How to Read an NR4 Non-Resident Tax Withholding Slip

What Is an NR4 Slip?

The NR4 slip, officially titled "Statement of Amounts Paid or Credited to Non-Residents of Canada," is an information slip issued by Canadian payers who make certain payments to non-residents. Similar to how T4 slips report employment income and T5 slips report investment income for Canadian residents, the NR4 slip reports income paid to non-residents and the non-resident withholding tax deducted on those payments.

Under Part XIII of the Income Tax Act, Canadian payers are required to withhold tax at source on certain payments to non-residents. The standard withholding rate is 25%, though this rate may be reduced by an applicable tax treaty between Canada and the non-resident's country of residence. The NR4 slip documents both the gross amount paid and the tax withheld.

Who Receives an NR4 Slip?

You will receive an NR4 slip if you are a non-resident of Canada and you received certain types of Canadian-source income during the year. The payer (the Canadian entity making the payment) is responsible for preparing and issuing the NR4 slip. Common recipients include:

• Former Canadian residents who moved abroad but still receive Canadian pension income, RRSP/RRIF withdrawals, or investment income.
• Non-resident property owners who earn rental income from Canadian real estate.
• Non-resident investors who receive dividends, interest, or royalties from Canadian sources.
• Non-resident beneficiaries of Canadian trusts or estates who receive distributions.

Newcomers who later leave Canada and become non-residents should be aware that any Canadian-source income they continue to receive will be subject to non-resident withholding tax and reported on NR4 slips. For related information, see our guide to Form T2062 for non-resident property sales.

Types of Income Reported on NR4

The NR4 slip uses income codes to identify the type of payment. Common income codes include:

• Code 01 - Management fees
• Code 04 - Interest (arm's length)
• Code 11 - Dividends paid by Canadian corporations
• Code 12 - Royalties (copyright, patent, etc.)
• Code 14 - Rents from real property
• Code 18 - Pension benefits (including OAS and CPP)
• Code 26 - RRSP payments
• Code 28 - RRIF payments
• Code 29 - Trust income
• Code 37 - Retiring allowances

The income code is important because it determines the applicable withholding rate and tax treaty provisions. Different types of income may have different treaty-reduced rates.

Understanding the NR4 Slip Layout

The NR4 slip contains several boxes with specific information:

Box 14 - Country Code

This identifies the non-resident's country of residence for tax treaty purposes. The country code determines which tax treaty (if any) applies to reduce the withholding rate.

Box 16 - Gross Income

This is the total gross amount paid or credited to the non-resident before any withholding tax is deducted. This is the full amount of the payment in Canadian dollars.

Box 17 - Non-Resident Tax Withheld

This is the amount of Canadian non-resident tax that was withheld at source. This amount has already been remitted to the CRA by the payer on the non-resident's behalf.

Box 18 - Income Code

This identifies the type of income using the income codes listed above. Each type of income may have different withholding rates and treaty provisions.

Box 24 - Exemption Code

If a reduced withholding rate was applied due to a tax treaty or other exemption, this box contains the code identifying the basis for the reduction.

Tax Treaty Rate Reductions

Canada has tax treaties with over 90 countries. These treaties often reduce the standard 25% withholding rate for non-residents. Common reduced rates include:

• Dividends: Often reduced to 15% (or 5% for substantial shareholders) under most treaties.
• Interest: Often reduced to 10% or exempt under many modern treaties. Note that arm's-length interest paid to non-residents is generally exempt from withholding tax under Canadian domestic law.
• Pensions: Reduced to 15% under many treaties (such as the Canada-US treaty). Some treaties exempt periodic pension payments entirely.
• Royalties: Often reduced to 10% under most treaties.
• Rents: The 25% rate generally applies to gross rents, though non-residents can elect to file a Section 216 return to be taxed on net rental income instead.

To benefit from a treaty-reduced rate, the non-resident (or the Canadian payer) must inform the CRA of the non-resident's country of residence and the applicable treaty provision. The payer typically requests this information using Form NR301 (Declaration of Eligibility for Benefits Under a Tax Treaty for a Non-Resident Person).

How to Use Your NR4 Slip

Filing a Canadian Tax Return

In most cases, non-resident withholding tax under Part XIII is a final tax, meaning you do not need to file a Canadian tax return for this income. However, there are situations where filing a Canadian return is beneficial or required:

• Section 216 Election for Rental Income: If you receive Canadian rental income, you can elect under Section 216 to file a return and be taxed on your net rental income (after expenses) rather than on the gross rent. This often results in less tax than the 25% withholding on gross rent.
• Section 217 Election for Pensions: If you receive Canadian pension income, you can elect under Section 217 to file a return and be taxed at graduated rates rather than the flat withholding rate. This may be beneficial if your total income is low.
• Selling Canadian Property: If you sold taxable Canadian property during the year, you must file a T1 return. See our guide to Form T2062 for details.

Claiming Foreign Tax Credits

The Canadian withholding tax shown on your NR4 slip is a tax you have already paid to Canada. In most cases, you can claim this as a foreign tax credit on your tax return in your country of residence. This prevents double taxation of the same income. For example, if you are a US resident receiving Canadian dividends, you would report the dividend income on your US tax return and claim a foreign tax credit for the Canadian withholding tax shown on the NR4.

Keep your NR4 slips as proof of Canadian tax paid when filing your tax return in your country of residence. Your foreign tax authority may require a copy of the NR4 slip to support your foreign tax credit claim.

Common Issues with NR4 Slips

Incorrect Withholding Rate

If the Canadian payer withheld at 25% when a lower treaty rate should have applied, you can request a refund from the CRA by filing a Canadian income tax return or by having the payer request an adjustment. Make sure the payer has your correct country of residence and the applicable NR301 declaration on file.

Missing NR4 Slips

If you did not receive an NR4 slip for income you know was paid to you, contact the Canadian payer directly. The payer is required to issue the NR4 slip by March 31 of the following year. You can also check with the CRA if you have a Canadian tax account.

Currency Conversion

NR4 amounts are reported in Canadian dollars. When reporting this income in your country of residence, you will need to convert the amounts to your local currency using the appropriate exchange rate. Check with your country's tax authority for the correct conversion method (annual average rate, spot rate on the date of payment, etc.).

NR4 for Former Canadian Residents

If you are a former Canadian resident who has moved abroad, you may receive NR4 slips for several types of income:

• RRSP or RRIF withdrawals - When you withdraw from your RRSP or RRIF as a non-resident, the financial institution withholds 25% (or the treaty rate) and issues an NR4.
• CPP/OAS payments - If you receive Canada Pension Plan or Old Age Security payments while living abroad, Service Canada will withhold non-resident tax and issue NR4 slips.
• Employer pensions - Private pension plans will withhold and report on NR4 slips.
• Rental income - If you still own rental property in Canada, your property manager or tenant should withhold and report on NR4 slips. Learn more in our guide to tenant rights in Canada.

Responsibilities of the Canadian Payer

The Canadian entity making payments to non-residents has several obligations:

• Withhold the appropriate non-resident tax at source
• Remit the withheld tax to the CRA by the 15th of the month following the payment
• File the NR4 information return with the CRA by March 31 of the following year
• Provide copies of the NR4 slip to the non-resident recipient by March 31

If a payer fails to withhold and remit, they are liable for the amount that should have been withheld, plus penalties and interest. The CRA takes non-resident withholding compliance seriously.

Getting Help

Non-resident tax matters can be complex, especially when tax treaties are involved. If you have questions about your NR4 slip or your Canadian tax obligations as a non-resident, consider consulting a Canadian tax professional with experience in international taxation. You can also contact the CRA's International Tax Services Office at 1-855-284-5942 (from outside Canada) or visit the CRA international tax page.

Final Thoughts

The NR4 slip is a key document for non-residents of Canada who receive Canadian-source income. Understanding the information on the slip, including the income codes, withholding rates, and treaty provisions, helps you ensure that the correct amount of tax is being withheld and that you can claim appropriate foreign tax credits in your country of residence. Keep your NR4 slips on file, verify that the withholding rate is correct based on the applicable tax treaty, and consider filing a Canadian return if it would result in a lower tax burden. By staying informed about your obligations, you can manage your cross-border tax affairs efficiently and avoid unnecessary costs.

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