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.
CANADIAN TAX FOUNDATION ROUNDTABLE November 1992 Conference
Question 37
If a non-resident shareholder of a Canadian company is assessed under subsection 15(2), the amount assessed is subject to Part XIII tax under subsection 214(3). This could result in double taxation since a non- resident may not take advantage of paragraph 20(1)(j) and since future dividend payments to the non-resident will not take this amount into account. We are aware of one instance where Revenue Canada permitted the payment of a dividend equal to the shareholder loan less the Part XIII tax to the non-resident shareholder without further Part XIII tax. Is this a general policy? If not, can some guidelines be provided which would give Revenue Canada discretion to waive Part XIII tax on dividends in circumstances similar to the above? Department's Position
Where a shareholder loan that was made to a non-resident of Canada was subject to Part XIII tax pursuant to subsection 15(2) and paragraph 214(3)(a), the Income Tax Act does not provide relief to the non- resident when the particular loan is repaid. All dividends paid by the Canadian corporation to the non-resident shareholder, regardless of the fact that a shareholder loan was repaid, will be subject to Part XIII tax. The question of why relief is provided on repayment of shareholder loans by Canadian shareholders (i.e. paragraph 20(1)(j)) and not non-resident shareholders is a question of tax policy that should be directed to officials from the Department of Finance.
P.S.
Subsequent to the conference, an administrative position was brought to our attention. The Department will give consideration to a request that the amount taxed should not be subject to withholding tax a second time if, and when, a dividend is paid to that non-resident.
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