Canada imposes a 25% withholding tax on certain types of Canadian source income paid to nonresidents of Canada. Residents of countries with which Canada has a treaty may be eligible for reduced rates.
The withholding rate on Canadian source dividends paid to US residents eligible for treaty benefits is 15%.
The CRA has forms NR301, NR302 and NR303, that payers may use to gather the necessary information. The forms serve a function similar to IRS Form W-8BEN.
Alternatively, payers can use their own format that solicits “equivalent information.” The CRA recommends that payers or intermediaries collect the information on the CRA forms.
If the payer does not have sufficient documentation, then the payer must apply the Part XIII withholding rate of 25% to certain types of income paid to non-residents of Canada. However, payers may apply the reduced treaty withholding rates, without obtaining the CRA forms or equivalent information, if all the following conditions are met:
Individuals US resident individuals use form NR301 to certify their eligibility.
Trusts The CRA posted information about the new forms to its website, in the form of questions and answers. The answer to one question says that a non-resident trust is generally a person under the Income Tax Act if it is taxed as a person under the tax rules of its country of residence. In these circumstances, the CRA would generally consider the trust to be the beneficial owner of the income, and eligible for treaty benefits on the income it receives. If this is the case, then the trust would complete Form NR301.