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What is Part XIII Income Tax and how does it affect non-resident corporations?

Tax Question:

What is Part XIII income tax and how does it affect non-resident corporations?

Facts:

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:

  • Pensions
  • Annuities
  • Management fees
  • Interest
  • Dividends
  • Rents
  • Royalties
  • Estate or trust income
  • 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 with 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 set up 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.


If you would like more information on this topic, please contact a member of the EPR Maple Ridge Langley team by filling out the contact form below.

Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. EPR Maple Ridge Langley, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.


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