Transamerica Life | CRA non-resident certification
What is happening?
The Canada Revenue Agency (CRA) has announced a change in their requirements for determining the applicable withholding tax treaty rate for non-residents. Tax is withheld under certain transactions such as fully registered withdrawals, annuity payments or income distributions on non-registered policies. The withholding rate applied is 25% unless reduced by the tax treaty between Canada and the country of residence.
Currently, CRA allows the address of the owner as the sole evidence of residency in order to apply the appropriate withholding tax treaty rates. Effective January 1, 2013, CRA requires formal certification from the owner to determine eligibility for the reduced withholding tax treaty rates using a new form NR301- Declaration of Eligibility for Benefits Under a Tax Treaty for a Non-resident Taxpayer. NR301 expires every 3 years or when there is a change in residency.
What is required of policyholders?
To ensure the proper withholding tax rate is applied, a letter and NR301 form will be sent on September 28th to policyholders that currently reside in a treaty country and are receiving a reduced tax rate. If a response is not received, a default non-resident tax rate of 25% will be applied to any transactions subject to withholding beginning January 1, 2013.