Canada

WHT at a rate of 25% is imposed on interest (other than most interest paid to arm's-length non-residents), dividends, rents, royalties, certain management and technical service fees, and similar payments made by a Canadian resident to a non-resident of Canada.

Canada is continually renegotiating and extending its network of treaties, some with retroactive effect. This table summarises WHT rates on payments arising in Canada. The applicable treaty should be consulted to determine the WHT rate that applies in a particular circumstance.

Notes

1. Interest: Canada does not impose WHT on interest (except for 'participating debt interest') paid or credited to arm's-length non-residents. Most treaties have an explicit provision for higher WHT on interest in excess of FMV in non-arm's-length circumstances.
2. Royalties: A zero royalty rate generally applies to:
   • copyright royalties and payments for a literary, dramatic, musical, or other artistic work (but not royalties for motion picture films, work on film or videotape, or other means of reproduction for use in television), and/or
   • royalties for computer software, a patent, for information concerning industrial, commercial, or scientific experience (but not royalties for a rental or franchise agreement), or for broadcasting.

   Most treaties explicitly provide for higher WHT on royalties in excess of FMV in non-arm's-length circumstances. A zero rate of tax may apply in certain cases.

3. The treaty has been signed but is not yet in force. In the absence of a treaty, Canada imposes a maximum WHT rate of 25% on dividends, interest, and royalties.
4. The lower (lowest two for Vietnam) rate applies if the beneficial owner of the dividend is a company that owns/controls a specified interest in the paying company. The nature of the ownership requirement, the necessary percentage (10%, 20%, 25%, or higher), and the relevant interest (e.g. capital, shares, voting power, equity percentage) vary by treaty.
5. If the other state (Canada for the treaty with Oman) concludes a treaty with another country providing for a lower WHT rate (higher rate for Kenya), the lower rate (higher rate for Kenya) will apply in respect of specific payments within limits, in some cases. This is called a ‘most favoured nation’ provision.
6. A 'most favoured nation' provision (see note 5 above) in Canada's treaty with Chile reduces the WHT rate on interest from 15% to 10% on 1 January 2019 (in certain cases, the 10% rate also applied between 1 January 2017 to 31 December 2018).
7. Canada's treaty with China does not apply to Hong Kong.
8. The treaty status of the republics that comprise the former USSR is as follows:
   • Azerbaijan, Estonia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Russia, Ukraine, and Uzbekistan: New treaties entered into force (see table for rates).
   • Other republics: No negotiations are underway.

   Belarus, Tajikistan, and Turkmenistan will not honour the treaty with the former USSR. As a result, Canada will impose a maximum WHT rate of 25% on dividends, interest, and royalties until a new treaty enters into force. For other republics that comprise the former USSR, the status of the former treaty with the USSR is uncertain. Because the situation is subject to change, Canadian taxpayers are advised to consult with the CRA as transactions are carried out.

9. A 'most favoured nation' provision (see note 5 above) in Canada's treaty with Lithuania exempts certain royalties (as mentioned in note 2 above) paid or credited after 31 December 2018 from WHT.
10. For the United States, the reduced treaty rates apply, subject to the Limitation on Benefits article.
11. The treaty or protocol is under renegotiation.

Interest coupon stripping

Recently enacted legislation amends the WHT rules to ensure that the total tax withheld on interest paid under an interest coupon stripping arrangement is the same as if the arrangement had not been undertaken. 

Interest coupon stripping arrangements generally involve a non-resident lender selling its right to receive future interest payments (interest coupons) in respect of a loan made to a non-arm’s-length Canadian-resident borrower to a party that is not subject to WHT or is subject to a rate of WHT that is lower than the applicable rate to the non-resident lender. Under such arrangements, the non-resident lender generally retains its right to the principal amount of the loan.

The rules generally apply to interest accrued after 6 April 2022 that is paid or payable by a Canadian resident borrower to an interest coupon holder. The effective date is deferred to 7 April 2023 if:

• the debt was issued by the Canadian resident borrower before 7 April 2022, and 
• the payment is made to an interest coupon holder that deals at arm’s length with the non-resident lender and who acquired the interest coupon under an arrangement entered into before 7 April 2022.