Double Taxation Treaty countries and rates - Canada
|Country of Residence||Interest (%)||Dividends (%)||Trust instrument income (%)|
|(note 11)||(note 1)||(note 2)|
|Argentina||0||15*||15 (note 3)|
|Armenia (note 5)||0||15*||15 (note 3)|
|Australia (note 8)||0||15*||15 (note 3)|
|Azerbaijan||0||15*||15 (note 3)|
|Barbados||0||15||15 (note 3)|
|Belgium||0||15*||15 (note 3)|
|Bulgaria (note 5)||0||15*||15 (note 3)|
|Chile||0||15*||15 (note 3)|
|China (note 6)||0||15*||25|
|Croatia||0||15*||15 (note 3)|
|Cyprus (note 5)||0||15||15 (note 3)|
|Czech Republic||0||15*||15 (note 3)|
|Denmark||0||15*||15 (note 3)|
|Dominican Republic||0||18||18 (note 3)|
|Ecuador||0||15*||15 (note 3)|
|Egypt||0||15||15 (note 3)|
|Estonia||0||15*||15 (note 3)|
|Finland||0||15*||15 (note 3)|
|France (note 10)||0||15*||15 (note 3)|
|Greece||0||15*||15 (note 3)|
|Hungary||0||15*||15 (note 3)|
|Iceland||0||15*||15 (note 3)|
|India||0||25*||15 (note 3)|
|Ireland (notes 5, 7, 10)||0||15*||15|
|Israel||0||15||15 (note 3)|
|Jamaica||0||15||15 (note 3)|
|Korea, Republic of||0||15*||15 (note 3)|
|Kuwait (note 9)||0||15*||25|
|Kyrgyzstan||0||15||15 (note 3)|
|Latvia||0||15*||15 (note 3)|
|Lithuania||0||15*||15 (note 3)|
|Luxembourg||0||15*||15 (note 3)|
|Malaysia (note 5)||0||15 (note 3)||15|
|Malta (note 5)||0||15||15 (note 3)|
|Mexico||0||15*||15 (note 3)|
|Moldova (note 5)||0||15*||15 (note 3)|
|Mongolia (note 5)||0||15*||15 (note 3)|
|Netherlands||0||15*||15 (note 4)|
|New Zealand||0||15||15 (note 3)|
|Norway||0||15*||15 (note 3)|
|Oman||0||15*||15 (note 3)|
|Pakistan||0||15||15 (note 3)|
|Papua New Guinea||0||15||25|
|Peru||0||15*||15 (note 3)|
|Portugal||0||15*||15 (note 3)|
|Senegal||0||15||15 (note 3)|
|Singapore (note 5)||0||15||15 (note 3)|
|Slovakia||0||15*||15 (note 3)|
|Slovenia||0||15*||15 (note 3)|
|South Africa||0||15*||15 (note 3)|
|Spain||0||15||15 (note 3)|
|Sri Lanka||0||15||15 (note 3)|
|Sweden (note 10)||0||15*||15 (note 3)|
|Trinidad and Tobago||0||15||25|
|Tunisia||0||15||15 (note 3)|
|Turkey (effective January 1, 2012)||0||20*||15 (note 3)|
|United Arab Emirates (note 9)||0||15*||15 (note 3)|
|United Kingdom (note 5)||0||15*||15|
|U.S.A. (note 10)||0||15*||15 (note 4)|
|Vietnam||0||15*||15 (note 3)|
|Zambia||0||15||15 (note 3)|
|All other countries||0||25||25|
1. Some treaties (indicated by an asterisk ("*") following the withholding tax) provide for a lower withholding rate on dividends if the non-resident owns more than 10% (or 15–25% under certain treaties) of the outstanding voting shares of the company. This is more likely to occur with private company shares than with publicly-traded shares.
2. Dividends and interest received by a trust (with non-resident beneficiaries) are income of the trust, not of the beneficiaries. On allocation to a non-resident, the amounts paid or credited to the non-resident do not retain their source identity but become trust income for non-resident withholding tax purposes. Withholding rates applicable to interest and dividends do not apply to the allocation of trust income. Instead, withholding rates applicable to trust income should be used.
Trust income includes income paid or credited from a mutual fund trust or pooled fund trust to a non-resident. Capital gains from a "mutual fund trust" are not included in trust income, and are generally exempt from non-resident withholding tax. However, to the extent that such gains arose from the disposition of taxable Canadian property ("TCP") after March 22, 2004 and are distributed from the mutual fund's TCP gains distribution account, they could be subject to non-resident withholding tax. (TCP includes Canadian real property, Canadian resource property, and timber resource property.) Withholding tax will only apply to TCP gains distributions from a mutual fund trust if more than 5 per cent of the total of all amounts designated is in respect of non-resident beneficiaries.
Since 2005, where a Canadian mutual fund trust or mutual fund corporation is listed on a designated Canadian or foreign stock exchange, and where its value is principally attributable to Canadian real estate, Canadian resource property or a timber resource property, a withholding tax of 15 per cent applies to otherwise tax-free distributions made to non-resident investors. This effectively subjects the untaxed portion of capital gains distributions and any return of capital distributions from such funds to a 15 per cent withholding tax. Where a non-resident realises a subsequent loss on the disposition of a unit or share in respect of which this 15 per cent withholding tax was paid, a potential refund of tax may be available by filing a special Canadian income tax return for the year that the unit or share was disposed of. Form 1262 "Part XIII.2 Tax Return for Non-resident's Investments in Canadian Mutual Funds" is used for this purpose and is available on the CRA website at www.cra-arc.gc.ca/E/pbg/tf/t1262/t1262-10e.pdf. The loss can be carried back three years or carried forward indefinitely.
Taxable distributions from a RESP are not included as trust income under the Income Tax Act and are subject to 25% non-resident withholding tax. However, if the RESP is established as a trust account, the CRA allows RESP payments to non-residents to benefit from the reduced treaty rates for trust income.
3. The lower rate of 15% (18% in the case of the Dominican Republic) is applied where the beneficial owner provides a letter or statement attesting that the income is being taxed in the country of residence. If this is not the case, then the statutory withholding rate of 25% should be applied.
4. The U.S.A. and Netherlands treaties with Canada provide for an exemption from Canadian tax on the portion of foreign (non-Canadian) source income of the Estate or Trust that is paid/credited to a beneficiary who resides in the U.S.A. or Netherlands (for example, U.S. dividends or interest, UK dividends received by the trust etc.).
Generally, this exemption should not be used unless it is certain that the amount of monthly foreign source income flowing through to non-resident beneficiaries will not decrease relative to Canadian source income as a result of year-end expense allocations. Such a situation would result in excessive use of the exemption (that is, too little non-resident tax withheld at source).
Personal trusts and estates should use the exemption where possible since most of these accounts will pay net income at year-end when all amounts are known.
5. (i) For the purposes of the Canada-UK tax treaty, the United Kingdom includes Great Britain and Northern Ireland. It does not include the islands of Jersey or Guernsey or the Isle of Man.
(ii) Most residents of the UK and Ireland are taxed on their worldwide income. However, some individuals are taxed on foreign source income only to the extent that it is remitted to the UK or Ireland, as applicable. Where amounts are remitted to the UK or Ireland, the reduced treaty rate should be applied. However, if income is not remitted (for example, if payments are forwarded to an account in Jersey or are left on deposit in an account in Canada) or if the client holds units of a mutual fund that re-invests income and issues additional units, rather than making actual cash distributions to unitholders, the non-treaty rate of 25% applies unless the beneficial owner provides a letter or statement attesting that such income is taxable in the UK or Ireland, as applicable, whether or not it is remitted there. (See Canada-UK tax treaty, Article 27-paragraph 2, and Canada-Ireland tax treaty, Article 28, paragraph 2, which contain these restrictions.)
(iii) There are also several other countries that tax some or all of their residents’ foreign source income only to the extent that it is remitted to the individual’s country of residence. Where income is not remitted, individuals resident in these countries will also have to provide a letter or statement attesting that such income is taxable, whether or not remitted to that country of residence. Where such a letter or attestation is not received, the non-treaty rate of 25% applies. The affected countries and related Treaty Articles are:
- Armenia (Article 28 – para. 5)
- Bulgaria (Article 28 – para. 3)
- Cyprus (Article 22)
- Malaysia (Article XXIV)
- Malta (Article 28 – para. 3)
- Moldova (Protocol – para. 9)
- Mongolia (Article 28 – para. 5)
- Romania (Article 28 – para. 5)
- Singapore (Article XXI)
6. Effective 1 July 1997, China took over the sovereignty of Hong Kong, the latter becoming a "Special Administrative Region" of China. However, China’s treaty rate does not apply to Hong Kong: Hong Kong maintains its own tax system and so separate country codes for Hong Kong residents should continue to be maintained.
7. For the purposes of the Canada-Ireland Income Tax Agreement, Ireland refers to Republic of Ireland only. Northern Ireland is covered under the Canada-UK Tax Treaty.
8. The treaty with Australia applies to the Territory of Heard Island, McDonald Islands, the Territory of Norfolk Island; the Territory of Christmas Island; the Territory of Cocos (Keeling) Islands; the Territory of Ashmore and Cartier Islands; and the Coral Sea Islands Territory.
9. For the purposes of the Canada-United Arab Emirates Tax Convention and the Canada-Kuwait Tax Convention, a resident individual of the UAE or of Kuwait must be a "national" and must meet certain other criteria to obtain benefits under the treaty. A "national" would be the equivalent to a citizen. Where an individual is not a "national" of the particular country, the reduced rates under the treaty are not available.
10. The treaty provides for an exemption from withholding on interest and dividend payments made to pension, retirement and employee benefit plans provided they are generally exempt from tax in their country of residence. Certain other conditions may be required under the treaty for dividend payments. In order to obtain a treaty exemption from withholding on dividends, these plans will have to file reclaims with the CRA using form NR7-R "Application for Refund of Non-Resident Part XIII Tax Withheld".
11. Effective 1 January 2008, most interest payments made to non-residents of Canada are exempt from withholding tax. Specifically, the Income Tax Act has been amended to eliminate Canadian withholding tax on all arm’s length interest paid to non-residents, regardless of their country of residence.
However, the withholding tax exemption will not apply to:
- Payments of interest to related parties (exception for government or government guaranteed debt); or
- Certain “participating interest” amounts from Canadian sources paid to a non-resident, where interest is contingent or dependent on the use or production from property in Canada or is computed by reference to revenue, profit, cash flow, commodity price or any other similar criterion or by reference to dividends paid or payable.
Note: Under the Canada-U.S.A. tax treaty, “participating interest” is subject to the 15% rate of withholding that applies to dividend payments.
Please refer to the website of the Canadian Department of Finance for an up-to-date listing of Canada’s tax treaties and the text of each treaty.