Canadian Withholding Tax

For the purposes of Canadian WHT, paying agents must be able to provide documentation to the Canada Revenue Agency (CRA) to establish the beneficial owner’s identity, country of residence for tax purposes and eligibility for benefits under a Double Tax Agreement (DTA) between Canada and the payee’s country of residence.

Where the requisite forms are completed by investors, a withholding tax of 15% may apply for Australian residents who derive income sourced in Canada, in accordance with the Australia / Canada DTA.  Alternatively, where the forms are not completed in full or in part, up to 25% tax may have been withheld by the applicable share registry.

The CRA has released the following forms (‘NR forms’) to allow paying agents to gather information from Canadian non-residents:

  • NR301 Form: Declaration of Eligibility for Benefits Under a Tax Treaty for a Non-resident Taxpayer
  • NR302 Form: Declaration of Eligibility for Benefits Under a Tax Treaty for a Partnership with Non-resident partners
  • NR 303 Form: Declaration of Eligibility for Benefits under a Tax Treaty for a Hybrid Entity

A payee who qualifies for treaty WHT rates is required the complete and sign the relevant NR Form if they are the beneficial owner of payments from a paying agent.

In order for treaty rates of WHT to apply to a payment, the relevant forms must be completed by the beneficial owner and submitted to the paying agent before any income is paid or credited.

Only investment account holders are required to complete a NR form.  The trustee will complete the required documentation on behalf of superannuation clients.

Generally, a NR form will remain in effect for three years from the end of the calendar year in which the form is signed and dated.

The NR forms should be collected by an agent/nominee/custodian (meaning, us), and will not be passed to the paying agent. Instead, the agent/nominee/custodian will be required to collect the NR forms, and will need to certify to the paying agent, using an IC76 Declaration, that they have done so in order to claim the treaty withholding tax rate.

If an investor has not provided the relevant NR form, and thus the agent/nominee/custodian cannot provide the IC76 Declaration to the paying agent, the investor will be subject to the statutory rate of withholding tax of 25% on all applicable payments.

An investor may or may not be able to claim the Canadian WHT charged in the form of a foreign income tax offset (FITO).

We recommend investors seek independent taxation advice to determine the appropriate treatment applicable to their individual circumstances.

Where Canadian WHT may be able to be claimed as a FITO, we will include the amount as a Foreign Income Tax Offset in the Tax ReportDetailed for that security.

We recommend investors seek independent taxation advice to determine the appropriate treatment applicable to their individual circumstances.

Further information about the requirements of these forms can found on the CRA website.