Taxes for non-residents

Canadian Tax for Non-Residents

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Non-residents of Canada vs. US Non-residents

Unlike the US tax system, your income tax obligations are not based on your citizenship, but residency status. To elaborate further, all US citizens are taxed on their worldwide income, no matter where they live. On the contrary, a non-resident of Canada is not taxed on his worldwide income and therefore do not pay anything for income received outside Canada. The only time a non-resident of Canada pays any tax is when the person have income from Canadian source. ​

What taxes do non-residents have to pay?

If you are a non-resident of Canada and you have income from Canadian sources, you have to pay tax on those income. In some cases, Canadian taxes are deducted at the source. Be sure to let your Canadian payers know that you are a non-resident of Canada and provide your country of residence so that they can deduct the applicable tax from your income. Non-residents usually pay 25 percent on amounts subject to Part XIII tax. Note that Part XIII tax is not refundable.

Canadian financial institutions and other payers are required to withhold non-resident tax on your income before paying you. This tax withheld is usually your final tax obligation to Canada on that income. If tax is not withheld accordingly, you could be subject to significant penalties and interest!​

Main types of taxes non-residents pay

As a non-resident of Canada you have to pay tax on income received from within Canada. The type of tax you pay – Part XIII or Part I – depends on the type of income you received.

As a non-resident, you have to pay Part XIII tax if you received any of the following income from sources in Canada:​

• Rental and royalty payments

• Dividends;

• Pension payments and CPP/QPP benefits;

• Old age security and retiring allowances;

• RRSP/RRIF/annuity payments; and

• Management fees.​

If you received any of the following income, the payer usually deducts Part I tax:​

• Employment income in Canada or income from a business carried on in Canada;

• Employment income from a Canadian resident for your employment in another country;

• Certain income from employment outside Canada, if you were a resident of Canada when the duties were performed;

• Taxable part of Canadian scholarships, fellowships, bursaries, and research grants;

• Taxable capital gains from disposing of certain Canadian property; and

• Income from providing services in Canada other than in the course of regular and continuous employment.​