Withholding tax on interest payments to non-residents

The tax rules provide that there is generally no Canadian withholding tax on interest paid to all arm’s-length non-residents (regardless of their country of residence), with certain exceptions. Interest paid on debts owed between related (non-arm’s length) parties is generally subject to a 25% withholding tax rate, which may be reduced under an income tax treaty. There is no withholding tax on interest paid to a related U.S. resident lender where the Canada-US Treaty applies.