# double taxation b/w Canada and US (for a Canadian non-resident for tax purposes)?



## mememeow (Sep 20, 2015)

Hello. I am a Canadian who has recently become a non-resident for tax purposes. 

I have investments in the US market, and the US has been taking withholding tax on the dividends I have been receiving. 

However, it is also my understanding that Revenue Canada will want 25% of all my earnings as I am now a non-resident for tax purposes. 

Am I going to be double taxed? Is there any tax treaty b/w Canada and US for a Canadian non-resident for tax purposes? Are there any documents I should complete to avoid double taxation?

Thanks for your help everybody!!!


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## OhGreatGuru (May 24, 2009)

mememeow said:


> ...
> However, it is also my understanding that Revenue Canada will want 25% of all my earnings as I am now a non-resident for tax purposes.
> ...


What "earnings" are you talking about? CRA will charge Part XIII tax (25%) on various Canadian sources of income such as:

dividends;
rental and royalty payments;
pension payments;
old age security pension;
Canada Pension Plan and Quebec Pension Plan benefits;
retiring allowances;
registered retirement savings plan payments;
registered retirement income fund payments;
annuity payments;
management fees.

See http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/nnrs-eng.html#txblgtns

If you no longer have Canadian sources of income, and you are not a tax resident, you are not subject to any Canadian taxes.


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## Guban (Jul 5, 2011)

Canada won't tax you on your US dividends, but the US will withhold more on your US dividends now that you are no longer a Canadian resident. 30%, I believe. Your citizenship does not matter. The Canada-US tax treaty is for Canadian tax residents and would not help you with your US investments.


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## mememeow (Sep 20, 2015)

Thank you so much OhGreatGuru and Guban for your replies. 

Can I clarify precisely my situation? I have investments (not employment income earnings) in both Canada and the US, and I receive dividends from each of them. I am now aware that the US will likely withhold 30% of my US dividends (and I will not be subject to Canadian taxes on these), and Canada will charge 25% tax on my Canadian dividends. 

How about capital gains when I sell my investments? Does the US take 30% of all capital gains on the US side, while Canada takes 25% of all capital gains on the Canadian side? 

Thanks again for your help and best wishes!!


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## Guban (Jul 5, 2011)

Generally, capital gains on stocks are taxed in the country of residence, so the US and Canada won't tax your hen you sell. I don't know your country of residence, however, so I don't know the tax treatment you'll receive. I note that investment real estate may not follow this rule.


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## Robillard (Apr 11, 2009)

You are only supposed to pay withholding tax once, and the rate should be based on either the domestic withholding rate or the rate agreed in the tax treaty between the source country and your residence country. Capital gains are generally not subject to withholding tax. 

The requirement to withhold is generally that of the payer. So, in general, your brokerage or fund company will withhold on payments and remit the tax to the appropriate authorities on the recipient's (your) behalf. 

If you intend to take advantage of lower withholding rates that you may be entitled to under the tax treaties where you are resident, you need to file paperwork with your brokerage. Many brokerages use the US W-8BEN form for this purpose. You might also send a letter to the brokerage citing the treaty along with your proof of residence. 

On a related note, I don't think non-residents are allowed to buy mutual funds through Canada's mutual fund sales system. They can be held through a Canadian brokerage, but the non-resident cannot add to positions by buying more units.


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## asterbin5 (Oct 1, 2015)

Income tax in Canada is assessed upon residents, those who work in Canada while maintaining residential ties, which has a rather broad and flexible definition. The U.S. bases taxation on both residence and citizenship.

This difference leads to a number of situations, but as a bottom line, a U.S. citizen generally files a U.S. tax return every year, regardless of residential arrangements.

Canada and the U.S. have an agreement that exempts a U.S. citizen from being taxed by the U.S. on income earned and taxed in Canada. However, the exemption itself is driven by proper completion of the U.S. 1040 federal tax return.

Failure to timely and accurately complete the U.S. return may lead to double taxation, denial of legitimate expenses, interest charges and penalties on incomplete or inaccurate forms.


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## mememeow (Sep 20, 2015)

Thank you again, everyone, for your continued support in providing information about my tax situation. I am grateful I found this forum where there are so many genuine and interested members!!


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## Eclectic12 (Oct 20, 2010)

Guban said:


> mememeow said:
> 
> 
> > How about capital gains when I sell my investments?
> ...


+1 that as a NR of Canada and the US, when sold after the departure from Canada - they won't tax the capital gains.

However, based on the questions plus "Canadian who has recently become a non-resident for tax purposes", I am wondering if the deemed disposition of property on the data of departure has been planned for?

As I understand it, Canada wants their capital gains taxes for property including investments. Going forward, the cost base for the investment to report future capital gains will be the FMV on the date of departure.



> When you leave Canada, you are considered to have sold certain types of property (even if you have not sold them) at their fair market value and to have immediately reacquired them for the same amount. This is called a deemed disposition and you may have to report a capital gain (also known as departure tax).


http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/lvng-eng.html#plc

When I follow the links to the form to use, the heading "number of shares" seems to say that investments in a taxable account likely are in this list.
http://www.cra-arc.gc.ca/E/pbg/tf/t1243/README.html

As Canada taxes world-wide income, I expect that should the US investments that are held in a taxable account would be included in the departure tax.

For things like RRSPs, pensions or interests in insurance policies ... there are exceptions.


This article isn't the same as it's a Canadian departing for the US but it does mention planning in advance to deal with shares owned in a taxable account.
http://www.theglobeandmail.com/glob...the-departure-tax-when-going/article22032765/


Cheers


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