Tax Question:
What is Part XIII income tax and how does it affect non-resident corporations?

Part XIII income tax is a tax withheld by a payer when they pay a non-resident. Not all income is subject to this tax. Generally, passive income is subject to Part XIII tax.

The most common types of Canadian income subject to Part XIII tax are:

– Pensions
– Annuities
– Management fees
– Interest
– Dividends
– Rents
– Royalties
– Estate or trust income
– Payments for film or video acting services

Generally, non-residents pay 25% tax on amounts taxable under Part XIII tax. However, the tax rate can be reduced if the non-resident corporation is from a country in which Canada has a tax treaty with. It is the responsibility of the Canadian payer to withhold and remit the correct amount of tax.
The Canada Revenue Agency (CRA) has an online non-resident tax calculator to determine your Part XIII tax liability.
Any non-resident tax deductions withheld by the Canadian payer will need to be remitted to the CRA on or before the 15th day of the month following the month the amount was paid or credited to the non-resident. A non-resident account number will need to be set up by the Canadian payer on behalf of the non-resident in order to remit the deductions.
In the following tax year, an NR4 statement of amounts paid or credited to non-residents of Canada will need to be filed with CRA. See International FAQ #16 for further information on filing an

Angela Hardbattle, Dipl. T (Hons), CPA, CA, Manager
Manager, Gilmour Group CPA’s
Disclaimer: The information contained in this article is intended solely to provide general guidance on matters of interest for the personal use of the reader, who accepts full responsibility for its use. While we have made every attempt to ensure the information contained in this article has been obtained from reliable sources and accurately described herein. SW Media Group and Gilmour Group Incorporated is not responsible for any errors or omissions, or for the results obtained from the use of this information. Before taking any action that might affect your personal and business finances, you should consult a qualified professional advisor.