Reply_To: vwvitek at gmail.com
My_question_is: Applicable to both US and Canada
Subject: License fees paid from US to Canadian resident
Expert: taxman at centa.com
Date: Tuesday June 28, 2005
Time: 11:39 PM -0700
QUESTION:
Hello, I am Canadian taxpayer from Port Moody, BC.
1) What exactly is my Canadian personal income tax liability in regards of
license fees paid from the U.S. to my account? In addition to the 15% tax,
as defined in US-Canadian tax treaty, do I pay income tax on my income from
license fees? I charge license fees for limited right to access and use of
my unique web server. I also have US patent & US trademark, I would like to
charge US and Canadian users for permission to use my patented software and
my US trade mark. 2) Does it matter if I authorize third-party Canadian
agency to collect license fees for me (and send me all the collected funds
1x monthly, less their service fee), or if I collect the fees directly? 3)
Would you be able to help me design taxwise-correct licensing agreement?
================================================
david ingram replies:
The 15% withholding tax is paid to the US. The royalties than have to be
added to Schedule 4 of the Canadian Return and tax will be calculated to
Canada.
The amount of tax paid to the US then goes on schedule 1 line 431.
The amount of income received from the US goes on line 433 of schedule 1
Assuming you have a taxable income over $35,000, you will get credit for the
money you paid to the US as a direct deduction form your Federal tax. If
there is any excess, you can take it off on the BC form 428.
2. It does not matter if you have an agent collect or you collect it
yourself.
3. I am not a lawyer. However, I would be glad to help with the tax
details.
Sorry this is so late. It was buried in over 500 emails.
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