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Questions and Answers
Which of the following scenarios would NOT result in a non-resident individual being taxed in Canada on their income?
Which of the following scenarios would NOT result in a non-resident individual being taxed in Canada on their income?
- A non-resident individual works remotely for a Canadian company from their home country. (correct)
- A non-resident individual establishes a branch office in Canada to conduct business.
- A non-resident individual sells a piece of real estate in Canada.
- A non-resident individual invests in a Canadian partnership whose value is primarily derived from Canadian real estate.
Which of the following is NOT considered taxable Canadian property for a non-resident?
Which of the following is NOT considered taxable Canadian property for a non-resident?
- Shares of a private Canadian corporation whose value is primarily derived from Canadian real estate.
- Shares of a publicly traded Canadian company listed on the Toronto Stock Exchange. (correct)
- Real estate located in Canada.
- Capital property used for business operations in Canada.
Which of the following is NOT a factor that determines if a foreign entity is required to pay taxes in Canada on business activities?
Which of the following is NOT a factor that determines if a foreign entity is required to pay taxes in Canada on business activities?
- The specific methods by which the foreign entity conducts business (e.g., direct sales, sales through independent contractors).
- The type of business structure used by the foreign entity (e.g., branch office, separate corporation).
- The amount of revenue generated by the foreign entity within Canada. (correct)
- Whether the foreign entity has a permanent establishment in Canada.
What is the key condition for a foreign entity to be taxed in Canada on business activities?
What is the key condition for a foreign entity to be taxed in Canada on business activities?
Based on the content, what is NOT considered a permanent establishment in Canada for a foreign entity?
Based on the content, what is NOT considered a permanent establishment in Canada for a foreign entity?
Flashcards
Tax on net income
Tax on net income
A tax applicable in Canada on income after expenses for non-residents engaged in business activities or employment.
Permanent establishment
Permanent establishment
A fixed place of business or agency relationship allowing non-residents to be taxed in Canada.
Taxable Canadian property
Taxable Canadian property
Property that, when disposed, incurs tax for non-residents, unless exempt by treaty.
Non-resident taxation criteria
Non-resident taxation criteria
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Exemptions by tax treaty
Exemptions by tax treaty
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Study Notes
Taxation of Non-Residents in Canada
- Non-residents are taxed on net income derived from various activities in Canada. Net income is calculated as revenues less permitted expenses.
- Activities triggering tax: Carrying on business in Canada, disposing of certain Canadian property (taxable Canadian property), or being employed in Canada.
- "Carrying on business" criteria: A foreign entity must actually conduct business in Canada, not just have an indirect presence. A critical factor is the concept of a "permanent establishment."
- Permanent establishment: This involves a fixed physical business location in Canada or an agency relationship where a Canadian resident acts on behalf of the non-resident entity, regularly contracting for them.
- Methods of conducting business impact tax: How a foreign entity operates in Canada (direct sales, sales through contractors, warehouses, branches, etc.) affects their tax liability.
Taxable Canadian Property
- Non-residents are taxable on gains from the disposal of "taxable Canadian property."
- Examples of taxable Canadian property:
- Canadian real estate
- Capital assets used in a Canadian business
- Shares of Canadian private corporations whose value comes from Canadian real estate
- Investments in partnerships and trusts, where the investments are valued mainly via Canadian property.
- Exemptions: Tax treaties may exempt certain dispositions from taxation.
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