Under subsection 233.3(3) of the Income Tax Act (“the Act”), Canadian residents are generally required to file form T1135 for any year in which they have “specified foreign property” with a total cost base of more than $100,000 at any time in the year. This form is generally due at the same time that the taxpayer’s normal… Continue Reading
Author Archives: Michael Atlas
CANADIAN TAX CONSIDERATIONS FOR EXPATS WITH DEFERRED COMPENSATION
Pretend you are a young and single Canadian who has had a really fantastic year at his or her job on Bay Street. The year is almost over, and you know you are in line to get a seven figure bonus at the beginning of next year. You think to yourself that you could easily… Continue Reading
TAX ISSUES FOR CANADIAN EXPATS WITH OFFSHORE TRUSTS
As a general rule, if a Canadian resident (“the contributor”) contributes property to a trust that would otherwise be non-resident (“NRT”), the trust will be a deemed resident trust (“DRT”). A DRT is subject to an extremely complex set-of rules in the Income Tax Act (“the Act”) generally found in section 94. As outlined in… Continue Reading
CANADIANS WITH FOREIGN REAL ESTATE CORPORATIONS CAN FACE SURPRISING FAPI ISSUES
A Canadian resident who is a shareholder of a “controlled foreign affiliate” (“CFA”) will have special Canadian tax issues if that CFA earns “foreign accrual property income” (“FAPI”). Any corporation that is not resident in Canada (“Forco”) will be a CFA of a particular Canadian resident if it is controlled by that Canadian resident. However,… 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
MORE HOGWASH ON OFFSHORE TAX AVOIDANCE FROM TORONTO STAR/CBC DUO-CANADA’S TIEAs GET A BUM RAP!
Most readers of the June 17, 2016 edition of the Toronto Star could not have failed to notice the headline of a prominently featured article: “Tax loopholes cost Canada billions in lost revenue” This was followed by the following subheading: “Canada used agreements meant to crack-down on tax evasion to open-up tax loopholes” What a… 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
THE LITTLE-KNOWN TAX ON CANADIAN TRUSTS WITH FOREIGN BENEFICIARIES
Here is an interesting experiment to try: ask an average Canadian accountant or lawyer about “Part XII.2 tax”. I am betting that you will get a blank stare. To me, that would be no surprise at all! In fact, even those who regularly practice in the tax area are generally fairly clueless about this obscure tax… 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