NR301 and Canadian Bank Accounts After You Leave Canada

Bank account as a non-resident of Canada: what changes?

Canadian tax law does not make you close a bank or brokerage account when you leave; each institution sets its own rules for non-resident clients. What tax law does require is that you notify your Canadian payers and financial institutions that you are no longer a resident. From then on, Canadian income paid to you falls under non-resident (Part XIII) withholding, which is usually your final Canadian tax on that income.

To get a treaty rate below 25%, give the institution Form NR301; it does not go to the CRA.

A case stops being simple when:

• the account kept paying resident slips for months or years after you left;
• the interest or dividends come from a private corporation you or your family control;
• you hold a joint account with a spouse or relative who stayed in Canada;
• you moved a second time, so your treaty country changed.

What to gather: your departure date, your new address and country of tax residence, a foreign tax number if your new country issues one, a completed Form NR301, every slip the institution issued after you left, and statements showing what was withheld.

Do I have to tell my bank I'm a non-resident?

Yes. The CRA says emigrants must notify Canadian payers and financial institutions. Expect the institution to ask for Form NR301 and your new country of tax residence and its tax number. Under Part XIX of the Income Tax Act, it reports accounts of residents of other countries to the CRA, including that number, and you must give the number when asked, or face a $500 penalty for each refusal unless you have applied for one or cannot get one.

Once the institution records you as a non-resident:

• Income paid while you were resident goes on resident slips such as the T5; only income paid while non-resident goes on an NR4 slip. In the year you leave, expect both.
• The T5 guide tells payers not to report non-residents' income on a T5.
• Withholding starts on dividends and other covered income.

If you say nothing, or leave a relative's Canadian address on file, the institution may keep issuing T5 slips and withholding nothing. Part XIII tax that should have been withheld, on dividends or fund income for example, then goes unpaid. That tax is yours: the CRA can assess you for it, the institution is also liable for it and can recover it from you, and you share liability for the interest on it. How to read the NR4 is covered in the NR4 slip guide. Updating the CRA itself is covered in telling the CRA you are leaving.

Does Canada withhold tax on bank interest paid to a non-resident?

Generally no. Interest paid by a payer that deals with you at arm's length is exempt from Canadian withholding tax, so ordinary savings, GIC and bond interest from a bank or public issuer is usually paid in full.

Two kinds of interest are still taxed under Income Tax Act section 212(1)(b):

• Non-arm's-length interest: interest from a person you do not deal with at arm's length, such as your own corporation or a related person (for example a spouse, parent, child or sibling), unless it is "fully exempt interest" (for example certain government bonds).
• Participating debt interest: interest that depends on profit, revenue, cash flow, a commodity price, dividends or the use of Canadian property.

Both start at 25%; a treaty may lower the rate. The rates for each income type are listed in non-resident tax rates in Canada.

How much does Canada withhold on dividends and fund distributions?

Dividends from Canadian corporations are withheld at 25% unless you show the institution you qualify for a lower treaty rate. Tax treaties commonly reduce the rate on dividends; the rate depends on your country and the treaty's dividend article. Look it up in the treaty with your new country on Finance Canada's list of treaties in force. If Canada has no treaty with your country, the full rate applies.

Mutual funds and ETFs work differently by what they pay out:

• Income a Canadian fund trust or ETF pays out is trust income under section 212(1)(c): it is withheld at 25%, or a lower treaty rate, even when the fund earned it as bank or bond interest.
• Capital gains a fund pays out are generally not Part XIII income: the Act leaves them out of trust income and capital gains dividends out of taxed dividends. The exceptions are gains from Canadian real estate or resources, below.
• Assessable distributions from a "Canadian property mutual fund investment" carry 15% withholding under section 218.3. That label covers listed fund units whose value comes mostly from Canadian real estate, resource or timber property; it catches amounts not otherwise taxed, such as capital gains distributions. The CRA treats this tax as your final Canadian tax on those amounts, though a non-resident who has a loss on the same fund units may be able to apply it against them by filing a Part XIII.2 return on Form T1262.

What is Form NR301, and who do I give it to?

Form NR301 is the declaration a non-resident individual completes to show a Canadian payer that they are the beneficial owner of the income, live in a treaty country and qualify for its reduced rate. You give it to the institution, not the CRA; the CRA's NR301 page is written for payers, who keep it for six years after the last tax year it relates to.

The trap: NR301 ties you to one treaty country. If you later move again, or anything on the form changes, the form says to tell the institution right away and complete a new one; until then the rate applied may be wrong. US residents should read Canadian accounts after moving to the US for both countries' side.

Do I pay Canadian tax when I sell Canadian shares or funds as a non-resident?

Generally not. A non-resident pays Canadian tax on a gain only if the property sold is "taxable Canadian property". Listed shares and fund units qualify only in narrow cases, such as a large holding in a company whose value comes mostly from Canadian real estate or resources; private company shares are tested differently. Both are covered in non-residents selling Canadian property.

The gain that built up before you left belongs on your departure return as a deemed disposition; see your investment account when you leave Canada.

What about my RRSP, RRIF, TFSA or FHSA at the same bank?

Registered plans follow their own rules, and the institution may ask about each one separately:

• Withdrawals from an RRSP or RRIF: cashing out an RRSP before or after leaving.
• New contributions: contributing to an RRSP or TFSA after leaving.
• FHSA: your FHSA when you leave Canada.
• Living in the US: RRSP and TFSA after leaving Canada.

Joint account with a spouse or relative still in Canada: how is it reported?

When one holder lives in Canada and the other does not, the institution may withhold Part XIII tax on the full amount and report all of it on one NR4, marked as a joint account. The holder in Canada then includes their share of the income and their share of the tax withheld on their own Canadian return. Other institutions split the account by the ownership shares on file, so the resident's share goes on a T5. Each holder should complete the applicable form.

When the holders live in different countries with different rates, the CRA lets the institution apply a composite rate based on the ownership shares it has on file, or withhold 25% and leave the holder to claim the excess with Form NR7-R. If the shares on file do not match who actually put the money in, whose return the income belongs on depends on facts this guide cannot settle.

Wrong rate withheld, or the bank still treats me as a resident: how do I fix it?

Fix it at the source first, then claim what was over-withheld:

1. Update your residence and address with the institution and give it Form NR301 (or the information it asks for).
2. Ask it to correct slips for the period after you left, where it can.
3. For Part XIII tax withheld at too high a rate, file Form NR7-R. The CRA must receive it within 2 years after the end of the calendar year in which the payer remitted the tax; some treaties allow longer.
4. If resident slips were issued after you left, ask the institution to replace them with NR4 slips. It owes the tax it did not withhold and may recover it from you. If you reported that income on a Canadian return as a resident, that return may need to change too.

The refund process and which income needs a Canadian return are covered in non-resident returns and catch-up.

Example

All figures are in Canadian dollars and illustrative.

Savings and dividends after moving to Australia

Lee moves to Australia and keeps a Canadian savings account and a brokerage account. Next year the savings account pays $2,000 of interest from the bank, an arm's-length payer: no Canadian tax is withheld. The brokerage account pays $5,000 of Canadian dividends. Without NR301, the broker withholds 25%, $1,250. With a completed NR301, it applies the dividend rate in the Canada–Australia treaty instead.

Joint account, one spouse leaves

Sam moves to Singapore; Alex stays in Ontario. Their joint savings account, owned equally, earns $1,000 of interest. Their bank reports the whole account on one NR4 for the full $1,000, marked as a joint account; as arm's-length interest, nothing is withheld. Alex reports $500 on a resident return.

Two years of resident slips

Jordan leaves Canada but never tells the broker.

• Year 1: the broker issues a T5 for $4,000 of dividends and withholds nothing; at 25%, $1,000 should have been withheld (less under a treaty).
• Year 2: the same again: another $1,000.
• Year 3: Jordan updates the address and gives NR301. The broker now withholds the treaty rate.

The two missed years are not fixed by NR301 alone. The $2,000 of Part XIII tax is Jordan's, and those slips name Jordan as a resident. The CRA can assess Jordan for it; the broker is also liable for it, can recover it from Jordan, and faces its own penalty; both share the interest. Settling this means working through the broker's corrections and the CRA, not only filing an NR7-R.

Different for you?

• Years of resident slips, a Canadian address left on file, or no withholding after you left: the past years need to be corrected, not only future ones. See non-resident returns and catch-up, and if the slips are already wrong, talk to us about individual tax help.
• Dividends or interest from your own or a family corporation: non-arm's-length interest is taxed and private-company dividends have their own planning. Get individual tax help.
• A large portfolio or holdings in several countries: treaty rates, the new country's tax and foreign tax credits must line up. Get individual tax help.
• Joint account with a spouse or relative in Canada, or a second move: who reports which share, and which treaty rate applies, depend on facts the institution's records may not show. Get individual tax help.
• You still have to deal with the year you left: see leaving Canada and your investment account when you leave.
• You now live in the US: see RRSP and TFSA after leaving Canada.
• Moving the money abroad: see moving your money out of Canada.
• Rates for pensions, rent and other income: see non-resident tax rates in Canada.