Non-residents who invest in Canadian property mutual fund investments are taxable at a rate of 15% on any amount not otherwise taxed that the mutual fund pays or credits them. A Canadian property mutual fund investment is an exchange-listed mutual fund that derives more than 50% of its unit or share value from real property in Canada, Canadian resource properties, or Canadian timber resource properties. The mutual fund has to report these amounts, called assessable distributions, and the withholding tax on an NR4 slip, Statement of Amounts Paid or Credited to Non-Residents of Canada.
Generally, the 15% tax withheld on the assessable distributions is considered the final tax obligation to Canada on that income.
A non-resident investor may apply any loss realized on the disposition of a Canadian property mutual fund investment against assessable distributions received, up to the amount of the total assessable distributions paid or credited on the investment. The non-resident investor applies the loss and can claim any resulting refund by filing Form T1262, Part XIII.2 Tax Return for Non-Resident's Investments in Canadian Mutual Funds. Unused amounts of this special form of capital loss, which can be used only for this purpose, may be carried back three tax years or carried forward indefinitely.
Tax withholding requirements
Part XIII.2 withholding tax remittances and the NR4 information return on assessable distributions
The Part XIII.2 tax of 15% withheld on assessable distributions is remitted and reported in the same manner as Part XIII tax. Therefore, the information and procedures in Guide T4061, NR4 – Non-Resident Tax Withholding, Remitting, and Reporting for remitting and reporting Part XIII tax also applies for Part XIII.2.
When do you remit Part XIII.2 tax deductions?
The mutual fund must remit the Part XIII.2 it withheld immediately to the Receiver General. However, we will allow the mutual fund to remit its deductions so that we receive them on or before the 15th day of the month following the month the tax was withheld.
How to remit Part XIII.2 tax deductions
The mutual fund has to remit the Part XIII.2 tax deductions into a non-resident tax account. It can remit the Part XIII.2 tax deductions to the same non-resident tax account used to make its Part XIII tax remittances or in a different account. If they are made to the same account, it can be remitted either as one payment for the combined tax deductions or as separate payments.
For more information on how you can remit these tax deductions, go to Payments to the Canada Revenue Agency.
Are you a new remitter or want a separate account for Part XIII.2 tax?
If you need a non-resident tax account to remit your Part XIII.2 tax deductions, go to New remitter.
Filing your NR4 information return
Mutual fund corporations have to file their NR4 information return by March 31, 2021 for assessable distributions paid to non-residents in 2020. As for mutual fund trusts, they must file their NR4 information return by March 31, 2021 or no later than 90 days after their tax year-end, whichever is earlier, for assessable distributions paid to non-residents in 2020.
The gross amount of assessable distributions for the tax year and the amount of non-resident tax withheld have to be reported on the NR4 slip under one of the following income codes:
- code 59, Assessable distributions paid or credited by a Canadian property mutual fund investment corporation
- code 60, Assessable distributions paid or credited by a Canadian property mutual fund investment trusts
If you remit Part XIII and Part XIII.2 withholding tax to the same non-resident tax account, make sure that the "Gross income" and "Non-resident tax withheld" amounts reported on the NR4 slip are shown separately under the appropriate income codes.
Need more information?
For more information, call 1-855-284-5946 from Canada and the United States, or 613-940-8499 from anywhere else.
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