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Non-resident and deemed resident forms for 2011

New forms have been added for Non-residents and deemed residents of Canada for 2011.

If you need to file a tax return in Canada, start with the return and guide:

5013-R T1 General - Income Tax and Benefit Return
5013-G General Income Tax and Benefit Guide

And then add additional forms as you need them:


5013-D1 T1 General - Federal Worksheet
5013-S1 T1 General - Schedule 1 (Calculation of Tax)
5013-SA T1 General - Schedule A - Statement of World Income
5013-SB T! General - Schedule B - Allowable Amount of Non-Refundable Tax Credits
5013 SC T1 General - Schedule C - Electing Under Section 217 of the Income Tax Act

Guide for Payments to Non-Residents for Services in Canada

The updated 2011 guide for payments to non-residents for services provided in Canada is now available online at CRA.

Transfer pricing - loans and guarantees

A good article in the CA Magazine concerning multi-national inter-company loans and guarantees and the transfer pricing implications.

TIEA signed with the Turks and Caicos

Another tax information exchange agreement has been signed.  This one with the Turks and Caicos.   The agreement is in effect for tax matters starting October 6, 2011.  For non-criminal matters it will only affect taxable periods starting on or after that date.

Canada - Italy Tax Treaty

The latest treaty between Canada and Italy has been signed.  The treaty takes effect as of January 1 of 2011.  So be sure to check for any new areas that might be pertinent to your tax returns this year.

TIEA signed with St. Kitts and Nevis

Canada has signed a Tax Information Exchange Agreement  between Canada and St. Kitts and Nevis.  The agreement is in effect for tax matters starting November 21, 2011.  For non-criminal matters it will only affect taxable periods starting on or after that date.

Canada- Bahamas TIEA

Canada and the Bahamas have signed a Tax Information Exchange Agreement.  The agreement is applicable only to taxable periods beginning on or after November 16, 2011 (except where criminal code applies then it will apply for tax periods that begin on or after January 1, 2004).

New information for higher education outside Canada

CRA has posted three new information sheets regarding educational institutions outside Canada.

One for Educational Institutions outside of Canada, one for students and one about donations.

Canada-Barbados Tax Treaty

The Minister of Finance announced today that a protocol has been signed to amend the treaty with Barbados.  This is a good sign as it has been under negotiation for many years.

A couple of highlights are the clearer definition of resident and article XXX now protects Canada's tax base more clearly with the stipulation that "Nothing in this Agreement shall be construed as preventing Canada from imposing a tax on amounts included in the income of a resident of Canada with respect to a company, partnership, trust, or other entity, in which that resident has an interest".

International Agreement Signed

In the ongoing effort to stop international tax evasion, Canada has signed an updated international agreement to help combat tax evasion.

This updated agreement will make it a more efficient tool for combating tax evasion.

Canadians heading to the US

CRA has updated their guide:

Canadian Residents Going Down South

This guide is a quick reference for residents, but is only a quick check for you to see if you may need to look further.  Always contact a Canadian designated accountant experienced in cross-border issues before you file your Canadian (and US where necessary) tax return.

Deloitte's comments on draft foreign affiliate rules

Deloitte has commented on the draft foreign affiliate rules.

Non-Resident Discretionary Trust

The T2 Schedule 22 to report an interest in a non-resident discretionary trust has been updated to remove the reference to subsection 94(1) of the Income Tax Act.  No other changes were made to the form.

This schedule is required to be filled out when

 - a corporation
 - a controlled foreign affiliate of the corporation, or
 - any other corporation or trust that did not deal at arm's length with the corporation

held a beneficial interest in a discretionary non-resident trust at any time during the tax year.

New NR4 forms

The CRA has posted the new NR4 forms and summary forms.  NR4 forms are used to report passive income paid to non-residents - whether you have collected and remitted withholding or not.  You have to file the NR4 return by March 31, 2012, or no later than 90 days after the end of the estate's or trust's 2011 tax year.

CRA and social media

According to the OECD Report on Social Media Technologies and Tax Administration, CRA is making good use of social media for information to the public.  The next step will be to develop a mobile app such as the one done by the IRS2Go.

New NR73 form

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.

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.

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).

Canada's treaties - Article 11

Determining the amount of withholding tax on interest being paid outside of Canada is the purpose of Article Xi.  In many situations, interest can be exempt from withholding tax under the treaty.


Before you check the treaty for interest withholding on interest being paid outside of Canada, it is a good idea to first look at paragraph 212(b) to determine whether or not withholding is even required.  If the interest is being paid to an arm's length person, it will often fall into one of the exemptions to Part XIII.


However, you still need to look at the treaty to see what taxes should be withheld on interest being paid to you (if you are a resident of Canada).  For instance, the Canada-Ecuador treaty exempt withholding on interest to a resident of Canada if the loan is guaranteed or insurance by the Export Development Corporation.  


The Canada-US treaty is much more complicated.  Although the first paragraph of the treaty exempts interest from withholding, subsequent paragraphs modify that statement.  For example interest that is contingent interest that doesn't qualify as portfolio interest is subject to the same withholding rate as dividends.


This paragraph can often be tricky in the details.  Reductions in withholding tax are only permitted based on beneficial ownership of shares.  You will also need to read this paragraph carefully for the definition of interest in each treaty to determine what is included and excluded.