Exempt U.S. Organizations - Under Article XXI of the Canada - United States Tax Convention

Revised March 31, 2024

T4016(E) Rev.24

Clients who want a Letter of Exemption should write to the Sudbury Tax Center at the following address:

Non-Resident Withholding Section
Canada Revenue Agency
Article XXI
Post Office Box 20000, Station A
Sudbury ON P3A 5C1

For more information about Letters of Exemption call us at 1-855-284-5946 (Canada and the United States), or 613-940-8499 (Outside Canada and the United States), or by fax us at 1-866-765-8460 (Canada and the United States) or 1-705-677-7712 (Outside Canada and the United States).

The U.S. organizations listed in this guide are approved for the exemption from Canadian Non-Resident Tax under Article XXI, paragraphs 1 and 2 of the Canada – U.S. Income Tax Convention with effect to March 31, 2022.

Letter of Exemption Requirements:

Paragraph 1

Under Paragraph 1 of Article XXI, we require the following information prior to issuing a Letter of Exemption:

• Articles of incorporation (to verify the purpose of the organization, the trustee information, dissolution clause, and the not-for-profit clause)
• A letter of favorable determination within 10 years of being issued from the Internal Revenue Service (IRS) stating that the organization is tax exempt under 501(c)(3) of the Internal Revenue Code or Form 6166 stating that the organization is recognized as a tax exempt organization per 501(c)(3) and resident in the United States
• Information concerning the types of income received from sources within Canada, and
• Address of organization

Paragraph 2

Under Paragraph 2 of Article XXI, we require the following information prior to issuing a Letter of Exemption:

• A letter from the IRS stating that the plan is tax exempt pursuant to the Internal Revenue Code
• Plan documents are required to verify the:
  1. non-diversion of funds
  2. dissolution clause
  3. trustee information
  4. effective date of the trust, trustee signature, and
  5. name and address of the plan

Individual Retirement Accounts (IRAs) are also exempt under Paragraph 2 of Article XXI. In order for an IRA plan to qualify for purposes of a Letter of Exemption, the custodian/trust/individual must provide the CRA with the following information:

• The name of the beneficial owners of the IRAs
• The Tax Identification Number of the beneficial owners
• The addresses of the beneficial owners
• A notarized affidavit as to the country of residence of the holder of the IRAs and either
  • a hard copy of the IRAs approved adoption agreement of an Individual Retirement Plan/Trust Agreement
  • a hard copy of the custodian’s Individual Retirement Plan/Trust Agreement, and
  • a hard copy of the fully completed IRS Form 5305 or 5305A

Article XXI
Exempt Organizations

1. Subject to the provisions of paragraph 4, income derived by a religious, scientific, literary, educational, or charitable organization shall be exempt from tax in a Contracting State but only to the extent that such income is exempt from tax in that other State.
2. Subject to the provisions of paragraph 4, income referred to in Articles X (Dividends) and XI (Interest) derived by a trust, company, organization or other arrangement that is a resident of a Contracting State, generally exempt from income taxation in a taxable year in that State and operated exclusively to administer or provide pension, retirement or employee benefits shall be exempt from income taxation in that taxable year in the other Contracting State.
3. Subject to the provisions of paragraph 4, income referred to in Articles X (Dividends) and XI (Interest) derived by a trust, company, organization or other arrangement that is a resident of a Contracting State, generally exempt from income taxation in a taxable year in that State and operated exclusively to earn income for the benefit of one or more of the following:
   1. An organization referred to in Paragraph 1; or
   2. A trust, company, organization or other arrangement referred to in paragraph 2;
   
   shall be exempt from income taxation in that taxable year in the other Contracting State.
4. The provisions of paragraphs 1, 2, and 3 shall not apply with respect to the income of a trust, company, organization, or other arrangement from carrying on a trade or business or from a related person other than a person referred to in paragraphs 1, 2, or 3.