Corporations that make certain payments—such as franchise fees, interest, and dividends—to recipients, investors, certain debtors, or shareholders who reside outside of Canada (i.e., they are non-residents), are required to withhold non-resident withholding tax from these payments and remit the withheld tax to the CRA.
The withholding rates vary depending on the type of income paid and the jurisdiction in which the recipient lives. In many cases, a tax treaty between Canada and the recipient’s country dictates the rate of withholding.
Corporations are required to file an NR4 summary and slips to report these incomes and the related withholding to the CRA. They should provide the recipient’s NR4 slip so the recipient may claim a foreign tax credit on the taxes withheld and paid to the CRA (if applicable under the relevant tax treaty).
Deadlines to Remit Withholding Tax
A corporation is required to remit taxes withheld on payments to non-residents by the fifteenth of the month following the payment.
A corporation is required to prepare and submit the NR4 Summary and Slips to the CRA by March 31 of the year following the payments to non-residents.
Penalties & Interest
- Failure to deduct: 10 per cent of withholding
- Failure to properly complete a NR4 Slip: $100 per slip
- Failure to remit and late remitting: 3-10 per cent
The CRA may also apply interest, based on prescribed rates, on late payments and penalties.
Need More Information?
For more information, refer to the CRA’s Non-Resident Tax Withholding, Remitting, and Reporting guide.