Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
This is in reply to your letter of May 21 concerning interest being paid by a Canadian bank to your grandmother, a U.S. resident and citizen.
We should first mention that pursuant to Article XI of the Canada-U.S. Income Tax Convention (1980), the rate of Canadian Part XIII tax on interest paid to a resident of the U.S. is 15%. Thus, if 25% is being withheld by the Canadian bank, as suggested in your letter, your grandmother is entitled to a refund of the excess withholding of 10%. She may obtain this refund by filing a form NR7-R within two years from the end of the taxation year in which the excess 10% was paid. Enclosed are two copies of form NR7-R. As noted on the form, it should be filed with the taxation office to which the withholdings were remitted. If this was the Vancouver office the address is:
Vancouver District Taxation Office 1166 Vest Pender Street Vancouver, B.C. V2A 1N6
Additional NR7-R forms, if required, may be obtained from that office.
Insofar as a complete exemption is concerned, there is no exemption from the 15% Canadian tax on interest earned on Canadian funds deposited on a short term basis with a Canadian bank. However, such exemptions are available with respect to interest earned on certain types of investments. We are enclosing copies of Interpretation Bulletins IT-155R2, 360R and 361R which discuss the types of investments on which interest is exempt from tax when paid to a non-resident of Canada. For example, if you refer to paragraph 6 of IT-360R, you will note that if an account deposited with a Canadian bank is repayable in U.S. dollars, the interest paid by the bank will be exempt if it is also payable in U.S. dollars.
We trust the above comments will be of assistance. Should you require additional information, we suggest that you contact officials in the the Vancouver District Taxation Office.
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