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The short answer
A Canadian payer must withhold Part XIII tax of 25% from royalties paid to a non-resident, including a Nigerian company, unless the Income Tax Act or a tax treaty reduces the rate (CRA guide T4061, September 2026). The Canada–Nigeria treaty can lower it; a Nigerian law-firm summary reports 12.5% for royalties, but confirm in the treaty text and get Form NR301 from the payee first. Remit by the 15th of the following month and file NR4 slips by the end of March.
What Part XIII covers
Part XIII of the Income Tax Act is Canada's withholding tax on certain payments to non-residents. The CRA's NR4 guide (T4061, modified September 2026) lists rents, royalties, interest, dividends and pensions among the amounts subject to it, and states: "Non-residents have to pay a 25% tax on amounts that are taxable under Part XIII." The rate can be reduced or removed by the Act or by a tax treaty.
Typical diaspora cases: a Canadian company pays a Nigerian company for the right to use a Nollywood film catalogue, a music catalogue, a brand or software developed in Lagos. Copyright royalties have their own NR4 income code (05). Payments for services performed in Nigeria are a different category and are not royalties just because the contract calls them a licence; the substance decides, so have an adviser look at mixed contracts.
Who withholds, and when
The Canadian payer or withholding agent is responsible for withholding and remitting at the correct rate. That includes Canadian residents paying non-residents and agents such as banks. The key dates in the guide:
| Obligation | Deadline (CRA T4061) |
|---|---|
| Remit the tax withheld | On or before the 15th of the month after the amount was paid or credited |
| NR4 slips and information return | On or before the last day of March after the calendar year |
| If the business ceases | Remittance within seven days |
If you fail to withhold, the CRA can assess you for the tax you should have deducted plus a penalty of 10% of the required amount, or 20% for a repeat failure in the same year made knowingly or through gross negligence. Interest, compounded daily, runs from the due date.
Using the treaty rate
Canada and Nigeria signed a tax agreement in Abuja on 4 August 1992; it has been in force since 16 November 1999. We could not open the treaty text for this article. A 2022 summary by the Nigerian law firm Udo Udoma & Belo-Osagie reports that Nigeria's original treaties, Canada's among them, set 12.5% on interest and royalties. Confirm the rate in the royalty article of the treaty, or with your adviser, before you apply it.
To apply any reduced rate, the guide says to check the rate under the Act first, then whether a treaty lowers it. The non-resident confirms eligibility on Form NR301, "Declaration of eligibility for benefits (reduced tax) under a tax treaty for a non-resident person", which confirms it is the beneficial owner, resident in the treaty country and entitled to the benefit. Without a valid NR301, withhold at 25%.
Worked example
Example only. An Edmonton streaming start-up pays a Lagos production company C$48,000 in royalties for a film catalogue in March.
| No valid NR301 | NR301 held, treaty rate of 12.5% confirmed | |
|---|---|---|
| Royalty | C$48,000 | C$48,000 |
| Part XIII withheld | C$12,000 (25%) | C$6,000 (12.5%) |
| Paid to the Nigerian company | C$36,000 | C$42,000 |
| Remit to the CRA by | 15 April | 15 April |
Check: 48,000 × 0.25 = 12,000; 48,000 × 0.125 = 6,000. The start-up then reports the payment and the tax on an NR4 slip by 31 March of the following year. Over-withholding is not the payer's loss but the payee's, which then has to claim a refund from the CRA, so getting NR301 before the first payment saves both sides time.
The Nigerian company's side
The Nigerian company receives the net amount and an NR4 slip showing the Canadian tax. Whether and how it can credit that tax against its Nigerian tax is a Nigerian question for its adviser under the Nigeria Tax Act and the treaty. Contracts often state whether royalties are gross or net of withholding; a clause saying the Canadian payer will "gross up" moves the tax cost onto the payer, so read it carefully.
Getting the paperwork in order
Before the first payment, collect the signed NR301, keep a copy of the licence agreement, and set up the royalty in your ledger with separate lines for the gross amount, the tax withheld and the net paid. Diarise the remittance date each month a royalty is paid, and reconcile the year's remittances to the NR4 return before March. Review the NR301 when the Nigerian company's details change.
Related obligations
- If the companies are related, the royalty must also be at an arm's-length rate; see transfer pricing between a Canadian and Nigerian company.
- Royalties count towards the $1,000,000 T106 test for related non-residents; see Form T106: reporting dealings with a Nigerian affiliate.
- For the reverse case, Nigerian withholding on payments to non-residents, see Nigerian withholding tax for non-resident companies.
This is information, not tax advice.
Where Pryme fits
Paying the net royalty in naira or dollars from a Pryme Business Account keeps the payment record in the contract currency, and Swap shows the rate and the fee before you approve. The Finance agent can prepare a reminder for each 15th-of-the-month remittance; a person approves every payment.
Questions people ask
What is the withholding tax on royalties paid to Nigeria from Canada?
Part XIII tax is 25% unless the Act or a treaty reduces it. A Nigerian law-firm summary reports 12.5% for royalties under the Canada–Nigeria treaty; confirm in the treaty text and hold a valid NR301 before applying it.
What is Form NR301?
The non-resident's declaration that it is the beneficial owner, resident in the treaty country and eligible for the reduced treaty rate.
When is Part XIII tax due?
On or before the 15th of the month after the royalty was paid or credited, with NR4 slips by the last day of March after the year (CRA T4061).
What if I forget to withhold?
The CRA can assess the payer for the tax plus a 10% penalty, 20% for a repeat failure made knowingly or through gross negligence, plus daily compounded interest.
Sources
- CRA guide T4061, NR4: Non-resident tax withholding, remitting and reporting (modified 22 Sep 2026) · accessed Oct 2026
- Publications.gc.ca: Canada–Nigeria agreement for the avoidance of double taxation (signed 4 Aug 1992, in force 16 Nov 1999, CTS 1999/48) · accessed Oct 2026
- Mondaq (Udo Udoma & Belo-Osagie): Withholding tax rates on dividend, interest and royalty payments to residents of Nigeria's treaty partners (10 Jun 2022) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.