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
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