Who signs Form NR302, the partnership or each partner?
The declaration is the partnership's, and it is given to the Canadian payer, but the treaty rates it reports are not the partnership's own. A partnership is not the taxpayer here; its partners are. So the form is signed on the partnership's behalf while the substance of it is an allocation: each partner's share of the income and the rate that partner is entitled to. That is why a partnership cannot simply assert a single treaty rate across a payment, and why the payer ends up withholding a blended amount rather than one rate on the whole of it.
Do all our partners have to appear on the allocation?
The allocation has to account for the whole payment, so every share needs to be identified even where a partner claims nothing. The payer is working out how much to withhold on one amount, and it can only do that if the shares add up. Leaving a partner off does not produce a lower blended rate; it produces a declaration the payer cannot rely on, and a payer that cannot rely on it will withhold at the statutory rate on everything. Getting the allocation right is therefore the substance of the exercise rather than an administrative tail to it.
Does one non-eligible partner cost the whole partnership its treaty rate?
No. The rate follows the partner, so a partner who is not entitled to treaty relief is withheld on at the statutory rate for their share, and the other partners keep the rate they are entitled to. The payer applies the blend that results. This is worth knowing because the instinct on discovering one problematic partner is to abandon the declaration altogether, which is the expensive answer: it moves every partner to the statutory rate. The correct response is to state the position accurately, including the share that does not qualify, and let the blend do its work.
How is a partnership that is itself a partner dealt with?
By looking through it. The declaration works by reference to the persons actually taxable on the income, so a partner that is itself a partnership pushes the question down a level rather than answering it. In practice that means mapping the chain until you reach holders who have a residence and a treaty position of their own, then building the allocation from there. Tiered structures are where this goes wrong quietly: the top-level percentages look tidy, the payer accepts them, and nobody has established where the income is taxable. Document the chain before the declaration is signed.
Is the payer or the partnership at risk if the allocation is wrong?
Both, in different ways. The Canadian payer is the one that withholds and remits, so an under-withheld payment is first of all the payer's problem, which is why payers are careful about the declarations they accept. The partnership and its partners carry the position asserted in the allocation and will have to support it if it is examined. The practical consequence is that a payer asked to accept a thin or unexplained allocation will often decline it and withhold at the statutory rate instead. A declaration that is easy for the payer to rely on is in everyone's interest.
Our partner mix changed mid-year. Do we need a new NR302?
Yes, if the allocation it reports is no longer the allocation. Admissions, retirements and changes in profit shares all move the blend the payer is meant to apply, and the payer has no way of knowing about them. The declaration is a statement of facts as they stand, so a change in those facts means a revised declaration given to the payer before the next payment rather than at the next renewal. Tying the review to the payment cycle, and to the partnership's own admissions process, is more reliable than treating it as an annual task.
Should I use a branch or a subsidiary abroad?
A branch is the same legal entity operating in another country, so its profits and losses sit with the parent and it is taxed there as a permanent establishment. A subsidiary is a separate company, taxed in its own right, with dividends and withholding on the way home. Losses, repatriation cost and liability usually decide it, and the answer differs by country pair. See branch vs subsidiary.
Can I set up a trust that works in two countries?
You can, but the two systems classify and tax trusts differently enough that a structure which is efficient in one is often a reporting problem in the other — a Canadian family trust with a US beneficiary, or a US revocable trust holding Canadian property, are the classic pairs. Canada's twenty-one-year deemed disposition, the US grantor rules and each country's reporting have to be read together, before drafting rather than after. See cross-border wills and trusts.
