What is Part XIII Tax?
Canadian withholding tax on passive income paid to non-residents, generally at a 25% rate reducible by tax treaties.
Definition
Part XIII tax refers to the Canadian Income Tax Act provisions imposing a withholding tax on certain types of passive income paid or credited to non-residents of Canada. The standard rate is 25%, but tax treaties may reduce this significantly. Common income types subject to Part XIII tax include dividends, interest, rents, royalties, pension payments, and retiring allowances. The payer is responsible for withholding and remitting the tax to the CRA.
Who Needs to Know This?
Non-residents of Canada receiving passive income from Canadian sources, and Canadian payers responsible for withholding. Important for US residents with Canadian investments or pensions.
Key Deadline
Payer must remit withheld tax to CRA by the 15th of the month following payment
Potential Penalties
Penalties for payers who fail to withhold or remit; non-residents may overpay without treaty claims
Related Forms
Common Mistakes to Avoid
- 1Not providing treaty country certification to reduce withholding
- 2Payers not withholding the correct rate
- 3Not claiming treaty benefits to reduce the 25% default rate
- 4Confusing Part XIII tax with Part I tax for non-residents
Related Terms
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