Canadian Tax Consultant Chartered Accountant International Tax Consultant Canadian Tax Professional Canadian Tax Accountant Michael Atlas - Canadian Tax Consultant US Tax Consultant
Michael Atlas - Canadian Tax Consultant
ABOUT MICHAEL ATLAS - A comprehensive summary of Michael Atlas' professional background and experience, as well as a listing of his extensive writings in the tax field AREAS OF PRACTICE - A description of the areas of tax practice in which he has extensive interest and expertise PROFESSIONAL FEES - Information on Michael Atlas' general approach to fees CANADIAN TAX GUIDE FOR NON-RESIDENTS - A useful summary of the application of Canadian tax rules for non-residents earning income from Canadian sources-includes analysis by type of income and application of major tax treaties CONTACTING MICHAEL ATLAS - Everything you need to know about contacting Michael Atlas
ABOUT MICHAEL ATLAS - A comprehensive summary of Michael Atlas' professional background and experience, as well as a listing of his extensive writings in the tax field
AREAS OF PRACTICE - A description of the areas of tax practice in which he has extensive interest and expertise
PROFESSIONAL FEES - Information on Michael Atlas' general approach to fees
CANADIAN TAX GUIDE FOR NON-RESIDENTS - A useful summary of the application of Canadian tax rules for non-residents earning income from Canadian sources-includes analysis by type of income and application of major tax treaties
CONTACTING MICHAEL ATLAS - Everything you need to know about contacting Michael Atlas

ROYALTIES AND OTHER RENTS

RULES UNDER THE INCOME TAX ACT

General Rules

A non-resident to whom royalties or rents are paid or credited by a Canadian resident is generally subject to Canadian tax thereon under Part XIII at a rate of 25%.

In addition to amounts which are "royalties" and "rents" in the traditional sense, this can apply to "similar payments" (e.g. "licensing fees") as well as certain other amounts (e.g. payments for services) which are calculated based on production, sales, profits, etc.

Rents paid in connection with Canadian real property are discussed separately under Real Estate Rents.

Payments By Other Non-Residents

Rents or royalties paid by a non-resident to another non-resident may be treated as being paid by a Canadian resident for this purpose, in the following circumstances:

Rent For Use in Canada Of Property

A non-resident who pays rent for the use in Canada of property (other than railway rolling stock) is deemed, in respect of the payment of such rent, to be a Canadian resident.

Timber Royalties

A non-resident who pays timber royalties in respect of a timber resources property or timber limit is deemed, in respect of the payment of such royalties, to be a Canadian resident.

Business Carried On Principally In Canada

A non-resident whose "business was carried on principally in Canada" in a taxation year is deemed to be a Canadian resident, in respect of any amounts paid to another non-resident, to the extent that they are deductible in computing his taxable income earned in Canada.

Manufacturing Or Resource Activities

A non-resident who engages in any of the activities indicated below in a taxation year is deemed to be a Canadian resident, in respect of any amounts paid to another non-resident, to the extent that they are deductible in computing his taxable income earned in Canada.

The activities that will bring a non-resident within the scope of this provision are as follows:

Exempt Royalties And Rents

There are a number of special rules that provide that certain types of royalties or rents paid to non-residents are exempt from Part XIII tax. These include:

RULES UNDER CANADA'S TAX TREATIES

Jurisdiction To Tax

Canada's tax treaties generally allow Canada to tax royalties and rents paid by Canadian residents to non-residents, although complex sourcing rules will often come into play.

However, Canada's treaty with the United States now generally exempts royalties in respect of computer software and certain patents and information from taxation. This is also the case under the treaty with France. In addition, Canada's treaty with the Netherlands now generally exempts royalties in respect of computer software from taxation. Furthermore, Canada's new treaty with Germany, that was signed on April 19, 2001, provides exemptions for certain royalties in respect of certain computer software patents and know-how.

Rates Of Tax

Canada's tax treaties generally lower the rate of tax that Canada may levy on royalties and rental (other than real estate rental) payments to either 10% or 15%. The 10% rate applies under Canada's treaties with France, Germany, Italy, Japan, the Netherlands, Switzerland, the United Kingdom, and the United States.