W-8BEN-E and Canada-US Tax Treaty

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

Moderator: Mark T Serbinski CA CPA

Post Reply
victoriaguy
Posts: 54
Joined: Sun Oct 26, 2014 12:03 am
Location: Victoria, BC, Canada

W-8BEN-E and Canada-US Tax Treaty

Post by victoriaguy »

Hi there,

I'll try to word this correctly...

I'm the principal of a small corporation resident in Canada, trying to fill out form W-8BEN-E for my first US client.

Because my corporation has no permanent establishment in the US, my corporation doesn't owe US taxes on the income from this client.

In filling out W-8BEN-E, can I use the same articles of the treaty to claim a "special rate" of withholding of 0% on this income?

I hope that makes sense. Thanks a lot!
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

"can I use the same articles of the treaty".

The same as what?
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
victoriaguy
Posts: 54
Joined: Sun Oct 26, 2014 12:03 am
Location: Victoria, BC, Canada

Post by victoriaguy »

Oh sorry, nelsona. And now I see I did only about 75% of my homework. I'm seeing that line 15 on W-8BEN-E is for interest or dividend types of income, so it's irrelevant to my original question.

On W-8BEN-E, Part III, question 4, I'm marking the checkbox "Company that meets the ownership and base erosion test". Does this eliminate the tax withholding?

Then, I also checked Part XXV (Active NFFE).

And, just to make sure I have not gone astray, does this (below) sound right?

On form 8833, I plan to use Articles:
-V (9) (determining whether there is a permanent establishment),
-VII (1) (business profits taxed only in resident state as no permanent establishment), and
-Limitation on Benefits clauses XXIX-A (1) and (2)(e)(i):
-Respectively, convention shall apply to qualifying persons; and,
-Corporation is a qualifying person, as it is owned by natural persons who are Canadian residents, and substantially all expenses are paid to qualifying persons.

Hopefully that is clear enough. Thanks for any insights. You guys rock!
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

I have no idea what you are talking about. Sorry.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
victoriaguy
Posts: 54
Joined: Sun Oct 26, 2014 12:03 am
Location: Victoria, BC, Canada

Post by victoriaguy »

Sorry, I guess I didn't say Articles of the Canada-US Tax Treaty.

Also, form W-8BEN-E is a form payers have to make foreign payees fill out to determine the amount of payment they will withhold.

Does that help? If you don't deal with these, thanks for hearing my question though.
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

This is a corporate form. See your US tax person for that.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
JGCA
Posts: 754
Joined: Thu Nov 18, 2010 3:05 pm
Location: Montreal, QC Canada

Post by JGCA »

What you need to do is simply file a treaty based corp tax from 1120F in the US to say under the treaty you will be paying all tax in your home based country Canada I=under the relevant tax treaty Articles you mentioned you still have to file a treaty based corp tax return othereise IRS can assess you on this income at a latter time if they feel so because you have not filed the treaty exemption will be denied so file a ttreaty based corp tax teturn
JG
victoriaguy
Posts: 54
Joined: Sun Oct 26, 2014 12:03 am
Location: Victoria, BC, Canada

Post by victoriaguy »

Thanks JGCA, and thanks again Nelsona.

Yes, I will definitely be filing that corp return with the treaty based positions.
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

JC is correct about the filing (was that the question?)
The US payor however may insist on some document to avoid having to withhold.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
victoriaguy
Posts: 54
Joined: Sun Oct 26, 2014 12:03 am
Location: Victoria, BC, Canada

Post by victoriaguy »

Yes, close. But it's always been my intention to file the 1120F with the treaty-based positions.

My question was, whether the treaty articles I listed were the correct ones to use on the treaty-based position form (8833), and also whether the W-8BEN-E could actually eliminate tax withholdings based on the same.

I've since verified the articles through a generous e-mail conversation with an accountant. I also found some passing references to actually eliminating withholdings. I've submitted the form. I'll see what happens.

Btw, from the reading I did online, the withholder IS permitted to rely upon representations made on this form by payees, in determining how much if any to withhold. And the form is signed under penalties of perjury.

I suspect there is an official IRS document or booklet or webpage somewhere that payors rely on as guidance. Just never found it.

Thanks!
Post Reply