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Home Panama Advice Tax withholding from Canadians living in Panama

Tax withholding from Canadians living in Panama

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Here is a common question about tax withholding from Canadians living in Panama:

Dear Roberto,

Hello... sorry to bother you but I am so frustrated trying to get answers from Canada Revenue Agency. I am trying to find out about our income tax situation if we go south for the winter or make a permanent move.

I was told that there is a non-resident withholding tax on our pensions of 25%. That seems a bit ridiculous if we were permanent residents of Panama. Also, told that there is a form NR4 or 5 that allows you to request a reduction but no way to contact the people to give them a hypothetical situation and find out how much we would actually have to pay without being in Panama and filing this form AFTER we make the move.

Do you have any idea where I can find out the criteria they consider. My husband's pension is $2600 per month and mine is $920 CPP disability pension. Those are gross figures and losing 25% of that would really reduce our income.

Thanks again for your time, should you decide to respond.

Debra C.

I asked a tax expert, Jordan Caplan of Soberman LLP to comment on this one. Here is his response:


Dear Rob,

In general, Part XIII of the Income Tax Act applies a 25% withholding tax on Canadian Pensions paid to non-residents. This can be reduced if Canada has a tax treaty with the country the non-resident resides in. Unfortunately Canada does not have a tax treaty with Panama.

The person asked a pretty specific question about being a non-resident of Canada. That means they would not be paying any tax in Canada other than the withholding of 25%. If they just go South for the winter and maintain Canadian residency, which means paying taxes in Canada there would be no additional withholding.

As always, this is of a general nature and I would caution anyone facing this situation to speak to their professional advisors to determine their facts and whether this applies to them.

Best regards,
Jordan Caplan C.A.
Partner, Assurance & Advisory
Soberman LLP, Chartered Accountants
T 416-963-7191

Last Updated on Tuesday, 11 May 2010 21:05  

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