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If your business pays money to someone outside Canada, you may have to hold part of it back and send it to the CRA yourself. Part XIII tax is 25% of the taxable amount unless a treaty or the Income Tax Act lowers it, and services done in Canada carry a separate 15% hold-back under Regulation 105. International tax withholding is the payer’s job, so a miss lands on your books, not the recipient’s.
Who handles international tax withholding, and on what?
You do, if you’re the one paying or crediting the amount. The CRA calls you the payer or withholding agent. Two rules cover most of what a small firm meets.
Part XIII covers certain amounts paid to non-residents, and the standard rate is 25%, as the CRA’s page on Part XIII tax rates confirms. Regulation 105 covers fees and commissions for services a non-resident performs in Canada, and the rate is 15% of the gross payment. Employees are handled through payroll, so they sit outside both rules. The CRA’s guide T4061 lists which payment types fall under Part XIII, so look there before you pay, not after.
| Rule | What it covers | Standard rate |
|---|---|---|
| Part XIII tax | Certain amounts paid to non-residents | 25% |
| Regulation 105 | Fees for services rendered in Canada, not employment | 15% of the gross |
| Part XIII, non-resident actors | Acting services rendered in Canada | 23% |
How do you find out if a treaty lowers the rate?
Ask the payee. The CRA suggests you get Form NR301 from them, or the same information in another form, showing where they live and that they qualify for treaty benefits. If you can’t confirm it, the CRA says the full 25% applies.
So don’t take a supplier’s word in an email and hope. Keep the paperwork with the invoice. Treaty rates change as treaties change, and the CRA tells payers to check them regularly. Its Information Circular IC76-12R8 has the treaty tables.
Here’s what the difference looks like on a $20,000 royalty. At the full 25% you hold back $5,000. If a treaty rate of 15% applied (an example rate, to show the arithmetic), you’d hold back $3,000 and the supplier gets $17,000 instead of $15,000. Getting the paperwork right is worth $2,000 to the other side of the deal.
When does the money go to the CRA?
By the 15th of the month after the month you paid or credited the amount. Pay a supplier on 20 October and the deadline is 15 November. Then you file an NR4 information return by the last day of March after the calendar year.
Take a $20,000 amount that is subject to Part XIII tax with no treaty relief. You hold back $5,000 and pay the supplier $15,000. On a $40,000 consulting fee for work done in Canada, Regulation 105 has you hold back $6,000. Those two sums are a ballpark, plain arithmetic on the CRA rates, since no calculator here does non-resident tax.
What does a mistake cost?
More than the tax itself. The CRA can charge a 10% penalty on Part XIII tax you should have withheld and didn’t, and 20% if it was knowing or grossly careless. Late remittances carry penalties from 3% to 10%, depending on how late. Late NR4 filing starts at a flat $100 for a small number of slips. And the tax is still owed.
The trap most people fall into is a small foreign contractor who does part of the job on site in Canada. If some of the work happens here, Regulation 105 may apply to that fee, and a non-resident who expects to owe less can ask the CRA for a waiver on Form R105 before you pay. Waivers take time, so start early.
What else touches the books?
The withholding is not an expense on top of the payment. It’s part of it, and the recipient gets credit for it on their own side. Record the gross amount as the cost and the withheld part as a payable to the CRA until you remit it.
If your own staff are the concern, the payroll remittance calculator covers the domestic side. To see what a new cost does to your corporate tax, try the corporate tax calculator. The GST/HST calculator helps when a foreign supplier’s invoice also carries sales tax questions, which is a separate matter from Part XIII.
What should you check before the first payment?
Run through four quick questions. Is the payee a non-resident? Is the payment the type that Part XIII covers, or is it a fee for work done in Canada? Do you hold treaty paperwork? And what date is the 15th of next month? Writing the answers on the invoice takes two minutes and gives you a record if the CRA ever asks how you decided.
Sources, and how we checked them
The Canada Revenue Agency publishes the Part XIII rates, the NR4 guide T4061 and Information Circular IC75-6 on Regulation 105. Figures here are as read on those pages in 2026. Treaties, waivers and payer duties can change, so read the current page before a large payment. This is an independent guide, separate from any government body.
Frequently asked questions
What is the standard Part XIII rate?
25% of the taxable amount. A treaty or the Income Tax Act can lower it, and the payer has to have proof that the recipient qualifies.
When do I send the withheld tax to the CRA?
It has to reach the CRA by the 15th of the month after the month you paid or credited the amount.
What is Regulation 105?
It requires a payer to withhold 15% of fees paid to a non-resident for services rendered in Canada, other than employment.
When is the NR4 return due?
By the last day of March following the calendar year of the payments.
What if I can't confirm treaty status?
The CRA says the standard 25% rate applies. Ask the payee for Form NR301 or the same details before you pay.
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