Part XIII Tax for Non-Residents of Canada: NR4, Section 216 and 217

Part XIII tax Canada is the withholding tax that Canadian payers deduct from certain payments to non-residents, usually at 25% unless a tax treaty lowers it. It applies to rent, dividends, pensions, RRSP and RRIF payments, royalties and similar income, and it is generally your final Canadian tax on that income. Two elections, section 216 for rental income and section 217 for certain pensions, let you file a Canadian return and possibly recover part of the tax. This guide is for Americans, Indian-origin owners and Canadians living abroad who receive Canadian-source income.

Part XIII tax Canada: what is it and who pays?

A non-resident normally pays Canadian tax only on Canadian-source income. Part XIII tax is collected at source by the person who pays you. The CRA says it covers dividends, rental and royalty payments, pensions and RRSP and RRIF payments. If the correct amount is deducted, that is your final Canadian tax on the income, and the CRA says not to file a return to report it unless you elect under section 216 or 217.

Income that is not Part XIII, such as employment income for work done in Canada, business income in Canada and taxable capital gains on certain Canadian property, is taxed under Part I and requires a Canadian return. Fees for services performed in Canada are different again: the payer must withhold 15% and report the payment on a T4A-NR slip, unless the non-resident holds a CRA letter authorizing a waiver or reduction. See the capital gains and principal residence guide for selling Canadian real estate.

How much is withheld, and what do treaties change?

A payer must verify whether a treaty applies. The usual tool is Form NR301, a declaration of eligibility for treaty benefits; for a pension, the payer may not apply a reduction unless the CRA authorizes it in writing. The CRA's Part XIII tax calculator and its information circular on treaty rates list rates by country, including for India; confirm them there before relying on any rate.

How to handle Part XIII withholding, step by step

1. Identify the payments. List every Canadian-source payment: tenant rent, brokerage dividends, RRIF payments, pension payments.
2. Tell the payer where you are resident. Give your foreign address and tax residence. If you do not certify treaty eligibility when asked, the payer should withhold the full statutory rate.
3. Claim treaty benefits. Complete Form NR301 for a reduced rate. For pensions, use Form NR5 to ask the CRA to reduce withholding in advance (submit it by October 1 or before the first payment is due).
4. For rent, decide on NR6. A Canadian agent such as a property manager can withhold 25% on net rent instead of gross if the CRA approves Form NR6. Gross rent is still reported on the NR4 slip.
5. If you have no agent, the CRA says a non-resident receiving residential rent must remit the 25% directly.
6. Receive the NR4 slip and decide whether to elect under section 216 or 217.
7. Claim a refund of excess withholding with Form NR7-R if you do not elect.

Section 216: elect to file on rental income

A non-resident with Canadian rental income or timber royalties, or CCA recapture on rental property, can file a Canadian return on a net basis. The return is Form T1159, Income Tax Return for Electing under Section 216, with Form T776 for rental income and expenses. You deduct expenses and claim capital cost allowance, and non-resident tax withheld is claimed on line 43700. The deadline is generally within two years from the end of the year the rent was paid or credited; for 2025 with an approved NR6 it is June 30, 2026, and a disposition of rental property with CCA recapture is due April 30, 2026. Guide T4144 lists the allowed deductions, including the RRSP deduction, FHSA deduction and support payments.

Section 217: elect to file on certain pensions

Section 217 covers Canadian-source OAS pension (not the supplement), CPP and QPP benefits, most superannuation and pension benefits, RRSP, PRPP, RRIF and DPSP income, death benefits, EI benefits and certain retiring allowances. You file the non-resident return with the section 217 schedules and are taxed at resident rates on that income; any withholding above the tax is refunded if you file on time. The 2025 return is due June 30, 2026, any balance owing is due April 30, 2026 to avoid interest, and a late return cannot be accepted for the election. Non-refundable credits may be limited: you can claim the full amount if the 217 income is at least 90% of net world income; otherwise the CRA applies a cap tied to 14.5% of the eligible income.

Documents and deadlines checklist

• NR4 slips from every payer, with the country code and gross amounts.
• Lease, property manager statements, and expense records for the rental.
• Approved NR6 letter, NR5 authorization or CRA waiver letters.
• Proof of residence in a treaty country, for example your U.S. or Indian tax filing.
• Bank details for any refund.
• Dates: payers remit by the 15th of the following month, NR4 filing and slips by the end of March, and the non-resident return by April 30 or June 15. For payers, late remitting carries penalties of 3% to 10% depending on how late, and failing to deduct can cost 10% of the tax not deducted (20% for repeated knowing failures).

Worked example: a Naperville condo owner

Daniel lives in Naperville and owns a Mississauga condo that rents for $30,000 a year in Canadian dollars. With no NR6, the tenant's agent withholds 25% of gross rent, or $7,500. With an approved NR6, expenses of $22,000 leave net rent of $8,000, and 25% withholding is $2,000, although the agent still reports $30,000 on the NR4. Daniel may also file a section 216 return on net income at graduated rates, which can yield a refund of part of the withholding depending on his other Canadian income. On his U.S. return he reports the net rent and claims a foreign tax credit for Canadian tax paid.

If you also file in the U.S. or India

Canada's Part XIII is similar in function to U.S. withholding on non-resident income; see the U.S. guide to FDAP and ECI for the reverse direction. A U.S. resident with Canadian rent or pension income normally reports it on Form 1040 and claims the credit for Canadian tax; see Canadians living in the U.S. and the Canada-U.S. treaty guide. A resident of India with Canadian income should read the India-Canada tax treaty guide and the CPP and OAS guide for immigrants.

Mistakes to avoid

• Assuming Canadian withholding ends your U.S. or Indian filing duty.
• Letting the payer withhold the full 25% because no NR301 or NR5 was filed.
• Missing the section 217 deadline of June 30, 2026 for 2025, since a late return cannot make the election.
• Confusing Reg. 105 service-fee withholding (15%) with Part XIII.
• Selling Canadian real property without the section 116 certificate.

How we can help

We are a U.S. CPA firm in Aurora, Illinois. We prepare the U.S. return for clients with Canadian rent, pensions or RRSP income, including foreign tax credits and treaty positions, and coordinate with your Canadian CPA, who handles NR forms and CRA elections, and with your Indian Chartered Accountant where needed. See real estate investor tax and cross-border tax services. More Canadian guides are on the Canada hub.

Frequently asked questions

General information only. It is not tax, legal, accounting or immigration advice for your situation, and rules change; confirm the current rules with the official source or a licensed professional in the relevant country.