CRA has updated their Determination of Residency Status (Leaving Canada) form.
This form is required when you leave Canada - permanently or temporarily. It gives CRA (and you) a starting point to determine whether or not you will remain a resident of Canada.
Wednesday, August 24, 2011
Saturday, August 20, 2011
Canada's treaties - Article 13
The article can be titled 'Gains', 'Capital Gains' or even 'Alienation of Property'. The purpose is the same. To determine the tax of gains on non-business property under the treaty.
In the Canada-Finland treaty, immovable property is normally taxed first in the country where it is situated then in the country of residence. In the Canada-US and Canada-Austrailia treaties the article refers to real property. The idea is the same - if it belongs to the land of the country then the country should be able to tax it. The treaties will also define what real or immovable property includes (such as shares in a corporation or a partnership interest where the property is principally immovable property).
Ships and aircraft usually have a separate paragraph that should be read for each treaty. Other gains, though, are normally taxed in the country of residence. The wording, such as the Canada-Gabon treaty, is that they "shall" be taxed in the country of residence - which doesn't allow the source country to withhold any tax (of course, you will normally have to file something with that source country to verify that you can use the treaty provisions.
There is often an additional paragraph to check. Particularly in Canada's newer treaties (or updated protocols). For instance, in the Canada-Gabon treaty, if the property has been treated as a gain for tax purposes when exiting the country (such as certain property when leaving Canada) the new country of residence may treat certain of those properties to be purchased for the fair market value when entering the new country.
All of the gains can be very involved and details need to be reviewed before any decision can be made where the gain should be taxed.
In the Canada-Finland treaty, immovable property is normally taxed first in the country where it is situated then in the country of residence. In the Canada-US and Canada-Austrailia treaties the article refers to real property. The idea is the same - if it belongs to the land of the country then the country should be able to tax it. The treaties will also define what real or immovable property includes (such as shares in a corporation or a partnership interest where the property is principally immovable property).
Ships and aircraft usually have a separate paragraph that should be read for each treaty. Other gains, though, are normally taxed in the country of residence. The wording, such as the Canada-Gabon treaty, is that they "shall" be taxed in the country of residence - which doesn't allow the source country to withhold any tax (of course, you will normally have to file something with that source country to verify that you can use the treaty provisions.
There is often an additional paragraph to check. Particularly in Canada's newer treaties (or updated protocols). For instance, in the Canada-Gabon treaty, if the property has been treated as a gain for tax purposes when exiting the country (such as certain property when leaving Canada) the new country of residence may treat certain of those properties to be purchased for the fair market value when entering the new country.
All of the gains can be very involved and details need to be reviewed before any decision can be made where the gain should be taxed.
Wednesday, August 3, 2011
Canada's treaties - Article 12
The taxation of royalties is determined by Article 12 of the treaty. In the case of the Canada-Egypt treaty, the first paragraph indicates that royalties arising in one country may be taxed in the other country. Remember that when you see the wording "may be taxed" it means that they may also be taxed in the originating country. Paragraph 2 of that treaty reducing the withholding tax to 15%. That's pretty standard for the treaties but it can be lower (for instance Canada-Australia is 10%).
Looking again at the Canada-Egypt treaty, the third paragraph of the article defines what will be considered to be a royalty. The definitions tend to be fairly broad and take into account many payment types so you need to review the treaty to see if your payment falls within the scope of this article. An additional paragraph to exclude certain items (such as business profits) from royalties is usually included to help clarify which payments will be subject to withholding.
Normally, you will also see a paragraph that defines the rules for sourcing. It is important to determine the source of the royalties to determine whether a reduction in the standard non-resident withholding is available. Because, don't forget, treaties do not assess tax, they are used to reduce double tax. If the treaty doesn't apply to royalties, the withholding will be at the high rate for that country (25% for Canada).
Looking again at the Canada-Egypt treaty, the third paragraph of the article defines what will be considered to be a royalty. The definitions tend to be fairly broad and take into account many payment types so you need to review the treaty to see if your payment falls within the scope of this article. An additional paragraph to exclude certain items (such as business profits) from royalties is usually included to help clarify which payments will be subject to withholding.
Normally, you will also see a paragraph that defines the rules for sourcing. It is important to determine the source of the royalties to determine whether a reduction in the standard non-resident withholding is available. Because, don't forget, treaties do not assess tax, they are used to reduce double tax. If the treaty doesn't apply to royalties, the withholding will be at the high rate for that country (25% for Canada).
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