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Non-Resident Withholding Tax Rates for Treaty Countries
Notes
(1) The actual treaty should be consulted to determine if specific conditions, exemptions or
tax-sparing provisions apply for each type of payment. The rates indicated in the table apply
to payments from Canada to the treaty country; in some cases, a treaty may provide for a
different rate of withholding tax on payments from the other country to Canada.
(2) As of September 30, 2014, Canada is negotiating or renegotiating tax treaties or protocols
with the following countries:
Australia
Madagascar (new) Spain
China (PRC)
Malaysia
Israel
Netherlands
(3) Canada imposes no domestic withholding tax on certain arm’s length interest payments,
however non-arm’s length payments are subject to a 25% withholding tax.
(4) Dividends subject to Canadian withholding tax include taxable dividends (other than capital
gains dividends paid by certain entities) and capital dividends.
The withholding tax rate on dividends under the terms of Canada’s tax treaties generally
varies depending on the percentage ownership of the total issued capital or voting rights
in respect of shares owned by the recipient.
(5) Royalties generally are defined to include:
• Payments received as consideration for the use of or the right to use any copyright,
patent, trademark, design or model, plan, secret formula or process.
• Payments received as consideration for the use of or the right to use industrial,
commercial or scientific equipment or for information concerning industrial,
commercial or scientific experience.
• Payments in respect of motion picture films, and works on film or videotape for use
in connection with television.
• In some cases, technical assistance in respect of these items is also included.
Canada generally exempts from withholding tax cultural royalties or similar payments
for copyrights in respect of the production or reproduction of any literary, dramatic,
musical or artistic work, other than motion-picture films and videotapes or other means
of reproduction for use in connection with television. However, several treaties exempt all
cultural royalties from tax.
Canada has announced in its treaty negotiations that it is prepared to eliminate the
withholding tax on arm’s-length payments in respect of rights to use patented information
or information concerning scientific experience. It also stated that it is prepared to
negotiate, on a bilateral basis, exemptions from withholding taxes for payments for the
use of computer software. As such, some recent treaties contain an exemption for such
payments.
Current as of September 30, 2014