Paying a Non-Resident Director of a cCPC

Question

2367 viewsAugust 21, 2019Accounting

0

Anonymous Posted August 19, 2019

Hi Allan,

Thanks for your help with great tax resources. I incorporated recently and will start a rice-import business from India. I have included my friend in India, as a director of my Canadian Corporation and myself.

He’d purchase the inventory from back home & be responsible for shipping. I need to pay him for his services i.e. minimum wage per hour for his time spent & will either pay in the form of dividends or self-employed fees.

I am aware that in Canada for dividends, a T5 should be filed, while T4A be filed for the fees.

Can you please advice if it’s the same slip for paying foreign residents? I heard about an NR4 slip & unsure if i need to issue that. Also, should i withhold 15% taxes every pay and remit to CRA? Please advise.

Really appreciate your help & Thanks again!

1 Answer

score 0 · Answer 1 · 2019-08-21T14:24:46+00:00

Since your friend is a non-resident shareholder of a Canadian corporation, an NR4 slip should be prepared annually to report the dividends paid to him and the taxes deducted. The default withholding tax rate is 25%. The lower rate of 15% applies (pursuant to the tax treaty between Indian and Canada) if the dividends are being paid to an Indian corporation owned by your friend and that Indian corporation owns shares in the Canadian payer corporation.

Paying a Non-Resident Director of a cCPC

1 Answer

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