Question

Hi

I’m a minority shareholder of a Canadian company and I’ve received a dividend from the company this year (I’m a US citizen living in the US). I received the full amount of the dividend and the company (really my family) didn’t withhold any taxes from the payment.

I’ve done a little research and it seems as though they should have withheld some taxes before they sent me the payment.

Is this correct? And if so, does this mean that I’ll be liable for the late withholding?

Thanks

XXXXXXXX

Answer

Hi XXXXX

You are correct, most likely the company should have withheld and remitted 15% of the dividend they paid you to CRA. Technically the payor (the company) will be liable for the withholding and possible penalties, however it’s best to get the amounts cleared up ASAP. You can also be found liable for any interest penalties that accrued.

One of your options is to file a voluntary disclosure application with CRA and remit the amounts before they found out they’ve been missed. Possible penalties for late filing remittances can be as high as 20% plus interest.

It’s also possible that you have specific foreign company disclosures to attach to your US tax returns each year via form 5471. If you need help with the voluntary disclosure or 5471 please let me know and we can discuss this further.

Regards

Phil Hogan, CPA, CA, CPA (Colorado)

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