Category Archives: Nonresident taxation

NEW TAX TREATY BETWEEN CANADA AND ISRAEL CLOSES LITTLE-KNOWN LOOPHOLE

On September 23, 2016, I got an email from the Ministry of Finance announcing a new tax treaty between Canada and Israel. The actual posting on the Ministry’s website contained the following statement: “A new Convention between the Government of Canada and the Government of the State of Israel for the Avoidance of Double Taxation… Continue Reading

NON-RESIDENTS INVESTING IN CANADIAN REAL ESTATE CAN CUT TAXES ON CAPITAL GAINS BY PROPER USE OF FORCO

In this troubled, chaotic world we are living in, Canada remains a politically and financially stable locale that is an attractive destination for foreign investment. I have little doubt that, in the years ahead, investment in Canadian real estate by non-residents will continue to be quite substantial. Over the years, I have found that most… Continue Reading

CANADIAN TAX ISSUES WITH ALIMONY PAYMENTS TO AND FROM NON-RESIDENTS

Under the Income Tax Act (“the Act”) alimony[1] paid by a separated or divorced spouse will generally be deductible in computing income of a Canadian resident. This assumes that it is paid pursuant to a written agreement or court order, and paid as an “allowance” on a periodic basis. Similarly, a Canadian resident recipient of… Continue Reading

CANADIAN NON-RESIDENT WITHHOLDING TAX ISSUES IN CONNECTION WITH PAYMENTS TO PARTNERSHIPS

Tax under Part XIII of the Income Tax Act (“the Act”) applies to many types of payments received by non-residents of Canada from Canadian residents[1]. Most commonly this can apply to dividends paid by Canadian corporations; royalties paid by Canadians for the use of property in Canada; rents paid by Canadians for the use of… Continue Reading

CANADA’S “THIN CAPITALIZATION” RULES-AN OVERVIEW

Like many other countries, Canada’s Income Tax Act (“the Act”) contains rules aimed at limiting the ability of foreign shareholders of a Canadian corporation (“Canco”) to reduce the taxable income of Canco by interest charges. These rules, which are commonly called “thin capitalization” rules, are found in subsections 18(4) through 18(8) of the Act. The… Continue Reading

CANADIAN TAX ISSUES WITH CROSS-BORDER GUARANTEE FEES

In situations where a foreign parent company (“Forco”) guarantees a debt of a Canadian subsidiary company (“Canco”) a fee may be charged for the provision of that guarantee. This would be particularly sensible for a tax planning perspective if Forco is subject to a lower rate of tax on its income than Canco. In addition,… Continue Reading

WHAT IS A “PERIODIC PENSION PAYMENT” FOR CANADIAN TAX TREATY PURPOSES?

As a general rule, when a nonresident of Canada receives a payment from a Canadian-based pension plan, including a registered pension plan (i.e. a normal company pension plan), a registered retirement savings plan (”RRSP”), or a Registered Retirement Income Fund (“RRIF”), Canada imposes a 25% tax under Part XIII of the Income Tax Act. However,… Continue Reading