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Withholding tax in Canada 2026
Canada's border tax is the flat 25% on dividends, rents, royalties and pensions paid to non-residents — usually final, usually reduced to 15% or less by treaty.
Interest is the standout exemption: arm's-length interest (other than participating debt) leaves Canada withholding-free, as does government-bond interest.
At a glance
- top rate
- 25%
- entry band
- 0% on arm's-length and government interest
- tax year basis
- Withheld when paid or credited
- filing deadline
- Final for passive income — no return needed
- residency basis
- Canadian-source payments to non-residents
- regime flag
- Rents and pensions: elect to file and pay graduated rates on net income instead
Rates
Withholding on non-residents (2026)
| Rate | Base | Applies to |
|---|---|---|
| 25% | Gross | Dividends, royalties, rents, pensions and trust distributions — treaties typically reduce to 15% or lower |
| 0% | — | Arm's-length interest (non-participating) and Canadian government-bond interest |
| 25% | Gross | Interest paid to related (non-arm's-length) lenders |
| 15% | Gross fees | Services rendered in Canada — an on-account deduction, waivers available |
| 23% | Net income | Non-resident film and video actors (elective simplified regime) |
| Graduated rates | Net | Employment, business and taxable capital gains — by return, like residents |
Thresholds & allowances
- Rental electionNet-basis filing
Non-resident landlords can file and pay graduated rates on net rents instead of 25% on gross
- Pension electionYear-by-year
Non-residents may opt to file and use graduated rates on Canadian pensions and registered-plan withdrawals
Residency
Residency trigger
Canadian payers withhold and remit; passive-income recipients need not file, while employment and business income runs through ordinary returns.
Non-resident treatment
The 90% worldwide-income test unlocks full personal credits for non-resident filers; no treaty relief generally applies to Canadian real estate rents.
Notes
- Sales of taxable Canadian property route through clearance certificates, with the buyer withholding until the seller's tax is secured.
- The 15% service withholding is refundable to the extent the final liability is lower — waivers need 30 days' lead time.
- Income not earned in a province (including much non-resident income) bears a 48% federal surtax in place of provincial tax — 33% becomes 48.84% at the top.
FAQ
What does Canada withhold on payments abroad?
25% on dividends, rents, royalties and pensions (treaties usually cut it to 15%), 15% on service fees — and 0% on arm's-length interest and government-bond interest.
Can non-resident landlords avoid the 25% on gross rent?
Yes — by electing to file a Canadian return and pay graduated rates (starting at 14% federally) on net rental income after expenses, which is almost always cheaper than 25% on gross.
Figures: tax year 2026, compiled from public sources. Not tax advice.