Principal Issues: 1) Whether distributions from the capital of an estate of a deceased Canadian resident to XXXXXXXXXX resident beneficiaries are subject to withholding tax; 2) If yes, what is the process, if any, by which a non-resident beneficiary may seek a refund of the withholding tax, if applicable? 3) What forms or other documentation are required to be filed by the trustees and/or non-resident beneficiaries in respect of the distributions?
Position: 1) No. Withholding tax is generally not required on capital distributions of an estate where they are not distributions of estate income that would be subject to tax in the hands of a Canadian beneficiary, nor capital dividends that were derived or received by the estate; 2) n/a; 3) Executors and trustees are required to file NR4 form (Summary and slips) for the estate even where there is no requirement to withhold and remit Part XIII tax. Executors and trustees are also required to obtain a clearance certificate from CRA in respect of the estate.
Reasons: 1) Although 212(11) deems estate distributions to be distributions of income of the estate, 212(1)(c) withholding tax would not apply to ordinary capital distributions as they would not be amounts described in subparagraphs 212(1)(c)(i) or (ii); 2) n/a; 3) Regulation 202(1)(c) and NR4 Guide (T4061), 159(2).
