CRA advises of exceptions to non-resident withholding tax requirements
On March 27, 2012, CIBC Mellon received a letter from the Canadian Revenue Agency (CRA) providing further guidance on Canadian-source income payments made to non-resident financial intermediaries (FIs) for their underlying Canadian-resident beneficial owners. The CRA’s letter follows discussions between CIBC Mellon, the CRA and other market participants regarding the CRA position outlined in our Straight Talk communication on December 16, 2011.
The CRA has advised CIBC Mellon that non-resident withholding tax does not have to be withheld provided the following conditions are met:
- Complete information on the Canadian beneficial owner(s) such as the name, address and Canadian tax identification number is provided to the Canadian payer prior to income payment.
- The Canadian payer will issue Canadian tax slips such as T5’s and T3’s to the beneficial owner(s) and to the CRA for the amounts of Canadian source income on the assets held by the Canadian payer for the non-resident FI.
- The Canadian payer is required to issue an NR4 tax slip to the non-resident FI for the income paid or credited to non-resident FI but was not reported on the Canadian tax slips issued to the Canadian beneficial owner(s).
Going forward, CIBC Mellon will not withhold 25 per cent tax on Canadian-source income payments to non-resident FI’s for their underlying Canadian resident beneficial owners provided that:
- All the conditions required by the CRA are met.
- Segregated account(s) are set up for disclosed resident beneficial owners.
- Certifications and proper documentation are provided to CIBC Mellon.
If your organization is a non-resident FI with underlying Canadian-resident beneficial owners, please contact your CIBC Mellon relationship manager for further information and a copy of the CRA’s letter.
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Straight Talk is provided for general information purposes only and CIBC Mellon Global Securities Services Company, CIBC Mellon Trust Company, CIBC, The Bank of New York Mellon Corporation and their affiliates make no representations or warranties as to its accuracy or completeness, nor do any of them take any responsibility for third parties to which reference may be made. Readers should be aware the content of this publication should not be regarded as legal, accounting, investment, financial or other professional advice nor is it intended for such use.