Patronage payments

You may provide patronage payments to a recipient. Depending on whether the recipient is a Canadian resident or a non-resident of Canada, your income tax withholding and reporting will be different.

On this page

• Steps
• References

Steps

1. Determine if you need to report the payment on a slip

   You must report the total of the patronage payments paid to a Canadian resident on a T4A slip or a non-resident of Canada on a NR4 slip in the year the patronage payments are made.

   What if you don't know the residency status 

2. Withhold deductions from the patronage payment

   You must withhold the following deductions from the patronage payment:

   • Income tax, unless the recipient is exempt under section 149 of the Income Tax Act - Withhold
     
     What if the recipient is exempt under section 149 of the Income Tax Act

     If the recipient is exempt under section 149, you still have to report the payment on a slip regardless of whether the payment is subject to either withholding tax or not.

     List of entities exempt under subsection 149(1)

     The following is a detailed list of entities exempt from income tax under section 149(1):

     • Municipalities and municipal or public bodies performing government functions
     • Tax-exempt crown-owned corporations
     • Boards of trade and chambers of commerce
     • Agricultural organizations
     • Registered charities
     • Registered Canadian amateur athletic associations
     • Registered national arts service organizations
     • Certain housing corporations for the aged
     • Labour organizations
     • Benevolent or fraternal benefit societies or orders
     • Non-profit organizations exempt from tax under paragraph 149(1)(l)
   • EI – Do not withhold
   • CPP – Do not withhold

3. Calculate the income tax deductions

   You have to calculate the income tax to withhold using one of the following tax rates depending on the recipient’s residency status:

   • Canadian resident

     You must calculate using the 15% withholding tax rate on the lesser of the amount of the payment and the total of the payments greater than $100.

     Learn how to calculate income tax deductions for patronage payments using this special tax rate calculation.

   • Non-resident of Canada

     You must calculate using the 25% Part XIII withholding tax rate unless a tax treaty between Canada and that country reduces this rate.

     Learn how to calculate income tax deductions for patronage payments using the Non-Resident Tax Calculator.

4. Report the payment on a slip

   You must report payments on a T4A or NR4 slip depending on the recipient’s residency status:

   • Canadian resident

     You must report the following amount on a T4A slip:

     • Code 030 – Patronage allocations

     Learn how to report the payment: T4A slip – Information for payers

   • Non-resident of Canada

     You must report the following amounts on a NR4 slip:

     • Box 16 or 26, Gross income
     • Box 18 or 28, Exemption code

     Learn how to report the payment: Filling out the NR4 slip

References

Related documents

• Archived Interpretation Bulletin IT-362R, Patronage dividends

Legislation