More information on forms NR301, NR302, and NR303

The Canada Revenue Agency (CRA) held a public consultation on forms NR301, NR302, and NR303 before their final release. This page addresses questions raised in the public consultation. For more information, see Information Circular 76-12.

Information for payers

Ensuring the completeness and accuracy of the information used to confirm eligibility for tax treaty benefits and to establish a withholding rate

A payer should review the information a non-resident provides on Form NR301, Form NR302, Form NR303, or in another format, to make sure the necessary information is provided to prove that the non-resident is eligible for tax treaty benefits on income being paid.

A payer may know or believe that the information a non-resident gave is wrong or misleading, or that the information was given in ignorance or without considering the facts of a situation. If so, the payer should question the information and look at other information received from the non-resident or that is known about the non-resident.

Relief from penalties and interest under subsection 220(3.1) when not enough Part XIII tax has been withheld

If the CRA determines that not enough Part XIII tax was withheld on a payment to a non-resident, an assessment (including interest) can be issued to the payer, the non-resident recipient, or both. An assessment can also be issued to an agent of the payer or the non-resident payee. If an assessment of tax is issued to the payer or an agent/intermediary, the amount assessed is also subject to a penalty.

You can ask for penalty/interest relief under subsection 220(3.1) by writing to the relevant tax services office or by sending a completed Form RC4288, Request for Taxpayer Relief. For details on what you need to support your request, see Information Circular IC07-1, Taxpayer Relief Provisions.

One of the factors in deciding whether to grant relief is whether the payer has been reasonably careful. So the payer's effort to determine and apply the correct tax rate is important. Collecting the appropriate form or the equivalent information (that is, a written declaration by the non-resident of beneficial ownership, residency, and eligibility for tax treaty benefits) will support a payer's effort to determine and apply the correct tax rate.

Using information from draft forms NR301, NR302, and NR303

Draft forms NR301, NR302, and NR303 were posted as CRA web content before they were officially released. A payer may have asked a non-resident to fill out the draft version of one of these forms. If so, the payer can continue to use the information on that completed form to apply the treaty tax rate on payments subject to Part XIII withholding tax until the expiry date of the draft form (the form expires when there is a change in eligibility for treaty benefits, or a change in the effective rate of withholding, or three years from the date it was signed, whichever is earlier).

If a payee does not complete Form NR301

Completing Form NR301 is not mandatory. However, if a non-resident refuses to provide certification of beneficial ownership, residency, or eligibility for treaty benefits after being asked to do so by a payer, the full statutory rate should be withheld, under the assumption that treaty benefits do not apply.

There could be many reasons why the payee does not return the form to the payer or does not reply to the payer. This is not the same as a refusal to complete the form. The payee may not be eligible for treaty benefits, or he or she may be eligible for treaty benefits but not have received or read the correspondence. Therefore, unless the form was requested by the payer in order to resolve conflicting information, the payer may want to take more steps to determine if treaty benefits apply.

Residents of the United States and Form NR301

An individual resident in the United States will always be a qualifying person under Article XXIX A (Limitation on Benefits) of the Canada–United States income tax treaty. However, by completing Form NR301, a payee confirms that he or she is the beneficial owner and an individual who is a resident of the United States. Written confirmation of these facts provides assurance to the payer, because the payee is an active participant in the payer's determination of the withholding tax rate. This should reduce instances of non-resident payees providing not enough or misleading information to payers.

Individuals who are not sure of their residency can read Income Tax Folio S5-F1-C1, Determining an Individual’s Residence Status, or use either Form NR73, Determination of Residency Status (Leaving Canada), or Form NR74, Determination of Residency Status (Entering Canada), to ask for help from the CRA.

Eligibility for corporations with an address in the United States

Not all corporations with an address in the United States will be entitled to treaty benefits under the Limitation on Benefits article in the Canada–United States income tax treaty. Therefore, the CRA recommends that the payer get a completed Form NR301 or similar information from the payee before applying a reduced tax treaty rate.

For information on the limitation on benefits provisions, see Article 25 of the Protocol Amending the Convention Between Canada and the United States. This is the amendment to Article XXIX A (Limitation on Benefits) of the Canada–United States income tax treaty.

Under Article XXIX A, a qualifying person is entitled to all benefits of the treaty, and a non-qualifying person may be entitled to benefits on specific income if certain conditions are met.

The article uses a list to define a qualifying person. You may be able to identify that a payee is a qualifying person by referring to the list. For example, a company or trust whose principal class of shares or units (and any disproportionate class of shares or units) is mainly and regularly traded on one or more recognized stock exchanges is listed as a qualifying person.

Also, if the company has an exemption letter or number issued by the CRA related to paragraph 2 of Article XXI, you would generally not have any reason to suspect the corporation is subject to the limitation on benefits provision.

Unless you know from information you have on file that the U.S. corporation fits into one of the categories in the list of qualifying persons, you have reason to question whether the corporation is entitled to treaty benefits.

Forms NR301, NR302, and NR303 in a situation where income is earned from a trust

Payments from an estate or trust to a non-resident beneficiary are taxed as trust income, regardless of the source from which the trust or estate got the income. So interest income that may be exempt from tax under the Income Tax Act that is paid to a trust and then paid out to a non-resident will be taxable as trust income: The withholding tax rate of which is 25%.

Similarly, dividends paid to a trust and then distributed to a non-resident beneficiary will be taxable as trust income. A lower withholding tax rate will only apply to amounts paid or credited by a trust or estate to a non-resident beneficiary when a tax treaty provides for a reduced withholding on such amounts (for example, the rate in the Canada–United States income tax treaty is 15%). The income type to be entered on Form NR301, Form NR302, or Form NR303 is trust income. However, this does not include a deemed dividend paid by a specified investment flow-through trust (to which subsection 104(16) applies). Such a deemed dividend keeps its status as a dividend.

As long as the income of a trust is payable to a non-resident and that non-resident is entitled in the year to require the payment to be made, the income is considered paid or credited to the non-resident and is subject to withholding tax. So the payer should get Form NR301, Form NR302, or Form NR303, whichever applies, or the information asked for on the applicable form.

There is a 15% withholding tax under Part XIII.2 on amounts paid or credited to a non-resident investor that are not otherwise subject to tax under Part I or Part XIII. Since this 15% withholding tax is provided for in the Income Tax Act rather than in a tax treaty, there is no need to get Form NR301 completed for this situation.

A person cannot use Form NR301 to claim treaty benefits under Article XXI of the Canada–United States income tax treaty. For exemptions from tax under Article XXI, a non-resident has to apply to the CRA for a letter of exemption. See Publication T4016, Exempt U.S. Organizations – Under Article XXI of the Canada–United States Tax Convention. Trust income paid to an organization that holds a letter of exemption issued by the CRA under paragraph 1 of Article XXI of the Canada–United States income tax treaty is exempt from withholding tax. Paragraph 1 provides an exemption for all income to the extent that the income is exempt from tax in the United States. However, an organization that holds a letter of exemption issued by the CRA under paragraph 2 of the same article is not exempt from tax on trust income. This is because paragraph 2 only provides an exemption for interest and dividend income, not trust income.

Payments to a partnership or hybrid entity that is subject to either Part XIII tax or the withholding tax under Regulation 105

To report payments of this type, complete one NR4 slip for payments subject to Part XIII tax and one T4A-NR slip for payments made to the partnership that are subject to withholding tax under Regulation 105 of the Income Tax Regulations. Do the same for payments to hybrid entities. The partnership will divide its income and the withholding tax among its partners and may have to file a T5013 information slip for each partner.

Supplying equivalent information instead of completing forms NR301, NR302, and NR303

The CRA prefers that you use the NR forms to give your information. However, you can give the same information in some other way. If you do that, include written confirmation of beneficial ownership, residency, and eligibility for treaty benefits. You can use an in-house form to send the CRA your information. And you can send written information from more than one source. Include a signature with your information.

Audits where Form NR301 was not filled out

In an audit situation, the CRA would look for written confirmation of beneficial ownership, residency, and eligibility for treaty benefits. To determine whether or not enough tax was withheld, the CRA would look at the payee name and address, as well as information on file. The next step could be an assessment or a decision to get more information.

Using Know Your Client documents as alternative documentation

Know Your Client documents alone would generally not be considered equivalent information. To apply treaty benefits, you need to know whether the person you are paying is the beneficial owner of the income, where that person resides for tax purposes, and whether the person is eligible under a treaty to receive treaty benefits.

Scanned copies and electronic signatures

If a payer collects all the information requested on Form NR301, Form NR302, or Form NR303, scanned or faxed copies or microfiche of the original signed forms are acceptable. Electronic signatures can be used on the forms, assuming the electronic signature is a representation of the person's original signature (that is, the person physically signs on an electronic device). An electronic signature cannot be used for all CRA forms.

Withholding while clients are collecting documents

The CRA recommends collecting the forms or equivalent information before withholding tax from the payment. However, it is up to each withholding agent or intermediary to determine whether it will default to the maximum rate before receiving all of the required information, or whether it will accept the risk of reducing the withholding tax to a tax treaty rate with less than the recommended information. The CRA can only issue an assessment when not enough tax has been withheld. Since the forms are not mandatory, there is no penalty for not having the forms on file.

The CRA cannot offer a grace period during which insufficient tax can be withheld. The Part XIII withholding tax is a final tax liability. So it is up to the payer to decide whether it wants to take the risk associated with withholding tax at the tax treaty rate with only the information available at that time. When the payer takes this risk and later determines that not enough tax was withheld, the payer has to send the remaining tax to the CRA.

Keeping documents

Forms NR301, NR302, and NR303 should be kept for six years from the end of the last tax year to which they relate.

Information for payers and non-resident payees

Necessity of forms NR301, NR302, and NR303

There is no provision in Canada’s Income Tax Act or tax treaties that specifies what information has to be collected before withholding tax is reduced to a tax treaty rate. What is needed generally depends on individual facts and circumstances. The CRA can issue an assessment of tax, penalty, and interest when not enough tax has been withheld and sent. The CRA recommends that payers or intermediaries collect the information requested on forms NR301, NR302, and NR303, since this information on beneficial ownership, residency, and eligibility for treaty benefits is generally the information the payer or intermediary will need to establish that a tax treaty rate applies. Exceptions to the CRA recommendation are posted at Beneficial ownership and tax treaty benefits.

Please note that Form NR301, Form NR302, or Form NR303 should be signed. Otherwise, the CRA will not be certain that the information is true and correct, and that the form was completed by the non-resident or an authorized person.

When a withholding agent or any intermediary in the chain of payments is responsible for deciding whether treaty benefits will be allowed for a particular payee at the withholding stage, that entity determines whether the recommended forms will be required, whether equivalent information will be accepted, and whether it will provide an agent/nominee certification as described in Information Circular 76-12, Applicable rate of Part XIII tax on amounts paid or credited to persons in countries with which Canada has a tax treaty, to the entity they receive payment from, supporting particular withholding rates.

Foreign tax identification number

A foreign tax identification number is a number that non-resident taxpayers use when reporting their income in their country of residence. Some countries do not issue tax identification numbers. So, if the “Foreign Tax Identifier” field is blank on an otherwise completed form, the payer can consider the form complete. However, most non-residents will have an identifier, and the payer should ask them to provide it.

Using a care-of address or a post office box

Form NR301 will be considered valid if a non-resident completes the mailing address information with a care-of address or a post office box, since the payer does not rely on the mailing address to determine the payee's country of residence. The payer instead relies on the field called “Country of residence for treaty purposes” in Part 6 on page 1 of the form. This field has to be properly completed by the payee. An entry in this field such as “see above” is not acceptable.

The CRA recommends that a taxpayer be asked to provide a revised Form NR301 if his or her mailing address has changed to a different country. A change in mailing address from one country to another indicates that the country of residence for treaty purposes may have changed.

Versions of Form NR7-R, Application for Refund of Part XIII Tax Withheld

For requests for refunds of non-resident tax on income paid in 2011 or earlier, the latest version of Form NR7-R should be used. This is because that version reflects the requirements of the Limitation on Benefits provisions placed in the Canada–U.S. tax treaty by the Fifth Protocol. If an earlier version of Form NR7-R is used when an individual, corporation, or trust is applying for a refund, then Form NR301 would also be required.

Multiple beneficial owners for a trust account

Generally, a Canadian trust is a person under the Income Tax Act and under Canada's tax treaties. A non-resident trust would also generally be a person if taxed as a person under the tax rules of the country of residence. In these circumstances, the CRA would generally consider the trust to be the beneficial owner of the income and eligible for treaty benefits on the income it receives. In that case, the trust would complete Form NR301.

Army post office (APO) addresses

Individual non-residents that do not have a physical address on file but have an APO address are eligible for the 15% rate on dividends under the Canada–United States tax treaty. The individuals should give you a completed Form NR301.

Regarding the exception, treat an APO address for U.S. military personnel as an address in the United States rather than as a post office box. Treat military addresses for military personnel from other countries as addresses in the country they are from, as long as you can identify the country.

Information considered recent and equivalent to the information on Form NR301

For a corporate account where you have corporate resolutions and/or certificates of incorporation from U.S. jurisdictions, more information will be required. This includes written confirmation of beneficial ownership, residency, and eligibility for treaty benefits.

For information on corporations and residency, go to Residency of a corporation.

Internal Revenue Service’s Form W-9, Request for Taxpayer Identification Number and Certification

The CRA recommends that payers or intermediaries collect information on forms NR301, NR302, and NR303, since the information on beneficial ownership, residency, and eligibility for treaty benefits is generally the information the payer or intermediary will need to establish that a tax treaty rate applies.

The Internal Revenue Service’s Form W9 is not enough, because it is only for U.S. persons (citizens or other U.S. persons as defined on the form) and does not address beneficial ownership, residency, or eligibility for treaty benefits under the Canada–U.S. tax treaty.

Payments made to a joint account

For payments to joint account holders, each account holder should complete the applicable form.

If account holders are resident in the same country or in separate countries with the same tax rate, the payer applies the appropriate rate. If they are resident in separate countries, with different tax rates, the payer can apply a composite rate depending on the ownership percentages of the income in an account.

When a payer applies a composite rate, he or she should keep the information on ownership percentages on file, in case the CRA asks to see it. Or the payer can withhold at the statutory tax rate of 25% and the account holder can apply for a refund from the CRA by sending Form NR7-R, Application for Refund of Part XIII Tax Withheld.

If one account holder is a Canadian resident and the other is not, and the payer withholds Part XIII tax on the full amount, the Canadian resident includes their share of income and their share of tax withheld on their income tax return (report the full amount paid and the tax withheld on an NR4 slip).

Corporations, trusts, and hybrid entities

On Form NR303, there is a box to indicate a corporation or a trust. A hybrid entity can be considered either a corporation or a trust for Canadian tax purposes.

The Canada–United States income tax treaty is the only treaty that Canada has signed under which a person (who is a resident of the United States) can be considered to derive income that flows through a hybrid entity (Article IV, paragraph 6 of the treaty). Therefore, to calculate Part XIII tax on an amount payable to a hybrid entity, use the treaty tax rate for members or shareholders who are residents of the United States and the statutory withholding rate of 25% for all other members (including residents of Canada).

When completing Form NR303, the authorized person should make sure that he or she reads and understands paragraphs 6 and 7 of Article IV of the Canada–United States income tax treaty and that treaty benefits apply to the income earned.

Royalty payments that are attributable to a permanent establishment in Canada

A non-resident of Canada receiving income normally subject to Part XIII withholding tax that is attributable to a permanent establishment in Canada cannot use Form NR301, Form NR302, or Form NR303 to prove to the payer that no withholding tax is required. Under regulations 805 and 805.1 of the Income Tax Regulations, a non-resident can ask for confirmation from the CRA that an amount will be considered to be attributed to a business carried on through a permanent establishment in Canada, and therefore reported on the non-resident's Canadian income tax return. Requests should be sent in the form of a letter to the related tax services office. The non-resident can then provide the letter from the CRA to the payer.

Non-resident partnerships or limited liability companies with many partners or shareholders

If a partnership or a hybrid entity with non-resident partners or members has many partners or members and it is not practical to get a completed Form NR301, Form NR302, or Form NR303 from each one (for example, when a small share or amount of income is attributable to a particular partner or member that is itself another partnership or hybrid entity with many partners or members), you may include them in Part II of Worksheet A or Worksheet B of Form NR302 and in Part II of Worksheet A of Form NR303. In this way, the composite tax rate will be calculated, assuming no benefits apply to those partners or members.

The partnership can ask for a refund from the CRA using Form NR7-R, Application for Refund of Part XIII Tax Withheld, no later than two years after the end of the year in which an excess withholding is sent.

Statement of Canadian residency for Canadian resident partners

Form NR302, Declaration of eligibility for benefits (reduced tax) under a tax treaty for a partnership with non-resident partners, provides for a reduction of the Part XIII withholding tax on income of a partnership that is allocated to Canadian resident partners that will report their share of partnership income on their Canadian income tax and benefit return. The certification part of Form NR302 requires a partnership to get a statement of Canadian residency for Canadian resident partners. A signed statement by the person or their authorized representative indicating the person is resident and taxable in Canada on their world income is preferable. However, similar statements or information obtained by the partnership from which it can be reasonably concluded that the partner will report the amount on a Canadian income tax and benefit return as a resident of Canada is also acceptable.

Statute of limitations

There is no statute of limitations for Part XIII tax.

Internal Revenue Service’s Form W8Ben

The United States Internal Revenue Service's Form W8Ben does not collect the same information as the CRA's Form NR301. Persons completing Form W8Ben are not resident in the United States. By completing that form, they are certifying beneficial ownership and residency for a treaty between the United States and their country of residence. For payments from Canada to that person, it is the treaty between Canada and that person's country of residence that may apply. Payers should get written confirmation of beneficial ownership and residency and eligibility for treaty benefits under the treaty between Canada and the country of residence. This is what Form NR301, completed by a non-resident person, provides to the payer.

The completion of forms NR301, NR302 and NR303, is not mandatory. Equivalent information (on beneficial ownership, residency, and eligibility for treaty benefits) can be collected from multiple sources. You can enter the requested information on an in-house form that collects other information. And you can use Form W8Ben to give some of the information. You would combine that completed form with other documentation. Such documentation should include written logic of your comparison of the particular two sets of treaties and separate certification of eligibility for treaty benefits or documentation that clearly shows, for example, the meeting of any limiting provisions in the treaty of the country of residence.

Government entities with Canadian-source income

A government entity, such as a foreign government or agency, or the central bank of a foreign country, may be eligible under the Doctrine of Sovereign Immunity for an exemption from tax on dividends from passive investment received from residents of Canada. Interest from passive investment also qualifies, but will generally already be exempt under the Income Tax Act. Exemption under the Doctrine of Sovereign Immunity is granted on a case-by-case basis, and an entity should have a letter of exemption issued by the CRA. These government entities do not complete any of the NR301, NR302, or NR303 forms.

If a government entity does not have a letter of exemption or the withholding tax rate on the income type is not reduced under the Doctrine of Sovereign Immunity, then a tax treaty provision that applies to the income type and available to other residents of that country may reduce the withholding tax rate. The reduced rate would apply if the government entity was the beneficial owner of the income, was considered a resident under the tax treaty, and met any other condition necessary under the particular treaty provision. Canada accepts that the government of a country (called a contracting state under the treaty), and any political subdivision or local authority thereof, is a resident of that country under Canada’s tax treaties. In addition, a few Canadian treaties have provisions that exempt interest and dividends, which certain government entities receive from withholding tax under certain conditions.

In these cases, Form NR301 does not apply to a government entity. Instead, the CRA recommends that the payer accept from the entity a certification of:

• beneficial ownership
• status as the government of a country or political subdivision or local authority thereof
• entitlement to treaty benefits
• having met any conditions specified under the particular provision or elsewhere in the treaty for a reduction of the tax on the income being paid

Professional associations such as unions, homeowners associations, and unincorporated associations with Canadian-source income

The form that professional associations, such as unions, homeowners associations and unincorporated associations, must complete to provide a Canadian payer with proof that they are entitled to a reduced rate of Canadian withholding tax (under the terms of the Canada-U.S. income tax treaty for their Canadian source income) depends on the type of entity the association is.

The following is given as guidance.

We are assuming a question does not include organizations referred to in Article XXI of the treaty (who would have a letter of exemption from the CRA).

For entities where the type of entity is not easily identified as one listed on the forms (NR301 – individual, trust, corporation; NR302 – partnership; NR303 – hybrid entity), the entity may or may not be entitled to the benefits of the treaty. If not entitled, then there is no form to complete.

Letters of exemption from the CRA

The CRA issues letters of exemption to organizations that are resident in the United States and are exempt from withholding tax under Article XXI of the Canada–United States tax treaty. You can find the information you need to get a letter of exemption in paragraph 78 of Information Circular 77-16R4, Non-Resident Income Tax.

Send your request for a letter of exemption to:

Non-Resident Withholding Division
International and Ottawa Tax Services Office
PO Box 9769
Station T
Ottawa ON  K1G 3Y4

For a list of organizations that have received letters of exemption, see Publication T4016, Exempt U.S. Organizations – Under Article XXI of the Canada–United States Tax Convention.

Forms and publications

• IC76-12, Applicable rate of part XIII tax on amounts paid or credited to persons in countries with which Canada has a tax convention
• NR301, Declaration of eligibility for benefits (reduced tax) under a tax treaty for a non-resident taxpayer
• NR302, Declaration of eligibility for benefits (reduced tax) under a tax treaty for a partnership with non-resident partners
• NR303, Declaration of eligibility for benefits (reduced tax) under a tax treaty for a hybrid entity
• NR7-R, Application for Refund of Part XIII Tax Withheld
• T4016, Exempt U.S. Organizations – Under Article XXI of the Canada–United States Tax Convention