Penalties for non-residents

Failure to deduct

If you failed to deduct the required amount of the Part XIII tax from the amount you pay or credit to a non-resident, you are liable for this amount even if you cannot recover the amounts. We may assess you for any amount owing. We will also assess a penalty and interest as described in the section below.

Penalty for failure to deduct 

The Canada Revenue Agency (CRA) can assess you for the amount of tax that you failed to deduct. The CRA can also assess a penalty of 10% of the required amount of Part XIII tax you failed to deduct.

If you are assessed this penalty more than once in a calendar year, the CRA will apply a 20% penalty to the second or later failures if they were made knowingly or under circumstances of gross negligence.

Failure to provide information on an information return

Anyone who prepares an NR4 information return has to make a reasonable effort to get the necessary and correct information, including identification numbers, from the recipients that will receive the slips. If you do not do this, you may be liable to a $100 penalty for each failure to comply with this requirement.

Penalty for failure to remit and remitting late

The CRA can assess a penalty on the amount you failed to remit when one of the following applies:

  • you deduct the amounts, but do not remit them
  • the CRA receives the amounts you deducted after the due date

When the due date is a Saturday, a Sunday, or a public holiday recognized by the CRA, your remittance is considered on time if the CRA receives it on the next business day.

The penalty for remitting late is:

  • 3% if the amount is one to three days late
  • 5% if the amount is four or five days late
  • 7% if the amount is six or seven days late
  • 10% if the amount is more than seven days late or if no amount is remitted

Note

The CRA will charge you a fee for any payment that your financial institution refuses to process. If your payment is late, the CRA can also charge penalties and interest on any amount you owe.

Late-filing and failure to file the NR4 information return

You have to give the recipient his or her NR4 slip and file your NR4 information return with the CRA on or before the last day of March after the calendar year the information return applies to, or no later than 90 days after the end of the estate's or trust's tax year.

Loss restriction event

A tax year of a trust or an estate may end early because of a loss restriction event. The CRA calls this a "pre-LRE year-end." When the pre-LRE year-end is in the same calendar year as the trust's or the estate's ordinary tax year-end, the NR4 return must be filed within 90 days of the trust's or the estate's ordinary tax year-end.

When the pre-LRE year-end is not in the same calendar year as the trust's or the estate's ordinary tax year-end, there are two scenarios:

  • for mutual fund trusts that filed an election to have a tax year-end of December 15 and the pre-LRE year-end is after December 15 of that calendar year, the NR4 return must be filed within 90 days of that December 15 tax year-end
  • in any other case, the NR4 return must be filed within 90 days of the end of the calendar year the pre-LRE year-end is in

For more information about loss restriction events, see Loss trading – Rules for trusts.

If your business or activity ceases during the year, you have to file an NR4 information return within 30 days of ending your business or stopping your activity.

When the due date falls on a Saturday, a Sunday, or a public holiday recognized by the CRA, your information return is considered on time if the CRA receives it or if it is postmarked on or before the next business day.

The CRA will assess a penalty if you file your information return late. For NR4 information returns, the CRA has an administrative policy that reduces the penalty that it assesses so it is fair and reasonable for small businesses.

Interest

If you fail to pay an amount, the CRA may apply interest from the day your payment was due. The interest rate the CRA uses is determined every three months, based on prescribed interest rates. Interest is compounded daily. The CRA also applies interest to unpaid penalties. 

Wrong method of filing information return

For more information, go to Penalty for failure to file information returns over the Internet.

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