Withholding required on dividends paid to non-residents
There are numerous circumstances where a Canadian resident company may be required to withhold taxes from amounts paid to non-residents.
In a previous post, we blogged about the requirement on Canadian companies to withhold 15% from amounts paid to non-residents for services provided while the non-resident was in Canada.
Canadian companies paying or deemed to pay dividends to non-resident shareholders have a similar obligation to withhold, remit and report on those amounts. Generally, a Canadian company has an obligation to withhold 25% of the gross amount of the dividends paid to the non-resident. The amount withheld will be remitted to the Canada Revenue Agency on behalf of the non-resident, and the Canadian company will be required to report the amount of dividends paid, as well as the amount withheld on an NR4 (a tax reporting slip for non-residents) – a copy of which must be provided to the non-resident recipient for their records.
If Canada has a treaty with the country in which the recipient of the dividend is resident, the treaty may reduce the withholding tax rate. For example, the Canada-US treaty reduces the withholding rate on dividends to 15% in general, and if the dividend recipient is a company that owns at least 10% of the voting shares of the dividend payer, the withholding rate is further reduced to 5%. Whether or not a reduced treaty rate would apply depends on the facts and circumstances of each specific situation.
If you have any questions about your withholding requirements, and whether or not a treaty would apply to reduce the amount you are required to withhold, please do not hesitate to contact a member of our team.
By: LaBarge Weinstein’s Taxation, Tax Planning, and Tax Litigation team.
This blog post is intended to provide general information and does not constitute legal advice. You should consult a lawyer for advice regarding your individual situation.
Every effort has been made to ensure the contents of the blog post were accurate as of the date it was written, however, the law can change and we cannot guarantee that the information remains accurate. In addition, because the comments above are of a general nature, they may not apply for every situation. If you have questions, please contact us and we would be happy to discuss your individual circumstances, and whether there have been any changes to the law that would affect the information presented.