Lines 25 to 27 - Non-resident tax payable

Complete the rest of this schedule by referring to the NR4 return for the trust.

Every non-resident person has to pay Canadian income tax of 25% under Part XIII, unless a tax treaty or convention provides a lower rate. Part XIII tax is paid on amounts that a Canadian trust paid or credited, or is considered to have paid or credited, to non-residents. You have to withhold and remit tax on these amounts. This tax has to be received by the Canada Revenue Agency or a Canadian financial institution on or before the 15^th day of the month after the month during which the tax was withheld.

Calculate the amount of non-resident tax payable and any balance due by following the steps in Part B of Schedule 10. Send any balance due to us, with Form NR76, Non-Resident Tax - Statement of Account, which is a combined remittance statement and receipt.

If you are remitting Part XIII tax for the first time, send us a statement with the trust's name and address, the type of payment (Part XIII tax), and the month during which you withheld the tax. When we receive the payment, we will issue Form NR76. You can use the bottom portion for remitting future payments.

You also have to complete an NR4 Summary, Summary of Amounts Paid or Credited to Non-Residents of Canada, and an NR4 slip, Statement of Amounts Paid or Credited to Non-Residents of Canada.

For more information on non-resident income tax, see:

• Information Circular IC76-12R, Applicable rate of Part XIII tax on amounts paid or credited to persons in countries with which Canada has a tax convention

• Information Circular IC77-16R, Non-Resident Income Tax

• archived Interpretation Bulletin IT-465, Non-Resident Beneficiaries of Trusts

Example

An inter vivos trust resident in Canada has two beneficiaries: Karson, a resident of Canada who is an eligible beneficiary, and Teagan, a non-resident who is a designated beneficiary. Each beneficiary is entitled to receive an equal share of the trust income that is distributed annually.

The trust has $1,400 net income for the year, which includes net business income (from a business carried on in Canada) of $1,000, and net interest income of $400.

On Schedule 10, the trustee would do all of the following:

• enter $1,000 on lines 1 and 6, since there are no other sources of specified income (the $400 interest is not specified income)

• enter $1,400 on line 11, since this is the total amount from columns 1 and 2 of line 928 of Schedule 9

• enter the lesser of lines 6 ($1,000) and 11 ($1,400) in the calculation area for line 12

• multiply $1,000 by 40%, and enter the result ($400) on line 12

• calculate the amount that is not subject to Part XIII non-resident tax by completing the calculation area for line 13 (divide $700 by $1,400 and multiply by $400). Enter the result ($200) on line 13 and on line 21

• calculate the amount of refundable Part XII.2 tax credit on line 14 by subtracting line 13 ($200) from line 12 ($400). Enter the result ($200) in box 38 on the T3 slip

Karson received $500, but he will include $700 ($500 + $200) in his income for the year. This amount, which is entered in box 26 on the T3 slip, is the 50% portion of the trust income distributed to him under the terms of the trust agreement. On his T1 return he will claim a refundable Part XII.2 tax credit of $200.

Teagan received $500. This amount, which is entered on the NR4 slip, is the 50% of the trust income distributed to her under the terms of the trust agreement. On Schedule 10, the trustee reduces the total income paid or payable to non-resident beneficiaries (line 15) by the Part XII.2 tax (line 21). Line 24 ($700 - $200 = $500) is the amount subject to non-resident tax.

Completing the NR4 return

Guide T4061, NR4 - Non-Resident Tax Withholding, Remitting, and Reporting, explains how to report amounts the trust paid or credited to non-residents of Canada and how to complete and distribute the NR4 return.

Report the total trust income you allocated to a non-resident beneficiary as estate and trust income on the NR4 return. Types of income, except for taxable capital gains from a mutual fund trust, lose their identity when allocated to a non-resident beneficiary. Therefore, you have to total and report them as "Gross income" in box 16 of the NR4 slip. In box 14 or 24, enter an income code of "11" for estate or trust income. Enter a code of "58" if there were taxable Canadian property gains distributions to the non-resident.

File this return no later than 90 days after the end of the trust's tax year.

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