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How Does Part XIII of Income Tax Affect Non-Resident Corporations?



Grant Gilmour, Tax Advisor

Part XIII income tax is a tax withheld by a payer when they pay a non-resident. Not all income is subject to this tax. Generally passive income is subject to Part XIII tax.

Discussion:

The most common types of Canadian income subject to Part XIII tax are:

1. Pensions

2. Annuities

3. Management fees

4. Interest

5. Dividends

6. Rents

7. Royalties

8. Estate or trust income

9. Payments for film or video acting services

Generally, non-residents pay 25% tax on amounts taxable under Part XIII tax. However, the tax rate can be reduced if the non-resident corporation is from a country in which Canada has a tax treaty with. It is the responsibility of the Canadian payer to withhold and remit the correct amount of tax.

The Canada Revenue Agency (CRA) has an online non-resident tax calculator to determine your Part XIII tax liability.

Any non-resident tax deductions withheld by the Canadian payer will need to be remitted to the CRA on or before the 15th day of the month following the month the amount was paid or credited to the non-resident. A non-resident account number will need to be setup by the Canadian payer on behalf of the non-resident in order to remit the deductions.

In the following tax year, an NR4 statement of amounts paid or credited to non-residents of Canada will need to be filed with CRA.

Have a question? Contact Grant Gilmour

Your comments are welcome!

Grant has been in the CA business since 1988, starting his own practice in 1994. His tax expertise encompasses tax planning, international tax issues, and Scientific Research and Development tax credits. He is a graduate of the CICA In-Depth Tax Course and in 2012, Grant received the CA Community Service Award and the Scout Leader Medal.

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