax). Tax treaties can reduce this: US residents typically pay 15% on dividends and pensions, 0% on interest. The withholding is applied at source by the Canadian payer and is often the final tax — no return needed for Part XIII income.

Non-Resident Tax Guide for Canada in 2026

Canadian Tax Residency Status

Status	Definition	Tax Obligation
Factual resident	Maintain significant residential ties in Canada	Taxed on worldwide income
Deemed resident	In Canada 183+ days/year (no residential ties)	Taxed on worldwide income
Non-resident	Severed ties, live permanently outside Canada	Taxed only on Canadian-source income
Deemed non-resident	Treaty tie-breaker rules override CRA determination	Taxed as non-resident

Residential Ties (Strongest Factors)

Factor	Strong Tie	Weaker Tie
Home in Canada	Owning/renting a home available for use	Storage unit or rental property
Spouse/dependents in Canada	Spouse living in Canada	Children visiting
Personal property	Car, furniture, belongings	Minor items
Social ties	Provincial health insurance, club memberships	Occasional visits
Driver’s licence	Active provincial licence	Expired licence
Bank accounts	Active chequing, credit cards	Dormant accounts

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%	0%	0%	Most interest exempt under treaties
Rental income (gross)	25%	25% (or elect net)	25% (or elect net)	Can elect to file Section 216 return
Pension income (CPP, OAS, company)	25%	15% (periodic), 25% (lump sum)	0–25%	Treaty-dependent
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

Tax on Canadian Rental Property (Non-Residents)

Option	How It Works	Tax Rate	Requirement
Default (NR4)	25% withholding on gross rent	25% of gross	Tenant or agent remits to CRA
Section 216 election	File Canadian return, pay tax on net income (after expenses)	Marginal rates (15%+)	Must file by June 30 or within 2 years
NR6 undertaking	Reduced withholding based on estimated net income	25% of estimated net	File NR6 before first rental payment of year

Section 216 Example

Item	Amount
Gross rental income	$30,000
Property tax	−$4,000
Insurance	−$2,000
Maintenance	−$3,000
Property management	−$3,000
Mortgage interest	−$8,000
Net rental income	$10,000
Tax (lowest marginal rate)	~$1,500
Savings vs 25% gross	$5,000 saved

Tax on Sale of Canadian Property (Non-Residents)

Step	Details	Timeline
Notify CRA	Must send clearance certificate request (T2062)	Within 10 days of sale
Withholding by buyer	Buyer must withhold 25% of sale price (or gain)	At closing
Clearance certificate	CRA issues certificate allowing release of funds	4–16 weeks
File Section 116 return	Report capital gain on Canadian return	By April 30 of following year
Penalties for non-compliance	Buyer liable for 25% if no certificate obtained	Significant

Departure Tax (Leaving Canada)

Rule	Details
Deemed disposition	All assets deemed sold at FMV on date of departure
Taxable properties	Stocks, real estate (except Canadian), personal property over $10,000
Exempt properties	Canadian real property (taxed when actually sold), pension plans, stock options (deferred)
Filing	Final Canadian tax return due April 30 of departure year
Security	Can post security to defer payment
RRSP/TFSA	Can keep open as non-resident; different rules apply

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)	Usually still Canadian resident	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 Canadian property	25% withholding + clearance certificate	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

Filing Requirements for Non-Residents

Form/Return	Who Files	Deadline
T1 (income tax return)	Non-residents with Canadian employment income, business income, or electing Section 217/216	April 30
Section 216 return	Non-residents with rental income (electing net income)	June 30 (or 2-year window)
Section 217 election	Non-residents receiving pension/RRSP income (may reduce withholding)	April 30
NR4 (information slip)	Canadian payers reporting amounts to non-residents	March 31
NR6 (undertaking)	Non-residents requesting reduced withholding on rental	Before first payment of year
T2062 (clearance certificate)	Non-residents selling taxable Canadian property	Within 10 days of sale
NR73 (Determination of Residency)	Individuals leaving Canada (optional CRA ruling)	Anytime
NR74 (Determination of Residency)	Individuals entering Canada (optional CRA ruling)	Anytime