The Canada Revenue Agency (CRA) has announced increased requirements for documentation for cross-border transactions. These new requirements become effective January 1, 2013.
The new rules include an increase in the responsibility of the Canadian taxpayer in documenting the identity and residence of non-residents to whom they are paying monies to and determining the effective treaty benefits for the purpose of withholding tax requirements.
CRA has issued forms NR301, NR302 and NR 303 to provide guidance on making these determinations. While the forms are not prescribed forms (i.e. not required for filing purposes) they do provide a guideline and it is recommended that taxpayers use the forms to ensure they are acting consistently with the new requirements.
NR301 is to be used by individuals, corporations or trusts that are non-residents of Canada and resident in a country with which Canada has a tax treaty. The form is for those non-residents receiving payments in the form of investment income, pensions, annuities, royalties, estate, trust or partnership or hybrid entity income and desire a reduction in the withholding tax rate in accordance with the tax treaty applicable. This form is also applicable to those filing form T2062 or T2062A requesting compliance certificates.
NR302 is to be used by non-resident partnerships with the same circumstances as for the NR301 and NR303 is similarly for use by non-resident hybrid entities.
All of these forms are available at the CRA website in fillable format.
NR301 -
NR302 -
NR303 -
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Many Canadians receive requests for these numbers when they decide to open a bank account in the U.S. or purchase a vacation property in the U.S. Up until now the process was cumbersome and often required taxpayers to go to U.S. border towns to have their documentation certified if they could not get it done at U.S. consular offices.
Effective January 1, 2013 this exercise will become even more cumbersome. The IRS will no longer accept notarized documents such as passports. Instead all identifying documents provided to the IRS to accompany an ITIN application will require either the original documents or will have to be certified by the issuing agency. As most Canadians use a passport as identification as it is the one document that is accepted by the IRS on its own therefore not requiring a secondary document, this means that a certification will have to be completed by Passport Canada.
An option that will become available will allow certifying acceptance agents to verify the authenticity of original documents so that documents will not have to be forwarded to issuing agencies or the IRS.
Another significant change is that ITINs will no longer be permanent but will expire after 5 years. It has not been announced whether the individual will have to re-identify themselves.


Many taxpayers have the impression that they can move funds between related companies without being concerned with the tax impact. Usually this is done to take advantage of losses available in the recipient company and reduce the tax liability of the payor. In the case of Les Enterprises Rejean Goyette Inc v The Queen the taxpayer had attempted exactly that. The Court determined that the management fees were not deductible as there was no contract for services and no other supporting corporate documentation except for an invoice dated on the last day of each taxation year. There was also no evidence to indicate what, if any services may have been made available to support the payment of the fees.

This case should serve as a warning for those who want to move money between corporate entities without appropriate documentation.


Everyone at Parker Garber & Chesney LLP wish all of our clients and friends a Merry Christmas and a Happy New Year.
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