# Understanding NR4 Summary Form



## mike_302 (Mar 5, 2015)

Hello helpful folks,

I understand this is the Canadian Tax forum, so I am being careful not to ask directly about my UK tax forms (I am Canadian, currently resident in the UK). I believe I have the vast majority of it filled out with my experience from last year. I am also non-resident for tax purposes in the Canada, so Questrade has given me a T3 and an NR4 summary form (for non-residents) and they auto-withdraw 15% of all dividend transactions in my registered account.

However, I want to make sure I understand the concept of the data in the Foreign Income and Foreign Tax Paid columns of the T3 form that Questrade has provided me.

*ITEM 1*
The Foreign Income value is LARGER than the amount of money that goes into my account for any one transaction. The amount that goes into my account is _Foreign Income_, less _Foreign Tax Paid_ and less _Return Of Capital_. Once the remainder is deposited in my account (i.e. the Total Distribution) Questrade withdraws 15%.

What I had previously done was to only care about the Total Distribution and the 15% tax withheld from my account. However, I want to understand if, in Canadian terms, you'd also be using the Foreign Income and Foreign Tax paid values in your calculation. If so, it would mean I've paid more than my 15% withholding tax, and I should probably figure out how to input that fact.

*ITEM 2*
A side problem: I am unconvinced that the T3 form is correct. The summary form lists a breakdown of all distribution transactions associated with my account for 2017. I have checked those transactions against the Excel listing of account activity. Considering the following ETFs: VAB, VUN, VDU. While Questrade has withheld 15% on all the distributions to my registered account (as shown in my account activity listing), they have only listed those withholding numbers for the VAB fund. On the summary form, the withheld amount is listed as Trust Income NRT, but only for the VAB transactions. For the others (VUN and VDU) they have withdrawn 15% of the dividend after each distribution entered my account, but they don't list it as Trust Income NRT; therefore the tax withheld comprises of only the tax withheld on VAB, despite the fact that total tax withheld includes far more.

To facilitate an answer, I've taken some of the transaction listings (anonymized) and provided them here: https://www.dropbox.com/s/ffwex3zm1fv5rmq/Example transactions.png?dl=0

Anyone good with ETF taxes, and good at explaining?

Thanks very much!


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## Eclectic12 (Oct 20, 2010)

No one has jumped in yet ... so with the cavaet that I don't have a NR layer added to whatever is held in Canada (i.e. I am a Canadian tax resident), I'll comment - FWIW.



mike_302 said:


> ... However, I want to make sure I understand the concept of the data in the Foreign Income and Foreign Tax Paid columns of the T3 form that Questrade has provided me.
> 
> *ITEM 1*
> The Foreign Income value is LARGER than the amount of money that goes into my account for any one transaction ...


It may well be this way ... certainly the US stock held with a transfer agent has the net of the $$ paid - US withholding tax - transfer agent fee rolled into added stock (even if it is at times less than a full share).

Your underlining suggests this is a concern ... but with other country withholding tax being taken before the broker receives the dividend or distribution, what is credited to the account will always be smaller.



mike_302 said:


> ... The amount that goes into my account is _Foreign Income_, less _Foreign Tax Paid_ and less _Return Of Capital_ ...


This looks wrong to me ... what I have seen is Foreign income total that includes RoC less Foreign tax paid.
Where I had the year's distributions classed as 100% RoC, with equal amounts paid per month - my monthly statement shows a credit of cash for the same amount.

I could see RoC that is treated as dividends or income increasing the amount of the withholding tax, if the source country does not recognise RoC but that should be reflected in a higher foreign tax paid on a percentage basis. As an example, $1 of RoC that is treated by the US as a dividend/income would mean the withholding tax increases by $0.15 instead of $1.




mike_302 said:


> ... Once the remainder is deposited in my account (i.e. the Total Distribution) Questrade withdraws 15%.


Seems right as this link from 2017 says dividends and trust instruments are at the 15% level, down from the no-tax treaty level of 25%.




mike_302 said:


> ... What I had previously done was to only care about the Total Distribution and the 15% tax withheld from my account. However, I want to understand if, in Canadian terms, you'd also be using the Foreign Income and Foreign Tax paid values in your calculation. If so, it would mean I've paid more than my 15% withholding tax, and I should probably figure out how to input that fact ...


Not sure what calculations you are referring to.

As I understand the Canadian tax POV, FT divided by FI should give the withholding tax percentage. The FT and FI are reported where the foreign tax credit (FTC) returns some or all of the foreign taxes paid. 
As an NR, you wouldn't be filing a Canadian tax return for this type of income so the FTC isn't going to help.

It would seem a key question is whether the UK tax system allows you to claim both the Canadian NR tax of 15% being applied to the net $$ received and the foreign country withholding tax on something like VUN (which is 15% as well).


I have to take time to think about Item #2 as well as check your selected transactions.


Cheers


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## mike_302 (Mar 5, 2015)

Thanks a bunch Eclectic! A big help as always.

I think you'll find the transactions help to better understand Item 1, as you can see quite easily what I mean about Foreign Tax, Foreign Income, RoC, and the amount that goes into my account. My apologies, as it seems that my original message was misleading in suggesting the transaction info was helpful only for answering Item 2.

When you get a chance, please see if the transaction info shines a better light on Item 1.

Thanks


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## Eclectic12 (Oct 20, 2010)

Okay ... I have checked out the samples.

For Item #1, the way I am reading the sample transactions is that "Net Amount credited to account" = "Total Foreign Iincome" - "Capital Gains" - "Foreign Tax Deducted". When checking the amount of the "Foreign Tax Deducted", I multiplied the ("Total Foreign Iincome" - "Capital Gains") x 15% which was lower than the figure provided. It seems more like 15.9% is what the US is taking.

The "Net Amount" is then reduced by 15% to cover the Canadian NR withholding tax.

Do you have some samples where RoC is included?
Or can you provide samples for an entire year of something that paid RoC?


And yes, you have paid more than 15% as there's the US 16% cut of non-CG US income/dividends then Canada's 15% on the net. 
As I said earlier, the key question is whether the UK lets you have credit for both types of tax being paid to two different gov'ts.
Maybe you can report the total and have the combination of monthly statements as well as the T forms to document the two sets of taxes paid? 


For Item #2, there isn't enough info. 

The bigger issue is that I was assuming only non-registered accounts were being discussed but just caught the part about "distributions to my registered account".
This may explain some of the gaps. 

Where the ETF is held in an RRSP, my understanding is that the US by virtue of the Canada - US tax treaty will take nothing as the RRSP is exempt. As a Canadian NR, I would think the RRSP is also exempt. If true, there should be no withholding tax at all.

Just don't dispose of assets in the RRSP as this tax document says the UK taxes the disposal of assets, when Canada does not tax this while the UK does not tax withdrawals where Canada does. As the tax events don't have matching events to allow a credit for taxes paid to be granted, one will pay double tax.
https://www.gov.uk/hmrc-internal-manuals/double-taxation-relief/dt4617

Now if the registered account is a TFSA, the US will take their withholding tax as the TFSA is not considered a retirement account so that it does not enjoy the exemption that the RRSP has. Canada doesn't tax the TFSA so there would be no Canadian withholding tax applied. This would mean only one layer of tax is taken.

In the non-registered, both the US and Canadian layers apply.


Without knowing what is held where as well as not having a year's worth of a particular ETF's distributions to make the annual allocation of tax types for the distributions paid - it is hard to say what is happen. Having nothing listed for a particular ETF may or may not be correct.


Cheers


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## mike_302 (Mar 5, 2015)

Super response! Thanks again. 

On Item 1: I think this is just about concluded, and the conclusion I draw is that I will calculate my foreign dividends as the sum of the "Foreign Income" minus any Capital Gain items if they occur on any of the transactions - - but I note that none of the samples show them occurring; should I subtract Return of Capital items too? They're included on these three samples, as 0.43, 0.09, and 0.11.

I agree and completely understand the point you're making about the UK's recognition of the total tax already withheld by two countries. I will ask their helpline and see if they're competent enough to answer that, but I suspect the answer will be yes, so: I suspect I can add the 15% clearly withdrawn from my account, AND the Foreign Tax Paid items (34.53, 16.23, and 19.67) and report that as my tax paid already. Notably, this adds to well over 15% of the dividend income from my registered accounts, which will help me because (presumably) my TFSA distributions haven't been taxed at all, so this will act as a credit.

Great - - if I understand correctly.


Item 2: I will get back to you shortly with a much more full list of transactions from the NR4 summary, paired with at least a handful of the relevant account activity items. I think I miscommunicated though: were only dealing with my registered account here. So all of these transactions (including the three samples you've already looked at) are seeing Foreign Income and Foreign Tax Paid line items in the NR4 summary (e.g. 217.15 and 34.53 for the first item) and also being subjected to 15% withholding by Canada, as per the yellow highlighted account activity. The concerning point for item 2 is that the amount withheld by Canada (27.45 in the first sample transaction) isn't being included in the NR4 summary, and not added to my T3, except for one ETF: vanguard aggregate bond (VAB).

As I said, I'll get you more sample transactions for a better evaluation on item 2. May take me a couple days to get back.

Thanks again for all your help.


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## Eclectic12 (Oct 20, 2010)

Sorry for the delay but there are several parts that still confuse me.

For #1 ... conceptually, I agree that reported on the UK tax return foreign dividends (FD) should be foreign income (FI) - capital gains (CG) items, with the cavaet that as I understand CG to be taxable by the UK - the CG amounts paid in cash should be reported as CG separately. 

Or to put it another way, I would think the UK tax authority would want all taxable parts to be reported.

As for no CG items ... VUN lists some so that would be where to be looking.

I am also confused by having a breakdown of each distribution. Usually the yearly amounts aren't published until March or April of the following year where the ETF company is listing amounts out of the total paid.


For reporting the two layers of taxes (US and Canada), I am not following the bit about it being a credit. Where both layers are credits on the UK return, the non-registered should have the biggest credit as both layers apply (as you note, over 15% in total). 

For the TFSA, the credit of the Canadian 15% drops off but the US one stays in place - less taxes paid means less credits. Unless the TFSA is UK tax free as well, this looks like less credits instead of more (i.e. UK taxes TFSA where only the US taxes paid can offset whatever is owing). 

Unless I misunderstood?


For item #2 ... yes it is concerning to have Canadian NR tax taken that is not recorded. The detailed line items spell the Canadian 15% NR withholding tax so I would think this is less of an issue where one can follow up as one has time.


Cheers


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## mike_302 (Mar 5, 2015)

Eclectic12 said:


> Sorry for the delay but there are several parts that still confuse me.
> 
> For #1 ... conceptually, I agree that reported on the UK tax return foreign dividends (FD) should be foreign income (FI) - capital gains (CG) items, with the caveat that as I understand CG to be taxable by the UK - the CG amounts paid in cash should be reported as CG separately.
> 
> ...


I'm also a little confused now  Sorry! I'll try to explain what I think you're saying.

Referring to the NR4 summary (*row* / *column heading*): 
Do we believe that the *Totals (CR)* / *Foreign Income* (number ending in 70 cents) _minus_ *Totals (CR)* / *Capital Gain *(number ending in 0.41) is the reportable foreign income value? Is this at least what you would report in Canada?

And

Do we believe that the *Totals (CR)* / *Foreign Tax Paid* (number ending in 7 cents) _plus_ the sum of all the 15% Non-resident transactions in my account (improperly listed on this NR4 summary sheet, as you have concluded in Item 2) is reportable foreign tax paid? Effectively, 15.9% of the Foreign Income and 15% of the funds that make it into my account.

If you just confirm these two points, then we have a better place to continue discussion.

*Note: I found out the 15.9% is in fact due to a 15% foreign withholding tax applied to the fund first, then expenses and tax adjustments are applied to the remainder, resulting in a smaller denominator, and hence the 15.9%... The cash distribution per unit that Vanguard lists online is after this 15% withholding tax, taz adjustments and expenses are taken off, so I would have no idea how to calculate the Foreign Income and Foreign Tax Paid, before Questrade provided it to me...




Eclectic12 said:


> For item #2 ... yes it is concerning to have Canadian NR tax taken that is not recorded. The detailed line items spell the Canadian 15% NR withholding tax so I would think this is less of an issue where one can follow up as one has time.


Excellent  Item 2 closed, and I will chase Questrade for this mistake, with a little more vigour than my first attempt to get them to explain this.


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## Eclectic12 (Oct 20, 2010)

mike_302 said:


> I'm also a little confused now  Sorry! I'll try to explain what I think you're saying ...


No worries ... having the US take their bit then Canada take the NR bit to end up filing a UK tax return complicates things.



mike_302 said:


> Referring to the NR4 summary (*row* / *column heading*):
> Do we believe that the *Totals (CR)* / *Foreign Income* (number ending in 70 cents) _minus_ *Totals (CR)* / *Capital Gain *(number ending in 0.41) is the reportable foreign income value?


As I say ... I am not an expert. 

Reducing the FI by the CG to report this net amount on the UK tax return is effectively making this part of the payment UK tax free. 
My understanding is that the UK taxes CG so I am thinking it has to be reported as CG.

If one reports the full FI without taking the CG out then effectively the CG part is being converted to what dividends/income are taxed at in the UK.
If one reports the net amount as dividends/income with the CG reported separately as CG then the full amount is being reported as taxable.




mike_302 said:


> ... Do we believe that the *Totals (CR)* / *Foreign Tax Paid* (number ending in 7 cents) _plus_ the sum of all the 15% Non-resident transactions in my account (improperly listed on this NR4 summary sheet, as you have concluded in Item 2) is reportable foreign tax paid? ...


Yes ... because if both sets of taxes paid are not reported then the foreign tax paid being reported will reflect one country's tax and not the other country's tax.
The UK return is the ne AFAICT that can give a credit for foreign tax paid so I would expect the total is what needs to on the UK return.


Cheers


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## mike_302 (Mar 5, 2015)

Okay, what you're saying seems like perfect sense  Report the Capital Gains as Capital Gains, and remember that the Foreign Income value is actually composed of Capital Gains and Dividend, so subtract Capital Gains from Foreign Income when determining the total dividend income.
_EDIT: Sorry, on review of the 2017 Annual Distributions for VUN (https://www.vanguardcanada.ca/individual/etf-distribution-history.htm?portId=9557), I'm starting to question if it's right to subtract the CG from the FI. By addition and subtraction of the numbers in the 2017 row:
You subtract the foreign tax paid from the foreign income (0.77668 - 0.12364 = 0.65304) then you add on the Capital Gains and Return of Capital amounts (0.03975 and 0.00071) to arrive at the "Total distribution per unit for tax purposes". Because it seems like you tack these values on, it doesn't seem like you need to subtract them from the Foreign Income. I could understand subtracting them from the Total Distributions column in the NR4 summary though..._

The UK has a dividend allowance of £5,000 anyways -- so I can make £5,000 in dividend income and not get taxed. The Capital Gains income is a bit more troublesome, because Vanguard ETFs trading on the TSX are classified as non-reporting offshore funds; i.e. the capital gains will be taxed as income tax and not capital gains... Good thing it's only on the scale of £10-£20!

As far as the calculation of foreign tax paid: I also understand this clearly now too. These foreign taxes and non-resident taxes are going to add up substantially!

The challenge going forward will be to calculate the Capital Gains earned for January-April of a tax year, because of the slight difference in tax years: so I need to know the capital gains earned between January-early April 2018, to calculate and file in the UK before early 31 January 2019. I'll have to check these numbers manually, on the Vanguard fund distribution listing; they should be available shortly after they are distributed, I think?

Similarly, the Foreign Income will be a challenge. In fact, I don't even know where to get this value. I suppose I could back-calculate? Take the total distribution paid into my account, subtract any capital gains and return of capital, then divide by 0.841, making the assumption that 15.9% foreign tax has been applied. The result should be similar or the exact same as the Foreign Income number on my summary NR4 form when it gets sent to me around April 2019. The 15% non-resident withholding amount is easy to figure out, because I can directly see that number in my account transactions...


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## mike_302 (Mar 5, 2015)

Just as a quick summary of where I progressed to on the weekend:

On review of the 2017 Annual Distributions for VUN (https://www.vanguardcanada.ca/individual/etf-distribution-history.htm?portId=9557), I believe we are wrong to subtract the CG from the Foreign Income; and by building a calculator tool in Excel, I've successfully back-calculated the Foreign Income values, starting with the value of the distribution deposited into my account -- not relying on the Capital Gain number on Questrade's NR4 summary; although it does rely on the Return of Capital number*. It works like this:
(Amount deposited into my brokerage account, minus Return of Capital), divided by 0.841 (to undo the 15.9% Foreign Tax, assuming it's always 15.9%). The result is always within 1 cent of the Foreign Income value on the NR4 form. Another way to look at it: (Amount deposited into my brokerage account, minus Return of Capital) minus Foreign Income equals the Foreign Tax Paid value on the NR4 form. The Capital Gain value isn't involved in this calc.
*Notably, I relied on the Return of Capital number to get the exact Foreign Income and Foreign Tax paid value, but Vanguard only reports that in late Jan/early February after the year ends. I can't rely on that; but the number is so small, I could just ignore this minuscule adjustment... 

So I have effectively used my Questrade account activity spreadsheet for April 6 of 2017 to April 5 of 2018 (a UK tax year) to sum the Non-Resident withholding tax; and to back-calculate the Foreign Income and Foreign Tax Paid numbers. I don't back-calculate for Vanguard Canadian Aggregate Bonds though, as VAB doesn't report Foreign Income.
Looking at the funds I have in a TFSA, I can apply the same calculation to determine the Foreign Income and Foreign Tax paid, to include these in the totals I report to the UK tax people.

The only thing that continues to bother me is the use of the Foreign Income and Foreign Tax Paid values. These values are included on the NR4 summary listings, but they aren't indicated on the NR4 form itself, so I am really starting to wonder if they can be used as credit. This Vanguard whitepaper shines a light on the matter from the perspective of a Canadian resident -- which is good enough for me. But, referring to the two tables provided on page 2, where do my Vanguard ETFs lie on this table? VEE and VCN sit in a TFSA; VDU, VAB, and VUN sit in a taxable account.


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## mike_302 (Mar 5, 2015)

Could still use a response to the last post. However, adding a development: Questrade has finally admitted that they did a calculation wrong, but it went unexpectedly: it's not that they forgot to include the non-resident tax withheld on y VDU and VUN positions, but rather that they shouldn't have withheld that 15% (presumably) because the fund's withholding of 15.9% means I was already taxed and double taxation agreements protect me.

Their first response seems to imply they are refunding the withheld amount, possibly also on VAB which doesn't see a withholding tax at the fund-level, so this would confuse me if it's true. I have asked for further clarification, because I obviously need to understand this stuff if I'm also calculating it to report to the UK tax authority...


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## Eclectic12 (Oct 20, 2010)

mike_302 said:


> Okay, what you're saying seems like perfect sense  Report the Capital Gains as Capital Gains, and remember that the Foreign Income value is actually composed of Capital Gains and Dividend, so subtract Capital Gains from Foreign Income when determining the total dividend income ...


It at times has been hard to keep clear what's the US tax, what a Canadian tax resident would report but wait!, it's the flat Canadian NR tax plus whatever the UK decided.
I'm not complaining ... just 


_EDIT: Sorry, on review of the 2017 Annual Distributions for VUN (https://www.vanguardcanada.ca/individual/etf-distribution-history.htm?portId=9557), I'm starting to question if it's right to subtract the CG from the FI ... [/QUOTE]
It seems to me this will depend on how the tax authority aka UK treats it.

*If* the UK has you report the $$ paid as part dividends and part CG/RoC (do they recognise these types for foreign investments?) then the separation with two different reporting needs to happen IMO. Otherwise, any difference in tax rates is going to help or harm one's tax bill.

Where the amounts published by Vanguard = NR4 summary then there is nothing to worry about. If I have understood correctly, you are saying these don't line up on an annual basis so that doesn't seem right.




mike_302 said:



... As far as the calculation of foreign tax paid: I also understand this clearly now too. These foreign taxes and non-resident taxes are going to add up substantially!

Click to expand...

I expect it would be a maximum of 30%, where it should be something less (i.e. 15 or 16% for the US then a bit less for Canada as it is 15% of the net). It would seem the key is for the UK tax authority to credit both or you will be a losing situation.




mike_302 said:



... The challenge going forward will be to calculate the Capital Gains earned for January-April of a tax year, because of the slight difference in tax years: so I need to know the capital gains earned between January-early April 2018, to calculate and file in the UK before early 31 January 2019 ...

Click to expand...

That is the challenge that seemed the most pain for your situation. If you were a Canadian tax resident still, I'd say estimate it and then file an adjustment to the return when the real numbers are in.
How hard is it to adjust your UK return for any issues with the estimation?




mike_302 said:



... I'll have to check these numbers manually, on the Vanguard fund distribution listing; they should be available shortly after they are distributed, I think? ...
Similarly, the Foreign Income will be a challenge. In fact, I don't even know where to get this value. I suppose I could back-calculate?...

Click to expand...

Maybe someone who uses Vanguard ETFs can comment?

The ETFs and REITs I hold have published their annual summary later than regular companies. Anywhere from mid-March to mid-April ... it was consistently late enough that I chose to move an ETF into my TFSA as it meant I had the number to file my tax return about a month early than when I had the ETF in a taxable account.


Cheers


*PS*
I missed the part about where to get the Foreign Income values ... AFAICT, the place to get this are Vanguard's Annual distribution tax breakdown or on the NR4 (or equivalent), which unfortunately is set for a different tax year. Some of my REITs publish on their web site the annual amounts but on another web site, the T3 shows by payment what is what. If there is an equivalent, it may mean you can add up the numbers for the UK tax year. 

When I find the link, I'll post it here - in case the same repository has ETF breakdowns to the lower level.

Only other option I can think of is to call Vanguard to explain you situation to see if they can help out._


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## Eclectic12 (Oct 20, 2010)

mike_302 said:


> Just as a quick summary of where I progressed to on the weekend:
> 
> On review of the 2017 Annual Distributions for VUN (https://www.vanguardcanada.ca/individual/etf-distribution-history.htm?portId=9557), I believe we are wrong to subtract the CG from the Foreign Income; and by building a calculator tool in Excel, I've successfully back-calculated the Foreign Income values, starting with the value of the distribution deposited into my account ...


Not sure the point of the back calculation as I suspect it will confirm what the US/Canada system the broker is a part of is setup to do for a Canadian tax resident.

Unless I misunderstood, the question at hand was what a UK tax resident has to report on the UK tax return. This I would expect to depend on whether the UK bothers splitting the FI into what is it made up of or whether the whole amount is classed as one type (i.e. dividends).




mike_302 said:


> ... The only thing that continues to bother me is the use of the Foreign Income and Foreign Tax Paid values. These values are included on the NR4 summary listings, but they aren't indicated on the NR4 form itself, so I am really starting to wonder if they can be used as credit ...


Again, I'm not a tax expert so that's a better question for the UK tax authority. 
However, there are references to tax treaties between both the US and Canada for the UK so I would expect credits to be available for both, despite the layers involved. Gov't and taxes can be weird so this may not be the case.




mike_302 said:


> ... This Vanguard whitepaper shines a light on the matter from the perspective of a Canadian resident -- which is good enough for me ...


I didn't think you had questions about the net amounts being paid so I am not clear on what info this is helping by providing.




mike_302 said:


> ... referring to the two tables provided on page 2, where do my Vanguard ETFs lie on this table? VEE and VCN sit in a TFSA; VDU, VAB, and VUN sit in a taxable account.


I'd have to check but I seem to recall your ETFs as holding investments or equivalents directly so I would think the Product Structure would only be "Canadian Listed ETF (direct)".


Cheers


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## mike_302 (Mar 5, 2015)

Hey, thanks for the responses. Latest update is that Questrade have admitted to messing up hard, and they shouldn't have been taking the 15% off me for the past year and a bit. They're going to refund it, but that obviously means I was developing a view of this whole thing based on incorrect taxation.

It s a nightmare... I'm now going to make it Questrade's nightmare to resolve this finally, asking for at least a certain degree of interest in return, and/or compensation for all the time that I had to put in to figure out THEIR mistake, and get them to finally admit to it...

Good thing I hadn't figured out what to do with the rest of the pot of cash yet, because then I'd have hundreds, maybe more than a thousand in improperly taken transactions over the whole time I've been non-resident...


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## Eclectic12 (Oct 20, 2010)

Wholly Messed Up Situation Batman!!!

Are they saying they should not have taken any withholding tax at all?


Cheers


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## mike_302 (Mar 5, 2015)

Yea, they're explicitly saying they should not have withdrawn the 15% from my account, after each dividend was paid in. What they are not clearly saying, but what I suspect the reason for that is, is that the 15.9% foreign tax already taken from the various funds is sufficient taxation.

The problem is that until now, I've been dealing with a middle man - - customer service agent who has been going back and forth to the Questrade tax people. Every time I get an email back, I get a half answer... Therefore, I've hit back hard now with a request to escalate to the highest level or I'll just pull out and create a bigger complaint out of the over-taxation. I am not their highest value client, but they won't ignore my complaint. Plus, this probably has implications for their other non-res clients, and I suspect they won't be proactively refunding those clients...

Will keep you posted. Maybe I can convince them to cover the costs of a proper tax review, which would benefit them to know they're doing it properly going forward!

Cheers

Mike


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## Eclectic12 (Oct 20, 2010)

Not an expert ... but I don't see the relevance of having already paid 15.9% to whether Questrade should or should not be deducting the 15% NR Canadian tax. Consider that for a Canadian tax resident - one reports the full $$ as taxable despite having paid the US their slice. As I understand it - where a Canadian tax resident missed claiming the foreign tax credit (FTC), they will pay double tax (the US slice and the Canadian slice with no credits to help out).

I have been trying to understand what would make these investments exempt from the Canadian NR tax. I have to check CRA's web site but the way this makes sense is where the source is not Canadian. As I recall, the Part XIII tax is on Canadian sources. Something like VUN is all US sourced where the Canadian company Vanguard is obscuring that it isn't Canadian income, leading both us and presumably Questrade down the garden path. Were it instead ETF VCN that has Canadian sources then the Canadian NR withholding tax likely applies.


I hope you strategy works for getting to a higher level as well as potentially getting Questrade to pay for an expert review. I'm not sure if you mentioned it but if you haven't - it's another reason for them to play ball. Any clients with larger $$ are far more likely to hit them a lot harder. It may be much cheaper for them to pay for a smaller review than what a bigger client may want/demand.


As my uncle used to say - they can only say no so as long as you aren't burning bridges while asking, there is no down side.

Cheers


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## mike_302 (Mar 5, 2015)

What a thrilling conclusion.

After lots of poking and prodding to get an answer, I have learned that this particular application of withholding tax is industry standard. So any non-resident clients of Canadian brokerages will see an amount withheld on every distribution they receive in a non-registered account. Then, after the brokerage has had time to review the CDS tax forms for the relevant tax year, they reimburse the non-resident client if they find there was already tax withheld at source for any particular holding (T3 boxes 33 and 34).

I dug a bit further to learn that this tax withheld at source is also relevant to some non-Canadian based ETFs in my TFSA. e.g. VEE, Vanguard Emerging Markets, withheld a total of 12 cents/share over 2017; so if I held 100 of VEE over 2017, I would have had $12 withheld at a foreign source, even though it was in my TFSA... The question is whether or not I can count that as foreign tax paid when I report to the UK tax authority --- and I have a feeling the answer is that Yes, I can, which I appreciate is a nice little bonus because, as you said in the first paragraph of your last post, I know you can't count this as a Canadian resident when filing your tax to the CRA. I'll be poking around with the UK tax authority to confirm this, but I just have a feeling... It does mean I have to report my Income as the Foreign Non-business Income number, which I don't think I can get my hands on until the CDS data is released... (See problem outlined in the next paragraph about timing)

Anyways, it looks like my reliance on the Questrade Account Activity spreadsheet to calculate my taxes paid is not going to work. I will need to rely more heavily on CDS information; and because of the timing of the release of that information, and the UK tax year timing, I will also be playing catch-up. For example, CDS info for transactions occurring January 2018-April 2018 will not come out until at least early Feb 2019, but I need that info to report my UK taxes by end of Jan 2019. I think this will be a bit of work...


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## Eclectic12 (Oct 20, 2010)

The headache about the UK tax timeline versus when the ETF info is published I expected ... the "withhold then rebate based on what is reported" I suppose makes sense as it is easier than asking the client for money after the fact.
Are they doing this on the Canadian ETFs that are solely US assets?

BTW ... I asked a while ago whether it was easy to adjust the UK return after the fact but I don't recall if you had found this out or not.
If changes are as easy as the Canadian tax system - it will still suck but likely be a lot more bearable.


Cheers


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## mike_302 (Mar 5, 2015)

Eclectic12 said:


> The headache about the UK tax timeline versus when the ETF info is published I expected ... the "withhold then rebate based on what is reported" I suppose makes sense as it is easier than asking the client for money after the fact.
> Are they doing this on the Canadian ETFs that are solely US assets?
> 
> BTW ... I asked a while ago whether it was easy to adjust the UK return after the fact but I don't recall if you had found this out or not.
> ...


Yea, they only do this on the Canadian ETFs that report Foreign Income (so VEE, VDU, VUN -- not VAB or VCN). VEE is held within my TFSA though, so they don't incorrectly withhold anything from that; but a foreign withholding tax is applicable to VEE as well, as per its CDS filing.

I confirmed with the UK authority now, and as I suspected, the Foreign withholding that's reported on the CDS can be counted as foreign tax paid already, so I will have to rely on CDS data going forward. That's possibly not the end of the world because...

To respond to your last question / the question you asked a while ago, apparently there is an option on the UK self-assessment form to say "these numbers are provisional" which means I will have 12 more months to return to that form and update the numbers if they're incorrect. You can also submit like normal, and then go back and say "I made a mistake, I need to correct something", but the government has recently been using that against people who don't hold British passports -- it's all rather controversial, and apparently they've now stopped that practice as of a couple weeks ago (https://qz.com/1292258/uk-suspends-anti-terror-law-used-to-deport-migrants-who-made-tax-errors/), but in short: I'd rather not ever have to say "I made a mistake, let me correct it". I like the subtle differentiation of a "provisional filing" 

Counting that foreign tax paid already is also beneficial, I suppose, for the reasons you pointed out already: it means I get to keep the same amount of the distribution that I would've seen if I were Canadian resident, and then I get a 15% foreign tax credit to my name, which I can probably count against something else.


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