The US-Canada income tax treaty

By Brent Chudoba, editor Updated September 15, 2026

Under the US-Canada income tax treaty, the most the paying country can withhold from an ordinary investor is 15% on dividends, 0% on interest and 0% to 10% on royalties depending on what is licensed. Some recipients and some kinds of payment get a different rate, and the table below lists each one. Without a treaty, US-source dividends and royalties paid to a nonresident are withheld at 30%, while the tax code already exempts most portfolio and bank-deposit interest whether or not a treaty applies.

The treaty has generally applied since 1985, and IRS lists its most recent protocol as taking effect in 2009. It also decides residency when both countries claim you, and assigns who taxes pensions and Social Security. It does not generally stop the US taxing its own citizens.

What are the US-Canada treaty withholding rates?

US-Canada treaty withholding rates and who qualifies
Income	Rate cap	Who gets this rate, and where the treaty says so
Dividends	15%	Anyone not in a category below, including an ordinary individual investor (Article X(2)(b))
Dividends	5%	a company that owns at least 10% of the voting stock of the company paying the dividends (voting stock held through a fiscally transparent entity counts in proportion to the company's share of that entity) (Article X(2)(a))
Dividends	10%	a US company that owns at least 10% of the voting stock of a Canadian non-resident-owned investment corporation paying the dividends (Canada's ceiling on those dividends) (Article X(7)(a))
Dividends	0%	a religious, scientific, literary, educational or charitable organization resident in the other country, only to the extent the income is tax-exempt there, and not on income from a business or from a related person (Article XXI(1))
Dividends	0%	a pension, retirement or employee-benefit trust, company or arrangement resident in the other country, generally tax-exempt there and operated only to provide those benefits, but not on income from a business or from a related person (Article XXI(2))
Dividends	0%	a tax-exempt trust, company or arrangement resident in the other country that is operated only to earn income for a qualifying charity or pension organization, but not on income from a business or from a related person (Article XXI(3))
Interest	0%	Anyone not in a category below, including an ordinary individual investor (Article XI(1))
Interest	15%	US-source contingent interest of a type that does not qualify as portfolio interest under US law, paid to a resident of Canada (Article XI(6)(a))
Interest	15%	Canadian-source interest paid to a US resident that is worked out by reference to the receipts, sales, income, profits or other cash flow of the debtor or a related person, a change in the value of their property, or a dividend or partnership distribution the debtor pays to a related person (Article XI(6)(b))
Royalties	0%	copyright royalties and similar payments for producing or reproducing a literary, dramatic, musical or artistic work, but not films or works on film, videotape or other reproduction for television (Article XII(3)(a))
Royalties	0%	payments for the use of, or the right to use, computer software (Article XII(3)(b))
Royalties	0%	payments for the use of a patent or of know-how (information concerning industrial, commercial or scientific experience), except information provided under a rental or franchise agreement (Article XII(3)(c))
Royalties	10%	every other royalty, including films and television works, trademarks, know-how provided under a rental or franchise agreement, and payments for the use of equipment or other tangible property (Article XII(2))

The cap applies to income paid from one country to a resident of the other, and each treaty conditions it on that resident being the real recipient rather than a conduit; the article cited beside each rate is the one that sets the condition. Which document sets each rate today: dividends, 15% is the 1980 Convention, X(2)(b), never amended. The 5% corporate rate was set by the 1995 Protocol (Article 5(1), replacing 10%) and restated by the 2007 Protocol (Article 5(1)). The 10% NRO rule is the 1995 Protocol (Article 5(2)). The 0% rates for exempt organizations are Article XXI as replaced by the 2007 Protocol (Article 16).; interest, 2007 Protocol, Article 6, which replaced Article XI in full. The Convention set 15% and the 1995 Protocol cut it to 10%. The 2007 Protocol's transitional 7% and 4% rates for related-party interest (Article 27(3)(d)) applied only during the first two calendar years ending after it entered into force and have expired.; royalties, 10% is the 1980 Convention, XII(2), never amended. The 0% list in XII(3) was set by the 1995 Protocol, Article 7(1). The 2007 Protocol amended only XII(5), XII(6)(a) and XII(8), not either rate..

What else changes the rate?

These are edge cases. If you hold ordinary shares, bonds or a copyright, skip to the next section.

Dividends: Dividends from a US Regulated Investment Company always take the 15% rate, even for a company holding 10% or more of the voting stock (X(7)(b)). Dividends from a US REIT never take 5%. They take 15% in only three cases (X(7)(c), as replaced by the 2007 Protocol): the owner is an individual holding no more than 10% of the REIT; the dividends are paid on a publicly traded class of stock and the owner holds no more than 5% of any class of the REIT's stock; or the REIT is diversified and the owner holds no more than 10% of it. In any other case the US domestic rate applies. Separately from dividends, a country may charge a branch profits tax of up to 5% on a permanent establishment's earnings (X(6)). The REIT, RIC and NRO rules run in one direction only. The other ceilings apply the same way in both countries.

Interest: The 15% in both tiers is the treaty's general dividend rate, which XI(6) borrows. An excess inclusion on a residual interest in a REMIC (real estate mortgage investment conduit) may be taxed under each country's own law with no treaty cap (XI(6)(c)). The exemption does not cover interest connected with a permanent establishment in the source country (XI(3)), or the part of related-party interest above an arm's-length amount (XI(5)).

Royalties: The rate depends on what is licensed, so there is no single rate for an individual. An author's or musician's copyright royalties, software payments, patent payments and know-how payments are exempt at source. Film, television and trademark royalties can be taxed at up to 10%. XII(3)(d) also lets the two governments add broadcasting payments to the 0% list by an exchange of notes. No such exchange appears in the IRS or Treasury documents, so broadcasting is not shown as exempt here. The article works the same way in both directions.

Which country are you a resident of under the US-Canada treaty?

If the US and Canada both treat you as a resident under their own laws, Article IV(2) decides. It works through these tests in order, and stops at the first one that points to a single country:

Where you have a permanent home available to you
If you have a permanent home available to you in both countries or in neither, where your personal and economic ties are closer (your centre of vital interests)
If that centre cannot be determined, where you have a habitual abode
If you have a habitual abode in both countries or in neither, the country you are a citizen of
If you are a citizen of both countries or of neither, the two tax authorities settle it by mutual agreement

Using the tie-breaker to be treated as a resident of Canada has US consequences: you file Form 1040-NR with Form 8833 attached, and a green card holder of 8 of the last 15 years who makes the claim is treated as having ended US residency. The details are on the hub page.

Before the treaty: does the US count you as a resident at all?

For someone who is not a US citizen or green card holder, US residency starts with the substantial presence test: at least 31 days in the US this year and 183 days over three years, counting every day this year, 1/3 of last year's days and 1/6 of the year before. If you pass it, the closer connection exception on Form 8840 can still keep you a nonresident without relying on the treaty, but only if you were in the US fewer than 183 days this year, kept a tax home in Canada all year and closer ties there than to the US, and hold no green card and have taken no step toward one.

Both answers turn on an accurate day count, so run yours:

The calculator is made by Spyglass Beacon, a sister site. It runs entirely in your browser: the days you enter are not sent anywhere, by them or by us. For the closer connection exception there is a separate Form 8840 calculator.

Counting after the fact is the hard part, because the answer depends on days you have to remember months later. Spyglass Beacon is a paid app that keeps the running count for you and warns you before you cross a line. We link it because it is a sister site, not because we are paid for the click.

How does the US-Canada treaty tax pensions and Social Security?

Pensions (Article XVIII(1) and XVIII(2)(a)). A pension from one country paid to someone living in the other may be taxed where the retiree lives. That country must exempt any part of the pension that the paying country would leave out of taxable income if the retiree lived there. The paying country may also tax it, but no more than 15% of the gross amount of each periodic payment, and only where the retiree is the beneficial owner. A payment that is not periodic, such as a lump sum, does not get that cap. The 15% cap is not on the saving clause exception list, so it does not limit US tax on a US citizen living in Canada.

Social Security (Article XVIII(5)). Social security benefits are taxed only by the country where the recipient lives. US Social Security paid to someone living in Canada is taxed only by Canada, which treats it like a Canada Pension Plan benefit and exempts 15% of it. A Canadian benefit paid to someone living in the US is taxed only by the US, which treats it like a US Social Security benefit, except that a type of benefit Canada does not tax when it pays it to its own residents is exempt from US tax too. This rule is an exception to the saving clause, so a US citizen living in Canada owes no US tax on US Social Security.

Does the treaty stop the US taxing its own citizens?

Generally no. The saving clause (Article XXIX(2)) keeps that right. Apart from the exceptions listed below, the treaty does not change how each country taxes its own residents, or how the United States taxes its citizens. So a US citizen living in Canada is still taxed by the US as if there were no treaty. The US may also tax a former US citizen or former long-term resident on US-source income for ten years after that person loses the status.

The exceptions: Some promises survive the saving clause, and XXIX(3)(a) lists them. Each country must still apply them, even to its own residents and even to US citizens. From the pensions article the survivors are XVIII(1), (3), (4), (5), (6)(b), (7), (8), (10) and (13), which is where the social security rule sits. Whole articles on the list are XIX (Government Service), XXI (Exempt Organizations), XXIV (Elimination of Double Taxation), XXV (Non-Discrimination) and XXVI (Mutual Agreement Procedure). The list also picks up a few narrower paragraphs in Articles IX, XIII, XXIX, XXIX B and XXX. The Students article is handled separately: under XXIX(3)(b) it survives only for people who are neither citizens of the taxing country nor hold immigrant status there.

What does the treaty say about students?

Article XX. You are covered if you are a student, apprentice or business trainee, you live in the other country or lived there right before the visit, and you are in the host country for full-time education or full-time training. The host country does not tax the payments you receive for your maintenance, education or training, as long as those payments come from outside that country. For an apprentice or business trainee the article runs for no more than one year from the date you first arrive for the training.

What do people most often get wrong about this treaty?

One dividend rate does not cover everyone. Individuals and portfolio investors face 15%. The 5% rate is only for a company that owns at least 10% of the voting stock, and REIT and mutual fund (RIC) dividends follow their own rules.

The interest rate people quote is often out of date. The 1980 Convention set 15% and the 1995 Protocol cut it to 10%. Since the 2007 Protocol most cross-border interest is exempt at source, and 15% is left only for certain contingent or profit-linked interest.

Royalties are not all taxed at 10%. Book, music, software, patent and know-how royalties are exempt at source. Film, TV and trademark royalties are the ones capped at 10%.

The US does not tax the Social Security it pays to its own citizens living in Canada. The social security rule is an exception to the saving clause, so only Canada taxes that benefit. The 15% pension cap is not an exception, so it does not protect US citizens the same way.

How do you claim the treaty rate?

Give the US payer Form W-8BEN naming Canada as your country of residence, before the payment. Many countries ask a US resident for Form 6166, a US residency certificate requested on Form 8802, before they apply the lower rate on their side. Both, with the fees and who can get them, are covered on US tax treaties by country.

Sources

Every rate and article on this page was read in the treaty text and its protocols, then checked a second time by a separate review of the same documents, on September 15, 2026.