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Canada takes 25% withholding tax on most income it pays to non-residents, unless the Income Tax Act or a tax treaty sets a lower rate. Say you pay $24,000 of rent to an owner abroad. That’s $6,000 a year, held back by you and sent to the CRA.
What does Part XIII tax cover?
It comes from Part XIII of the Income Tax Act, which is why people call it Part XIII tax. It applies to certain amounts a Canadian payer pays or credits to someone who lives outside Canada. The CRA lists pensions and annuities, management fees, interest (unless an exemption applies), dividends, rents and royalties, and estate or trust income. Payments for acting in films and videos are on the list too, at a rate of 23%.
The payer holds the tax back and sends it to the CRA. The non-resident gets the net amount, plus an NR4 slip at the end of the year. If you’re the payer, that’s your job, not theirs.
Who counts as the payer?
Anyone who pays or credits the money. That could be a tenant, a property manager acting as agent, a company paying a dividend to a shareholder abroad, or a pension plan. If the person receiving the money lives elsewhere, that’s you. Treat the 25% as money that was never yours to hand over.
What rate applies to non-residents?
| Situation | Rate |
|---|---|
| Standard rate on Part XIII income | 25% |
| Payee in a country with a tax treaty | Treaty rate, often lower |
| Payee in a country with no treaty | 25% |
| Acting services in a film or video | 23% |
| Non-resident RRSP withdrawal (federal data) | 25% |
Treaty rates change with the country and the type of income. The CRA publishes them in Information Circular IC76-12. You’ll want to look up both before you assume a figure.
How much is held back on rent paid abroad?
A non-resident owns a Toronto condo and collects $2,000 a month. The payer holds back 25% of each payment, so $500 goes to the CRA and the owner gets $1,500. Over a year, that’s $6,000 of tax on $24,000 of gross rent.
The tax applies to the gross rent, before expenses. So an owner with high costs can end up paying far more than their real profit would justify. Ouch. And if there’s no Canadian agent, such as a property manager, the CRA says the non-resident must remit the 25% directly on residential rent, which isn’t something you’d want to learn late.
A resident landlord is taxed on net rent instead, the model in the rental income tax calculator. On $30,000 collected and $14,000 of costs in Ontario, the extra tax is $4,744 on $16,000 of net rent. Set that against 25% of the gross. Dividends work differently again, as the dividend tax calculator shows for residents.
To see why a treaty rate matters, imagine a treaty cut the rate on a payment to 15%. The same $24,000 would carry $3,600 of tax instead of $6,000, a difference of $2,400. That’s no small change, so a few bucks of paperwork up front can pay off. The 15% here is an illustration only, not a rate for any country.
When is withholding tax due, and can the rate go down?
You, as payer, must see that the CRA receives the tax by the 15th day of the month after the payment is made or credited. The NR4 return is due on the last day of March after the calendar year, and estates and trusts get 90 days after year end.
To claim a treaty rate, the non-resident should give the payer the right form showing who owns the income and where they live. NR301 is for individuals, NR302 for partnerships and NR303 for hybrid entities. If you receive a pension, you can ask the CRA for a lower rate with Form NR5, but the CRA has to approve it before the payer applies it.
Get that form before the first payment, not after. A payer who has already held back 25% can’t easily undo it, and the owner is left asking the CRA for the difference later.
What happens if the payer gets it wrong?
- Paying a non-resident in full and sorting out the tax later. The payer is responsible for withholding.
- Using the wrong treaty rate because the income type was misread.
- Paying late. Penalties run from 3% for a payment one to three days late up to 10% for seven or more days.
- Not withholding at all, which carries a penalty of 10% of the tax not withheld, and 20% for repeated knowing failures.
- Missing the NR4 deadline. It starts at $100 or an amount per slip, whichever is greater.
On $6,000 of rent tax, a payment seven or more days late means a $600 penalty at 10%, and one that’s one to three days late means $180 at 3%. Failing to withhold at all adds a $600 penalty on top of the $6,000 you still owe as payer.
Other tools for non-residents
Property brings other taxes. The non-resident buyer tax calculator covers the Ontario and British Columbia taxes on foreign buyers, which are separate from withholding tax. A sale can also create a gain, and the capital gains tax calculator estimates it for residents.
None of these tools model Part XIII tax for other countries or treaty rates. For those, use the CRA circular and speak to a tax professional.
Sources, and how we checked them
Rates, deadlines and penalties come from the Canada Revenue Agency pages on Part XIII tax, the NR4 guide T4061 and the treaty rate circular, checked on 30 September 2026. We didn’t confirm any individual treaty rate. This is an independent guide, separate from any government body.
Frequently asked questions
What is the withholding tax rate for non-residents in Canada?
The standard rate is 25% on income under Part XIII. A treaty or the Income Tax Act can lower it.
How much tax is held back on $2,000 of monthly rent?
At 25%, $500 is held back and $1,500 goes to the owner. That's $6,000 of tax over 12 months.
When must the payer send the tax to the CRA?
The CRA must receive it by the 15th day of the month after the payment was paid or credited.
How does a non-resident claim a treaty rate?
By giving the payer a form such as NR301 to show ownership and residence. Pension recipients can use NR5 to ask for approval of a lower rate.
What happens if the payer does not withhold?
The penalty is 10% of the tax that should have been held, and 20% for repeated knowing failures.
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