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Non-Resident Withholding Tax Rates for Treaty Countries / 133

Dividends—The 5% withholding tax rate applies if the recipient of the dividends is a

company that is the beneficial owner of at least 10% of the voting stock of the payer. The

rate of Canadian branch tax is also limited to 5% on cumulative branch profits exceeding

Cdn$500,000. The first Cdn$500,000 of cumulative branch profits are exempt from branch

tax. See also note (4).

Royalties—Royalties are generally defined as payments for the use of, or right to use, any

cultural property and any copyright of scientific work; any patent, trademark, design or

model, plan, secret formula or process; and information concerning industrial, commercial

or scientific experience. The definition also includes gains from the alienation of any

intangible property or rights in such property to the extent that such gains are contingent

on the productivity, use or subsequent disposition of such property or rights. See also

note (5).

The following royalties are exempt from withholding tax:

• Cultural royalties, excluding royalties in respect of films or motion pictures, and

videotapes or other media for use in television broadcasting

• Payments for the use of, or right to use, computer software

• Payments for the use of, or right to use, patents or information concerning industrial,

commercial or scientific experience (excluding any such information in relation to a

rental or franchise agreement)

• Payments in respect of broadcasting as may be agreed to between the countries.

Pensions/Annuities—Pensions are defined to include any payment under a superannuation,

pension, or other retirement arrangement and certain other amounts, but exclude IAAC

payments. The protocol extends the definition of pensions to include Roth IRAs and similar

arrangements. Payments of Old Age Security and Canada/Québec Pension Plan benefits

to U.S. residents are taxable only in the U.S. and are not subject to Canadian withholding

tax. Conversely, the U.S. will not withhold tax on social security benefits paid to Canadian

residents, and only 85% of such benefits will be taxable by Canada.

Annuities are defined as periodic payments payable during a person’s lifetime or for a

specified period of time, under an obligation to make the payments in return for adequate

and full consideration (other than services rendered). The definition excludes non-periodic

payments or any annuity the cost of which was tax deductible in the country in which it

was acquired. See also note (6).

Current as of May 3, 2013