Canada: Non-Residents With Canadian Activities Or Dispositions Must File Canadian Tax Return

Last Updated: June 13 2000

Shannon Baker and Kevin Hinz of PricewaterhouseCoopers LLP outline the treaty-based filing requirements contained in Canada Customs and Revenue Agency’s recently released Schedule 91.

Canada Customs and Revenue Agency ("CCRA") recently released Schedule 91, a supplementary schedule to the filing required of non-resident corporations claiming treaty exemption from taxation in Canada. Canadian tax return filings are required within six months of year-end for years starting after 1998, where a non-resident is carrying on business in Canada or disposes of taxable Canadian property. Penalties will be imposed if the non-resident is found to be in non-compliance.

Even if the non-resident is exempt from Canadian tax under a tax treaty (i.e. does not have a Canadian permanent establishment), a Canadian return is still required. Schedule 91 is intended to provide CCRA with an overview of the non-resident’s activities in Canada to help in evaluating whether the non-resident could have a permanent establishment in Canada. The following information is requested:

  • description of business activities in Canada;
  • gross Canadian source revenues derived from sale of goods, provision of services, and other activities;
  • details of physical facilities leased in the year;
  • treaty provisions relied on for tax exemption;
  • the five largest Canadian customers and the gross revenues earned from each;
  • salary, wages and remuneration paid for services rendered in Canada, and dates of engagement;
  • fees, charges, reimbursements of expenses or other payments made to both resident and non-resident subcontractors for services rendered in Canada and dates of engagement; and
  • whether a waiver from Regulation 105 withholding taxes was obtained or applied for from CCRA.

Schedule 91 also requests information on the disposition of defined taxable Canadian property:

  • description of property subject to disposition;
  • proceeds of disposition, adjusted cost base, and gain or loss realized;
  • specific treaty provisions relied on for tax exemption; and
  • whether a section 116 certificate was obtained from CCRA to waive required withholding otherwise necessary for the acquisition by the purchaser.

This information request is the latest example of CCRA's increased attention to inbound activities. It follows the growth in attention to the Regulation 105 requirement to withhold 15% from gross payments to non-residents for services rendered in Canada where a waiver from withholding is not obtained.

This withholding is an instalment on any tax liability the non-resident may otherwise have. It will only be refunded when the non-resident files a Canadian tax return and satisfies the CCRA as to there being no Canadian tax liability. Review of the non-resident’s activities in Canada includes a consideration as to whether any non-resident employees rendering services in Canada are subject to Canadian taxation on their Canadian source employment income

The information provided herein is for general guidance on matters of interest only. The application and impact of laws, regulations and administrative practices can vary widely, based on the specific facts involved. In addition, laws, regulations and administrative practices are continually being revised. Accordingly, this information is not intended to constitute legal, accounting, tax, investment or other professional advice or service.

While every effort has been made to ensure the information provided herein is accurate and timely, no decision should be made or action taken on the basis of this information without first consulting a PricewaterhouseCoopers LLP professional. Should you have any questions concerning the information provided herein or require specific advice, please contact your PricewaterhouseCoopers LLP advisor.

PricewaterhouseCoopers refers to the Canadian firm of PricewaterhouseCoopers LLP and other members of the worldwide PricewaterhouseCoopers organization.

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