NR4 Amounts for Non-Residents of Canada – By Angela Hardbattle

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Angela Hardbattle
Angela Hardbattle
Angela Hardbattle

Tax FAQ:

What an NR4 statement of amounts paid or credited to non-residents of Canada is?

Facts:

If a Canadian corporation pays a non-resident pensions, annuities, management fees, interest, dividends, rents, royalties and payments for film or video acting services, the Canadian corporation is required to withhold a certain amount of tax (Part 13 tax) and remit the tax to the Canada Revenue Agency (CRA). The relating income and withholding tax is then required to be reported on a NR4 information return which includes NR4 slips and the related NR4 summary. Once the information return is completed, it is submitted to the CRA.

Discussion:

A NR4 is required as the CRA wants to ensure that it is getting its fair share of taxes on income being paid to non-residents. Generally, non-residents pay 25% tax on amounts taxable under Part 13 tax. The tax rate can be reduced if the non-resident is from a country in which Canada has a tax treaty with. It is up to the Canadian corporation paying the funds to withhold and remit the correct amount of tax.

If a corporation fails to withhold taxes, the CRA can assess the Canadian corporation a penalty of 10% of the required amount of Part 13 tax that it failed to deduct. Any taxes withheld are required to be sent to the CRA by the 15th day of the month following the month the amount was paid to the non-resident. If the withholding tax is remitted late, penalties of up to 20% can be assessed.

The NR4 information return must be filed by March 31 after the calendar year the information return applies to. Again, there are penalties for filing late. The minimum penalty is $100 and can be as high as $7,500.

Being aware of these requirements are extremely important in the Canadian hot property market as more and more properties are being bought by non-residents. If the properties are being rented out, a Canadian corporation renting the space is required to withhold the required tax. With penalties of up to 20%, there is concern that many people are at risk of being held liable for taxes not withheld.

Angela Hardbattle, Dipl. T (Hons), CPA, CA
Staff Accountant, Gilmour Knotts
Chartered Accountant.
Email: faqs@gilmour.ca
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