Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Non-resident withholding tax on income from U.S. sources.
Position: General comments provided.
Reasons: The matter relates to U.S. tax administration.
XXXXXXXXXX
Dear XXXXXXXXXX :
The Honourable James M. Flaherty, Minister of Finance, forwarded to me a copy of your correspondence concerning the U.S. government's tax filing and reporting requirements relating to non-resident withholding tax on income from U.S. sources. I apologize for the delay in replying.
Based on the information in your correspondence, a Canadian corporation has an opportunity to provide XXXXXXXXXX services to a U.S. customer by sending a Canadian employee to that customer's U.S. location. Before engaging the Canadian corporation's services, the U.S. customer has asked the corporation to complete the appropriate U.S. tax form: Form W-8BEN, Form 8233, or Form W-8ECI. I understand that these forms are used to determine and report non-resident withholding tax responsibilities to the Internal Revenue Service (IRS). This matter relates to U.S. tax administration, and the Canada Revenue Agency is unable to help you in this regard. However, I can offer you the following information.
Generally, a corporation that is a non-resident of the United States is subject to a withholding tax rate of 30% on income from U.S. sources. However, a Canadian corporation may be entitled to a reduced withholding rate on its U.S.-source income under the Canada-United States tax treaty. For instance, under Article 7 of this treaty, the business profits of a Canadian corporation may be taxed in the United States only if the corporation carries on business through a permanent establishment in the United States.
For the clarification you seek about completing the appropriate U.S. tax form, and to determine the U.S. withholding tax rate applicable to your situation, you should contact the IRS or speak to a qualified tax professional. You can find IRS contact information on its Web site at www.irs.gov/contact.
I encourage you to comply with the U.S. tax requirements so that you can get all the benefits to which you are entitled under the treaty.
I regret that I cannot provide further assistance, but I trust that the information I have provided is helpful.
Yours sincerely,
Gail Shea, P.C., M.P.
Minister of National Revenue
Minguy Choi
613-957-2053
2011-043164
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