NR5 Form: Lower Withholding on Canadian Pensions Abroad

Can Form NR5 reduce non-resident tax on my CPP, OAS or pension?

Yes, for future payments, if the CRA approves it. Canada withholds 25% from CPP, OAS and most pension payments to non-residents unless a treaty lowers it (Service Canada). Form NR5 asks the CRA to authorize your payers to withhold less, for one of two reasons (Form NR5):

• Section 217 reduction. The CRA uses your estimates to decide whether paying tax at resident rates on a section 217 return would cost less than flat withholding. If so, it lowers withholding now, and you file a return for every approved year.
• Treaty exemption. Residents of certain countries, including Portugal and the Philippines, can only get a treaty exemption on their pensions through NR5. The NR5 form says this kind of approval needs no Canadian return, but Service Canada's page says a return is still due each year; follow what the CRA's approval letter says.

NR5 tends to be worth it when Canadian pension-type payments are most of your income and your world income is modest, or when your country's treaty exemption needs it. The cost of a section 217 approval is a return for every year it covers.

The payer may not reduce tax until it receives the CRA's written authorization; the CRA sends a letter to you and each payer (CRA: T4061).

A case stops being simple when you have income in two countries to estimate, a pension in Canada plus a pension or job abroad, a missed return in an approved year, or a residence question that is not settled. Gather before you apply:

• Your SIN or ITN, date of birth and date you left Canada
• Each Canadian benefit for the coming year: CPP or QPP, OAS, pension, RRSP, RRIF (minimum amount), with account numbers and payer addresses
• Estimated other Canadian income and estimated income from outside Canada
• Spouse and dependant details, if you will claim credits
• A copy of the power of attorney, if someone signs for you

Which form lowers which withholding: treaty rate, NR301 or NR5?

It depends on who pays and what you want. CPP and OAS reach the treaty rate without any form; a private payer (pension plan, RRIF provider, bank) applies a treaty rate from Form NR301; only the CRA, through NR5, can grant a section 217 reduction or the treaty exemptions that require it.

A payer uses NR301 to confirm you are the beneficial owner and a treaty resident before applying a reduced rate (CRA: T4061). For bank and brokerage payers, see Canadian bank and brokerage accounts after leaving. For each country's rates, see non-resident tax rates in Canada.

Do I need NR5 if my country already has a treaty rate for CPP and OAS?

Usually not for the treaty rate itself. Service Canada's country table lists the rate on OAS, CPP and QPP for each treaty country, and says residents of a treaty country do not need to ask for the reduction (Service Canada).

NR5 still matters in two cases: your country's exemption is one of those that need CRA approval, or you want withholding below the treaty rate through a section 217 election. If you live in a country without a tax treaty, NR5 is the only way to withhold less than 25% before year end.

When is NR5 the only way to get a treaty exemption?

When your country's treaty gives a pension exemption that the CRA must approve. The NR5 form names residents of Algeria, Azerbaijan, Brazil, Croatia, Cyprus, Ecuador, Greece, Ireland, Italy, the Philippines, Portugal, Romania, Senegal, Slovenia and Turkey (Form NR5); the CRA's pensions page also lists Poland. For a treaty-only application, complete every section and report all Canadian benefits and net world income (your income from every country, after deductions). You are not electing under section 217, and the form says you need not file a return for it; Service Canada's page says a return is still due each year, so read your approval letter.

Sources: Service Canada; CRA: pensions and similar payments.

The Portugal treaty applies the exemption to periodic pension payments: Canadian tax on them may not exceed 15% of the year's periodic payments above $12,000, or the resident-rate amount if lower (Article 18). Lump-sum payments, such as an RRSP withdrawal, fall outside that cap. The Philippines treaty likewise applies its threshold to periodic pension payments: going over $5,000 does not lose the exemption on the first $5,000, and Canadian tax on the excess may not exceed 30% of it (Article XVIII). For other listed countries, read the treaty's pension article on the Department of Finance treaty page before applying.

When does a section 217 NR5 pay off?

When pension-type payments are most of your income and your total income is modest. Withholding is a flat rate on the gross payment; a section 217 return taxes the same payments at resident rates with credits, using your world income to set the rate (section 217). The more of your world income comes from these Canadian payments, the more credits the return allows; the section 217 return guide explains how.

The payments that qualify include CPP and QPP, OAS, most pensions, RRSP and RRIF payments, retiring allowances, death benefits and employment insurance benefits (Form NR5). The CRA, not you, decides whether the election benefits you, from the figures you put on NR5.

The trade is cash now versus a filing duty for five tax years. If you would rather not commit, you can skip NR5 and still file a section 217 return after the year to recover over-withheld tax. For how that return works, see the section 217 return for pension and RRSP income.

When must I send NR5, and when does lower withholding start?

Send it early: the CRA says by October 1 or before the first payment is due (CRA). Service Canada's page gives October 31 for CPP and OAS and says an approved reduction starts with January payments of the following year (Service Canada). The two dates differ; sending by the earlier date meets both.

Send NR5 to the CRA's Non-Resident Withholding Section by mail, fax, or the Submit Documents service in My Account (see CRA My Account from outside Canada); the form lists the address and fax numbers (Form NR5). Until your payers receive the CRA's letter, they keep withholding at the old rate.

How long does NR5 approval last, and what needs a new or amended NR5?

An approval usually covers five tax years, at the same reduced rate unless your situation changes (CRA: five-year policy).

An amendment approved in the first year keeps the original five-year period; one approved in a later year counts as a new application (CRA: five-year policy).

What do I promise, and what if I miss the section 217 return?

With a section 217 approval, you promise to file a section 217 return for each approved year by June 30 of the next year (CRA reminder). Miss it and you owe the full tax the payers should have withheld, less only what they did withhold.

The NR5 form adds that the CRA cannot process a section 217 return filed late (Form NR5), so a missed year is not fixed by filing late. If a deadline has already passed, see non-resident returns and catching up. The tax withheld each year shows on your NR4 slip.

What if the CRA refuses my NR5?

Withholding continues at the normal rate, and you can still file a section 217 return after the year to claim back all or part of the tax withheld on eligible income (CRA: should you elect). A refusal does not stop you from filing that return. If a payer withheld more than the correct rate, Form NR7-R is the other route (catch-up guide).

What do I send with NR5?

The signed form, with every section that applies completed. The form asks for (Form NR5):

1. Your identity: SIN or ITN, date of birth, departure date, spouse's name and number. Without a SIN or ITN, file Form T1261 first.
2. Each Canadian benefit for the year, with estimated gross amount, account or policy number and payer address. For a RRIF, give the minimum amount.
3. Estimated other Canadian income and income from outside Canada, with details on a separate sheet where asked.
4. Credit information for a spouse, dependants, studies or disability.
5. Your signature. If someone signs for you, attach a copy of the power of attorney.

Do not use NR5 for pension, retiring allowance or RRSP amounts you are transferring to an RRSP or RPP; Form NRTA1 covers those.

Example

Illustrative figures in Canadian dollars.

A retiree in Portugal

CPP of C$9,000 and a company pension of C$6,000 a year, total C$15,000. Without NR5, CPP is withheld at Portugal's listed 15%, C$1,350 a year, and the company pension at the rate its payer applies. With an approved NR5, the first C$12,000 is exempt; Canadian tax on the remaining C$3,000 is at most 15%, C$450, and lower if a Canadian resident would pay less tax on C$15,000 of pensions. The CRA's letter tells each payer what to withhold. The NR5 form says no section 217 return is needed for this treaty-only approval; the letter confirms what applies.

A retiree in the Philippines

The only Canadian pension is CPP of C$4,000 a year. Without NR5, 25% is withheld, C$1,000 a year. With an approved NR5, nothing is taxed: periodic pensions are taxed only above C$5,000 a year. If a RRIF later lifts the total to C$7,000, the first C$5,000 stays exempt and Canadian tax on the C$2,000 above it is at most 30%, C$600; tell the CRA with a new or amended NR5.

A RRIF and little other income

A non-resident in a country without a tax treaty with Canada draws C$20,000 a year from a RRIF and has little other world income. Without NR5, 25% is withheld: C$5,000 a year. The CRA approves a section 217 NR5 in year 1 and authorizes lower withholding for years 1 to 5:

• Years 1 to 5: file a section 217 return by June 30 after each year.
• Year 3: a foreign job starts and world income rises. File an amended NR5 within 30 days; once approved, it counts as a new five-year period, so section 217 returns are then due for years 3 to 7, not only to year 5.
• If the year 4 return is missed: the full tax less the reduced withholding becomes owing for year 4.

Different for you?

• You missed a section 217 return in an approved year, or several years: see non-resident returns and catching up and get individual tax help.
• You are filing the section 217 return, Schedule C or the OAS return: use the section 217 return guide.
• You are converting an RRSP to a RRIF from abroad: see converting an RRSP to a RRIF as a non-resident.
• You live in the US: Service Canada's table lists no Canadian tax on CPP, QPP or OAS for US residents, so NR5 does not apply to them (Service Canada). For RRSP, RRIF and pension payments, see RRSP and TFSA after leaving Canada and get cross-border tax help.
• The CRA sent a letter about your NR5 or a section 217 year, or mail went to your old address: see answering a CRA letter from abroad and get individual tax help.
• You are not sure you are a non-resident, or you left this year: start with leaving Canada before applying.
• Your estimates span pensions, a job or investments in two countries: the NR5 figures drive the CRA's decision and your five-year duty; get individual tax help.