Is the filing of an NR4 required where an amount is credited to a non-resident which is not subject to Part XIII tax, e.g., interest paid to an arm’s length lender? CRA responded that, as stated at 26 April 2017 IFA Roundtable Q. 8, 2017-0691141C6, a resident person has an obligation to file an information return (i.e., an NR4 slip) respecting amounts described in Regs. 202(1)(a) to (h) that are paid or credited to a non-resident irrespective whether such amounts are subject to Part XIII tax, so that, for example, interest paid to an arm’s length non-resident creditor is subject to such reporting.
Is an NR4 information return required for amounts paid by a resident to a non-resident person even where there is no required Part XIII withholding?
CRA responded that the Canadian resident must file an NR4 in respect of arm’s-length interest paid to a non-resident that is not subject to Part XIII tax. The filing requirement has not been waived under s. 220(2.1).
Canco pays management or administration fees (“Reimbursement Payment”) to its foreign parent ("Forco") as a reimbursement of expenses incurred by Forco on Canco’s behalf. The Reimbursement Payment satisfies s. 212(4)(b), so that no witholding applies. What reporting is required? CRA stated:
[D]espite the fact that the Reimbursement Payment is exempt from Part XIII tax by virtue of paragraph 212(4)(b) of the Act, a payment to a non-resident for a management or administration fee or charge would require the filing of information returns, specifically:
- Form NR4 “Statement of Amounts Paid or Credited to Non-Residents of Canada”;
- Form NR4SUM “Summary of Amounts Paid or Credited to Non-Residents of Canada”; and
- Schedule 29 “Payments to Non-Residents”.
Information return T106 “Information Return of Non-Arm’s Length Transactions with Non-Residents” must also be filed by a “reporting person” in respect of a “reportable transaction” in which a reporting person and a non-resident non-arm’s length person participated in the year, pursuant to subsection 233.1(2)
Are amounts within Reg. 202 those received by the non-resident on a cash basis or accrual basis? For example, would only interest paid, or accrued interest as well, on a guaranteed investment certificate be reported on Form NR4? After referencing the applicable paid or credited, or deemed to be paid or credited, language, CRA responded:
The filing requirements under these provisions are not based on the accounting method used by the recipient for the amount for which the information return is made.
Does Reg. 202(1) require a Canadian-resident trust to report a capital distribution to a non-resident capital beneficiary? CRA responded:
Pursuant to subsection 202(1)…a person resident in Canada who pays, or is deemed under Part XIII of the Act to pay, an amount to a non-resident person as income of the trust, is required to file an information return on Form NR4.
Subsection 212(11)…ensures that distributions of capital of a trust are deemed to be distributions of income for the purposes of Part XIII. However, only distributions of capital described in subparagraph 212(1)(c)(ii)...will be subject to Part XIII tax, i.e., capital dividends… .
However…any distribution of capital in the trust, regardless of whether it is described in subparagraph 212(1)(c)(ii), must be reported on an NR4 form…[and] coded "S" in box 18 or 28… .
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|Tax Topics - Income Tax Act - Section 212 - Subsection 212(11)||capital distributions other than of capital dividends not subject to Part XIII tax||57|