I have a client who his brother in law based in the US and wants to put my client as trustee on his trust for his kids. (My client nephews)
I am not a trust expert, but is there any impact with that from Canadian Tax perspective?
I will point out that, if your client is resident in Canada, the trust is equally resident in Canada, and the beneficiaries would be non-resident beneficiaries, meaning that Part XIII withholdings will apply.
You may wish to caution your client and his brother in law about this impact.
Does that mean Canada would tax 23% of the trust if my client’s brother in law passes away? So his kids would get 23% less money?
Here is the CRA page on this topic…
To answer your question about Canada taxing, withholding tax isn’t tax. It is withholding.
When a Canadian is employed, the employer withholds taxes. But that withholding can be returned by filing a return. Until the return is filed, the amount being taxed isn’t known.
Overall, it is better to file a return, but it may not be valuable to file. or it could be expensive not to file. This is something you @Jacklo should be aware as a tax preparer. This is not the forum to handle that type of question, since it will depend on your business as a tax preparer.
That you talk about 23% suggests that you work with resident taxes and are now reaching the complications of non-residents. Please check the link out to find out if non-residents ever pay only 23%.
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