Section 216.1

Subsection 216.1(1)

Administrative Policy

27 July 2016 External T.I. 2015-0603271E5 - Subsection 216.1(1) and permanent establishment

late filing under s. 216.1 not accommodated

A U.S.-resident actor provides acting services in Canada through an LLC or “S” corporation, which is subject to 23% withholding tax under s. 212(5.1), on the amounts paid for the actor’s acting services unless it elects under s. 216.1(1). S. 216.1(1) states that no s. 212(5.1) tax is payable if the non-resident files a Part I return for the year on or before its filing due date therefor and elects in the return to have s. 216.1 apply. If the elective return is filed late, the election will be considered invalid.

If the non-resident corporation missed this deadline, could it late-file a “regular” Part I return where the provision of the acting services had resulted in it having a Canadian permanent establishment under the Treaty? In responding negatively, CRA stated:

[S]ubsection 115(2.1) excludes income from the acting services to which subsection 212(5.1) applies from the computation of the non-resident’s taxable income earned in Canada. As a result, such income is taxable under Part XIII and is not taxable under Part I unless a valid election is made under subsection 216.1(1). In addition, absent the election, a non-resident corporation providing the acting services is not required to file an income tax return under Part I of the Act. [citing s. 150(1)(a)(i)(B)]. …

Locations of other summaries Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 16 Art. 16 of US Treaty permits gross withholding taxation even if PE 166
Tax Topics - Income Tax Act - Section 115 - Subsection 115(2.1) prohibition against acting income being filed on a net basis in absence of timely s. 216.1 election 103