non-resident witholding tax on Canadian source dividends

browneyed_girlksk · Post by **browneyed_girlksk** » Fri Mar 25, 2011 2:57 pm

Hi,

I'm a Canadiancitizen/UK resident. I left Canada in early 2009 but there was a cock up with a small mutual fund account I hold back in Canada - essentially, despite several conversations with them, they neglected to keep back the necessary witholding tax and some dividends I received and sent a T5 to my old address. You mentioned before that the best way to fix this was to write the CRA and send them a cheque for the 15% witholding tax. I just wondered, will there be any interest or penalties on this amount as a result of what's happened, or can I just send them the 15% and forget about it (assuming I deal with it before the end of April).

Thanks...

nelsona · Post by **nelsona** » Fri Mar 25, 2011 4:24 pm

Probably there won't be any interest -- certainly not for 2010. but this situation has existed since 2009, so you have that year to fix as well.

As well as fixing this, you would be subject to deemed disposition tax upon departure for the gains you had made before departure. Your 2009 return is a tad late -- you need to do this correctly.

make sure you find out what the NR tax is for dividends to UK residents. This is a US tax site, so I don't research UK rates.

browneyed_girlksk · Post by **browneyed_girlksk** » Fri Mar 25, 2011 5:53 pm

thanks for your quick reply..

incidentally, I did file a proper departure return last year, and did a deemed disposition of the mutual funds (I discussed this at the time with the broker so imagine my surprise to receive a T5 this year). I had a T5 for the dividends last year; at the time I didn't understand all the rules re: witholding tax and the implications of the different forms - but I declared the dividend income from the T5 on my departure return so presumably my tax liability is covered there (I hope).

Per the tax treaty - witholding is 15% for UK residents.

So I should assume no penalties/interest then. Am I ok for 2009?

browneyed_girlksk · Post by **browneyed_girlksk** » Fri Mar 25, 2011 5:55 pm

I should add as well that we're talking about a pretty small amound of income - a few hundred dollars, so the witholding tax is going to be about 30-40$ CAD. Perhaps the CRA won't even care, but I worry about incurring their scrutiny....

nelsona · Post by **nelsona** » Sat Mar 26, 2011 8:09 am

The money does need to be sent in. Its creditable on your UK return.

For 2009 looks like you did all right ..almost. For dividends after departure you should have address separately like you are going to do for 2010.

For 2009 I would not worry, since you overpaid. Not worth the hassle.

browneyed_girlksk · Post by **browneyed_girlksk** » Sun Mar 27, 2011 11:15 am

Thanks again,

one last question - is the witholding tax payable on the "actual" or "taxable" amount of dividends?

JGCA · Post by **JGCA** » Tue Mar 29, 2011 11:00 pm

The witholding is on the actual not the gross up amount that is used in Canada only for the div tax cr. Make sure you include teh tax paid in teh amount you declare as income in UK and not teh net of tax amount received.