Voluntarily Remit Non-Resident Tax to CRA

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SM
Posts: 94
Joined: Fri Mar 20, 2015 3:43 pm

Voluntarily Remit Non-Resident Tax to CRA

Post by SM »

If I’m a former Canadian resident holding non-registered investments and do not tell my Canadian financial institution I have departed Canada and moved to the US, the institution obviously won’t withhold the correct non-resident tax and report it on a proper NR4 slip (let’s assume 15% treaty rate for dividends). They will issue a T5 or T3 by mistake.

I’ve read somewhere that I’m still required to voluntarily remit the required withholding tax to CRA. What’s the best way to do this? 1) File a non-resident return and include the full amount of the T5/T3 dividend income on the return; which likely means I will pay more tax than I have to. I will be charged the 15% federal rate and 48% surtax and I’m guessing will not be able to claim the dividend tax credit, basic personal exemption, etc 2) Just send a letter to CRA explaining the situation along with a copy of the T3/T5 slip and a cheque for the 15% tax.

If there are capital gains and interest on the same T3/T5 slip, no tax withholding is required on either of these correct? 1) You pay no tax to Canada on capital gains as a non-resident (unless it’s considered taxable Canadian property – which is rare after the 2010 changes made to the definition of Taxable Canadian Property – earnings must be primarily from real property, etc. 2) After 2008, there is no longer a requirement to withhold tax on interest income (unless you are related to the payer).
Any insight on this would be greatly appreciated
nelsona
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Post by nelsona »

"They will issue a T5 or T3 by mistake." No, they will issue T5 or T3 because you failed to tell them.

The only correct way to remit NR tax on flat rate items is by a letter, informing them what the income was and how much, and attaching a cheque.

As a US resident you are not subject to cap gains tax in Canada on most investments, since you took care of this by your departure tax -- other than for the few items that are real property or resource related. For those an NR return should be filed, with the proper return, and either NR surtax or provincial surtax applied.

And you MUST inform your broker that you are US resident. You are both in vilation of securities regs.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
SM
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Joined: Fri Mar 20, 2015 3:43 pm

Post by SM »

Ok thanks for the info!!

So in summary if the T3/T5 has dividend income, capital gains, and interest income I only have to worry about the dividend income (I can ignore the rest). I need to notify the institution ASAP and send a letter to CRA with a cheque for 15% of the amount of the "Grossed-up" dividends.

What about capital gains dividends, other income, and foreign income? I assume other income will generally be interest income and capital gains dividends are actually capital gains; so they can both be ignored too correct? What about foreign income? Technically a non-resident of Canada would not have to pay tax on foreign income, so can this be ignored as well?
nelsona
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Post by nelsona »

15% of the dividends, not grossed up.

I'll let ypu straighten that out with your broker.
Of course all this ris reported in US as well.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
mikie
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Post by mikie »

I moved to USA from Canada in early 2015. Still sorting out the exact date issue. I have only bank interest from my two Canadian banks. There has never been any withholding while a Canadian resident, and of course there won't be any if the banks think that I am still a Canadian resident. I have two RRIFs, and withholding is at 15%, not because of my US residence, but because they were set up that way. I have officially informed my pension payer, CPP, etc. of my move. I have no dividends, capital gains, etc. I still haven't told the banks or RRIF holders of my move to the USA. Do I need to? If so, how or what forms do I use?
SM
Posts: 94
Joined: Fri Mar 20, 2015 3:43 pm

Post by SM »

Thanks Nelsona will do. I suppose if I have a T3/T5 slip in the year of departure I will need to prorate the amounts on the slips, include the applicable portion on the departure return and send CRA a cheque for the non-resident 15% withholding portion? Does that sound correct? Of course if this was done correctly, the institution should have been notified at the time of departure and they would have sent me two slips instead of one; a T3/T5 slip and an NR4 slip.

If the amount is small and I don't want to bother with the 15% non-resident cheque portion, could I just include the entire amount on the departure return and be done with it? I realize that by doing this I would likely be over paying.

I suppose the only time I could not do this is if the the "marginal" tax that's created from this income is less than the required 15%. If it's over 15%, I'm sure CRA would gladly take the extra money. Of course I would need to be careful and make sure the software does not to take the dividend tax credit for this income.

Mikie, to ensure the correct treaty rate is applied, I believe you need to complete and send the financial institution Form NR301 (Declaration of Eligibility for Benefits under a Tax Treaty for a Non-Resident Taxpayer). This will also ensure they provide you with the proper NR4 slip and not a T4RIF slip.
nelsona
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Post by nelsona »

Actually, had you informed your payer's that you had left, the y still would have issued only one slip and NR4. But atleast you would know what was withheld, and thus what occurred after leaving.

The slip name isin;t important, firct anyone leaving MUST inform any investment firm they deal with because of regulatory issues. Second, only self-directed RRSPs or RRIf can be held by US residents (if the firm even wants to keep you).

You cannot simply say that your fine if the RRIF happens to withhold 15%.
The firm will decide what documentation the need to ensure they are withholding properly.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
SM
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Joined: Fri Mar 20, 2015 3:43 pm

Post by SM »

Thanks Nelsona.

I'm just a bit confused about the part you said they will only issue ONE slip "and" NR4. Did you mean to say one slip "an" NR4 slip instead of "and" or did you actually mean two slips? In other words, do they issue you a T3 slip for the portion of the year you are a resident AND an NR4 slip for the portion of the year you are a non-resident (two slips for the same account for the same year with the amount prorated by the INSTITUTION for each period)?

Or perhaps they issue a T3 slip for the entire year, and an NR4 slip for the period you were a non-resident and it's YOUR responsibility to manually calculate how much of the T3 slip is from the period of residency vs. the period of non-residency. Do you know which way they do this?

I ask this because there was two accounts at two different brokers and one institution was not notified and the other was. So the account that was not notified will have a T3 slip for the entire year, which I guess will need to be prorated between the period of non-residency and residency (as suggested in my last post but you didn't say for sure). And the second account should have the proper T3 and NR4 slip for it, so I'm just wondering if anything needs to be manually calculated based on the slips they provide.

Any further help with this would be greatly helpful!! I appreciate your patience.
nelsona
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Post by nelsona »

One slip: an NR4. You will only get on slip.
Merely correcting your comment to the other poster. You do get carried away a bit don't you.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
SM
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Post by SM »

Thank you for clarifying Nelsona!

What was wrong with my post to the other poster? All I said is that I think the form you use is NR301. There is nothing incorrect about this statement. This is not a prescribed form by CRA, but is sometimes asked for. I suppose I should have mentioned that you still need to call the institution to let them know you are a non-resident so they can issue you the proper NR4 slip instead of a T4RIF slip, but I thought this was implied by my previous posts. Sorry, was just trying to offer some input.

I'm not sure what you mean by getting carried away, I think that was only the first or second time I ever offered any input to another poster. If you are referring to getting carried away with my posts, I would disagree with you here. I'm fairly new to this forum and I'm just trying to learn from you and everyone else by offering some common detailed real life situations that I have come across; and hope that I and everyone else reading them can learn something from them.

Trust me, I truly appreciate the time and effort you have put into this forum and we are all tremendously thankful!!!!!!
nelsona
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Post by nelsona »

You said they would supply him an NR4 and T4RIF, They won't. he will get one slip.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
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Post by nelsona »

Your posts are about twice as long as necessary. Read more.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
SM
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Joined: Fri Mar 20, 2015 3:43 pm

Post by SM »

Ok fair enough, I will consider this for future posts.

Just for the record I said "This will also ensure they provide you with the proper NR4 slip and not a T4RIF slip".

In other words, I said they would supply him with a NR4 slip INSTEAD of a T4RIF slip NOT both.

In any event, as always I really appreciate you taking the time to respond to my posts!! Have a great day.
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