T5 for divident income

[browneyed_girlksk]

Hi there,

I am a a Canadian living in the UK (canadian non-resident for tax purposes based on tax treaty). My parents recently received a T5 for some dividends from a mutual fund account that I set up years ago when I still lived in Canada. Essentially, I did a deemed disposition of property with my departure tax return last year, however, my mutual fund broker didn't change the address on my account (its still my parent's address in Canada). As such, they haven't witheld any tax. I presume this just means that I will have to file a non-resident tax return this year (and of course, notify the broker that I'm a non-resident). Due to the tax treaty, I assume this oversight will not detrimentally affect my residency status - correct?

At this stage of the game, is it possible for this to be rectified from the broker's end (ie - can they take the tax off and issue amended slips??) or am I pretty much committed to having to remit the tax myself. I assume that if I've received the T5, Revenue Canada has too.

Thanks and regards.

[browneyed_girlksk]

PS: my accoutant has said that if/when I go back to Canada the 'disposition of property' for my mutual funds can be 'unravelled'. Is this necessary? If so, what are the benefits of doing this?

[nelsona]

Since this income should have had NR withholding (not reported on any return), the only way to correct is to write a letter to CRA explaining the income and including a cheque for the correct withholding amount for UK residents, which I believe is 15% on dividends. You also need to determine if some of these mutual fund dividends are actually dividends or if they are interest (0%) and cap gains (0%).

All the income will of course need to be reported in UK as well.

This has no impact on your residence.

When you contact your broker be prepared for them to request you close your account and liquidate your funds.

As to unwinding a deemed disposition when you return, the set of circumstances where that would be favourable let alone possible are so minute, that it is not something you will have to worry about.

By the way, you are non-resident of canada by fact, not by treaty. To be non-resident by treaty implies that you have strong primary ties in canada (which is house and/or spouse) that are outweighed by your ties in UK. You have no such ties in Canada.

[browneyed_girlksk]

Thanks for the info:

With respect to liquidating the assets - can they demand I do this? I understand that I can't trade as a non-resident but muy intent was just to let the funds sit (as they've been doing for the last 10 years or so). I know of other people who have just let these accounts sit so its a bit of a surprise to hear that I will likely have to sell the funds.

[nelsona]

It is up to the brokerage. This usually applies for US residents. UK may not have as strict policies as US. In fact, if UK residents are allowe to let their accounts 'sit", I see no reason why they could not also trade (in things other tnan mutual funds)

I merely said "be prepared".

[browneyed_girlksk]

OK - so with respect to residence, essentially what you're saying is that any number of secondary residency ties in Canada don't matter as long as you are habitually resident, and considered a resident for tax purposes, of the UK. I don't need to be worried about cancelling my credit cards, DL, etc. and the CRA is not going to scrutinise my UK residency status at a later time if I go back to Canada?

[nelsona]

That is correct. You DL is invlaid anyways after a few months.