Dividend paid to shareholder non- resident

Tax Topics
1

Hello,

The owner of a CCPC move to US and just had investment in the corporation. No active business income. He sold all investment and Withrow cash form corporation.

I assume corporation consider non resident now and the owner too is non resident too.

He already submitted 15% tax to CRA. I am wondering if I have to issue T4NR4 for him or not.

what option also must select in the tax cycle the corporation file . I did not see Non resident corporation type .

Thank you for info.

Ali

2

The corporation always remains resident of Canada (for tax purposes). It only ceases to be a CCPC. Tax withholding is required (and remittance be made within the next month of payment). T4NR4 is to be issued.

As mentioned, there’s no NON-RESIDENT corp.

Atul

3

I am not sure if this is entirely correct.

A Canadian corporation can become a non-resident under specific conditions defined by the Income Tax Act (ITA). A corporation may be deemed non-resident if: a) It is considered a resident of another country under a tax treaty between Canada and that country. b) It does not meet the residency criteria set by the ITA.

Factors influencing Residency: The residency of a corporation is generally determined by where its central management and control is exercised. This includes the location of board meetings, the residence of directors, the place where significant business activities occur.

Common Scenarios for Non-Residency

  1. Incorporation Outside Canada: If a corporation is incorporated outside Canada and its central management is also outside Canada, it is typically considered non-resident.

  2. Tax Treaty Provisions: If a corporation qualifies as a resident of another country under a tax treaty, it may be deemed non-resident in Canada.

  3. Business Operations: A corporation that ceases to carry on business in Canada and meets the criteria for non-residency may also lose its resident status.

and:

4

Thanks, I stand corrected.

Atul

1 Like
5

Even if the corporation remains a Canadian corporation it will also be taxed in the US as a majority shareholder is a US resident. If it has not been filed in the past, it could be subject to Section 965 transition taxes.