What is non-resident tax?

by TurboTax• Updated 1 week ago

One who's a non-resident of Canada for income tax purposes, and who's received income from a source within Canada, is generally subject to Canadian income tax on that income.

The Canadian tax rules for this are in Part XIII of the Income Tax Act. The terms "Part XIII tax", and "non-resident tax", are basically the same thing.

Canadians who make certain payments to non-residents are required to issue an NR4 tax slip to the non-resident for all such amounts paid during the year. For example, interest, dividends, and rental income are listed there. Employment income and business income aren't. (Over eighty different types of income requiring an NR4 slip are listed on the back of the slip.)

What is the Part XIII tax rate?

25% is the rate that non-residents generally pay on Part XIII amounts (with those providing acting services in a film or video production paying 23%). A lower rate may apply if the non-resident resides in a country that has a tax treaty with Canada. For more info, review Rate of tax to be withheld.

Can I elect to pay tax on net income?

Part XIII tax is based on the gross amount received by the non-resident. For certain types of Part XIII amounts received, a non-resident may choose to determine their tax liability based on their net income (after allowable deductions). The most common of such elections are:

Section 216 election, primarily for rental property income
Section 217 election, primarily for pension income