ARCHIVED - General Guide for Non-Residents - 2016 - Net federal tax

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• Step 2 of Schedule 1 – Federal tax on taxable income
• Step 3 of Schedule 1 – Net federal tax
  • Recapture of investment tax credit
  • Federal logging tax credit
  • Line 405 – Federal foreign tax credit
  • Lines 409 and 410 – Federal political contribution tax credit
  • Line 412 – Investment tax credit
  • Lines 413, 414, 411, and 419 – Labour-sponsored funds tax credit
  • Line 415 – Working income tax benefit (WITB) advance payments
  • Line 418 – Special taxes
  • Line 424 – Federal tax on split income
  • Line 425 – Federal dividend tax credit
  • Line 427 – Minimum tax carryover
  • Line 445 – Section 217 tax adjustment
  • Line 56 – Surtax for non-residents of Canada and deemed residents of Canada
  • Calculation of provincial and territorial tax

Step 2 of Schedule 1 – Federal tax on taxable income

Enter your taxable income from line 260 of your return on line 40 of Schedule 1.

Complete the appropriate column depending on the amount on line 40.

Step 3 of Schedule 1 – Net federal tax

There are no lines on the return for the recapture of the investment tax credit or for the federal logging tax credit. If these amounts apply, use them to calculate your net federal tax on Schedule 1. If the result of these adjustments is negative, and you do not have to pay minimum tax, enter "0" on line 61 of Schedule 1, or line 66 for residents of Quebec.

⬤▲Recapture of investment tax credit

If you have to repay all or part of an investment tax credit you received previously for scientific research and experimental development or for child care spaces, calculate on Form T2038(IND), Investment Tax Credit (Individuals), the amount you have to repay. Write "recapture of investment tax credit" and the amount below line 59 on Schedule 1. Add it to the amount on line 59.

⬤▲Federal logging tax credit

If you paid logging tax to a province for logging operations you performed in the province, you may be able to claim a logging tax credit. To calculate your credit, use the lesser of the following two amounts for each province in which you had a logging operation:

• 66.6667% of the logging tax paid for the year to the province; and
• 6.6667% of your net logging income for the year in the province.

Your allowable credit is the total of the credits for the year for all provinces, up to 6.6667% of your taxable income (line 260), not including any amounts on lines 208, 214, 215, 219, and 220. Write "federal logging tax credit" and enter the allowable amount below line 59 on Schedule 1. Subtract it from the total of the amount on line 59 and the amount of any applicable recapture of investment tax credits.

⬤▮▲Line 405 – Federal foreign tax credit

Deemed residents – You may be able to claim this credit if you paid foreign taxes on income you received from outside Canada and reported on your Canadian return. Complete Form T2209, Federal Foreign Tax Credits, to calculate your credit, and claim the amount from line 12 on line 405 of Schedule 1.

Non-residents and non-residents electing under section 217 – Generally, a non-resident of Canada is not eligible for a foreign tax credit. However, if you were a former resident of Canada who disposed of certain taxable Canadian property in 2016, you may be able to claim a foreign tax credit. Contact the CRA for the special rules that may apply to you.

Supporting documents – Attach to your return your completed Form T2209 and documents that show the foreign taxes you paid. If you paid taxes to the United States, attach your W-2 information slip, U.S. 1040 return, U.S tax account transcript, and any other supporting documents that apply. If you are submitting documents in a foreign language, you will need to provide a copy of the original documents and a certified English or French translation.

⬤Lines 409 and 410 – Federal political contribution tax credit

You can claim contributions either you or your spouse or common-law partner made during 2016 to a registered federal political party or to a candidate for election to the House of Commons.

The eligible amount is the amount by which the fair market value of your monetary contribution exceeds any advantage you received or will receive for making it. Generally, an advantage includes the value of certain property, service, compensation, use, or any other benefit.

Complete the chart for line 410 on the federal worksheet to calculate your credit. However, if your total political contributions are $1,275 or more, enter $650 on line 410.

Supporting documents – Attach to your return your official receipts. Do not attach official receipts for amounts shown in box 14 of your T5003 slips, in box 184 of your T5013 slips, or on financial statements showing an amount a partnership allocated to you. Keep copies of all your documents in case we ask to see them later.

⬤▮▲Line 412 – Investment tax credit

You may be eligible for this credit if any of the following apply. You:

• bought certain new buildings, machinery, or equipment and they were used in certain areas of Canada in qualifying activities such as farming, fishing, logging, manufacturing, or processing;
• have unclaimed credits from the purchase of qualified property after 2005;
• have an amount shown in box 41 of your T3 slips;
• have an amount shown in box 186 or 194 of your T5013 slips;
• have an amount shown in box 128 of your T101 slips;
• have a partnership statement that allocates to you an amount that qualifies for this credit;
• have an investment in a mining operation that allocates certain exploration expenditures to you; or
• employ an eligible apprentice in your business.

You can claim an investment tax credit if you carry on a business and create one or more new child care spaces for children of your employees and other children. For more information, see Form T2038(IND), Investment Tax Credit (Individuals).

For investment tax credits earned in a year after 2005, the carry-forward period is 20 years.

New Eligibility for the mineral exploration tax credit has been extended to flow-through share agreements entered into before April 2017.

How to claim this credit

Attach to your return a completed copy of Form T2038(IND). For more information about the investment tax credit, see the information sheet attached to Form T2038(IND).

You must send the form to us no later than 12 months after the due date of your return for the year the qualified expenditure arises.

⬤▮▲Lines 413, 414, 411, and 419 – Labour-sponsored funds tax credit

You may be able to claim this credit if you became the first registered holder to acquire or irrevocably subscribe to and pay for an approved share of the capital stock of a prescribed labour-sponsored venture capital corporation (LSVCC) from January 1, 2016, to March 1, 2017.

If you became the first registered holder of an approved share from January 1, 2016, to February 29, 2016, and did not claim the whole credit for it on your 2015 return, you can claim the unused part on your 2016 return.

If you became the first registered holder of an approved share from January 1, 2017, to March 1, 2017, you can claim any part of the credit for that share on your return for 2016 and the unused part on your return for 2017.

New Provincially registered LSVCC
Enter the net cost of your acquisition of provincially registered shares of a labour-sponsored venture capital corporation on line 413. Net cost is the amount you paid for your shares minus any government assistance (other than federal or provincial tax credits) on the shares.

Claim the amount of your allowable credit on line 414 to a maximum of $750.

The allowable credit is 15% of the lesser of:

• $5,000; and
• net cost reported at line 413.

Federally registered LSVCC
Enter the net cost of your acquisition of federally registered shares of a labour‑sponsored venture capital corporation on line 411. Net cost is the amount you paid for your shares minus any government assistance (other than federal or provincial tax credits) on the shares.

Claim the amount of your allowable credit on line 419 to a maximum of $250.

The allowable credit is 5% of the lesser of:

• $5,000 minus the amount reported at line 413; and
• net cost reported at line 411.

Supporting documents – Attach to your return your T5006 slips, Statement of Registered Labour-Sponsored Venture Capital Corporation Class A Shares, or official provincial or territorial slips.

⬤Line 415 – Working income tax benefit (WITB) advance payments

If you received WITB advance payments in 2016, report the amount from box 10 of your RC210 slip.

For more information, go to Working Income Tax Benefit (WITB) or see Form RC201, Working Income Tax Benefit Advance Payments Application for 2017. To view your RC210 slip online, go to My Account for Individuals.

⬤▮▲Line 418 – Special taxes

RESP accumulated income payments

If you received an accumulated income payment from a registered education savings plan (RESP) in 2016, you may have to pay an additional tax on all or part of the amount shown in box 040 of your T4A slips. Complete Form T1172, Additional Tax on Accumulated Income Payments from RESPs, to calculate your tax payable on this accumulated income and report the amount from line 10, 13, or 16 (whichever applies). For more information, see Information Sheet RC4092, Registered Education Savings Plans (RESPs).

Tax on excess employees profit-sharing plan (EPSP) amounts

You may have to pay a tax if you are a specified employee (an employee dealing with an employer in a non-arm's length relationship or with a significant equity interest in their employer) and contributions your employer made to an EPSP allocated to you for the year exceed a threshold equal to 20% of your employment income from the employer for the year. For more information and to calculate your threshold and tax payable on this excess amount, use Form RC359, Tax on Excess Employees Profit-Sharing Plan Amounts. Report the amount from line 10 of Form RC359 on line 418 of your return. If this tax applies to you, you may be eligible to claim a deduction on line 229 of your return.

Tax related to the non-purchase of replacement shares in a Quebec labour-sponsored fund

You must pay a special tax if you redeemed your shares in a Quebec labour-sponsored fund to participate in the Home Buyers' Plan (HBP) or the Lifelong Learning Plan (LLP) but did not purchase replacement shares within the prescribed time. Report the amount shown in box 11 of your T5006 information slips or from your official provincial slips.

Supporting documents – Attach your T5006 information slips, or your official provincial slips.

⬤Line 424 – Federal tax on split income

This tax applies to certain types of income of a child born in 1999 or later. For more information, see Split income of a child under 18. If this tax applies, calculate it on Form T1206, Tax on Split Income, and report the amount from line 5 on line 424 of Schedule 1.

A child under 18 years of age may have to pay tax on split income for dividends on shares of a corporation. Any capital gain from the disposition of those shares to a person who does not deal at arm's length with the child will be deemed to be a dividend. This deemed dividend is subject to the tax on split income and is considered to be an "other than eligible dividend" for the purposes of the dividend tax credit.

⬤Line 425 – Federal dividend tax credit

If you reported dividends on line 120 of your return, claim on line 425 of Schedule 1 the total of the dividend tax credits from taxable Canadian corporations shown on your information slips.

If you received eligible dividends, the federal dividend tax credit is 15.0198% of your taxable amount of eligible dividends reported on line 120 of your return.

New If you received "other than eligible dividends," the federal dividend tax credit is 10.5217% of your taxable amount of dividends reported on line 180 of your return.

For explanations of eligible dividends  and "other than eligible dividends," see line 120.

⬤▮▲Line 427 – Minimum tax carryover

If you paid minimum tax on any of your 2009 to 2015 returns but you do not have to pay minimum tax for 2016, you may be able to claim credits against your taxes for 2016 for all or part of the minimum tax you paid in those years.

To calculate your claim, complete the applicable parts of Form T691, Alternative Minimum Tax.

Supporting documents – Attach the form to your return.

▲Line 445 – Section 217 tax adjustment

Complete this line only if you have entered on line 40 of Schedule 1 the amount from line 16 of Schedule A.

If this is your situation, complete Part 2 of Schedule C, Electing under Section 217 of the Income Tax Act, to determine the amount to enter on line 445 of Schedule 1.

⬤▮▲Line 56 – Surtax for non-residents of Canada and deemed residents of Canada

This tax is paid instead of a provincial or territorial tax. If you did not have a business with a permanent establishment in Canada, follow the instructions at line 56 of Schedule 1 to calculate this surtax.

If you are reporting employment income in addition to section 217 eligible income, or if you had income from a business (including income you received as a limited or non-active partner), and the business has a permanent establishment in Canada, you have to pay provincial or territorial tax on that income. Use Form T2203, Provincial and Territorial Taxes for 2016 – Multiple Jurisdictions, to calculate your provincial or territorial tax (except for Quebec). Attach a copy of the form to your return.

⬤▮Calculation of provincial and territorial tax

If you had income from employment in Canada or income from a business (including income you received as a limited or non‑active partner), and the business has a permanent establishment in a province or territory (other than Quebec) in Canada in 2016. If this is your situation, use Form T2203, Provincial and Territorial Taxes for 2016 – Multiple Jurisdictions, to calculate your tax for provinces and territories.

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