U.S. – Canada
Cross-Border Tax
Navigating U.S.-Canada cross-border tax issues is critical for companies engaged in trade. Compliance with both IRS and CRA is vital to avoid financial repercussions. A sound corporate structure helps prevent double taxation and minimizes global tax liabilities. Our service packages include expert advice on U.S. federal and state tax laws, ensuring clients make informed decisions and avoid costly consequences in this intricate area.
What is cross-border Tax?
Cross-border tax refers to the taxation considerations and implications that arise when individuals, businesses, or investments operate across national borders. It involves navigating the complex web of tax laws and regulations in multiple countries, addressing issues such as income reporting, deductions, credits, and compliance requirements. US – Canada tax accountants are rare, and firms have cross border tax specialists are hard to find, Achen Henderson is your solution for your US Canada cross border tax accountant needs.
Find out more about our cross-border tax services
Our cross-border tax accountants are experts at knowing what your tax obligations are on both sides of the Canadian – US border. Cross-border tax compliance is complex tax because not only are returns often required in Canada and the US, but there are also specialized tax obligations that stem from the Canada-US tax treaty and international reporting forms in both Canada and the US. Canadian businesses doing business in the US, and Canadian residents who have ties to the US should hire a specialized cross-border CPA to understand all of their tax obligations. Here are the cross-border tax services that we offer:
U.S. Corporate Returns
If your corporation has carried out business south of the border, you must file a U.S. tax return. This applies whether your income is taxable in the U.S. or not. Learn about your U.S. corporate tax return filing requirements.
U.S. Personal Returns
If you’re a U.S. citizen, chances are you need to file a U.S. personal return even if you’ve never set foot in the U.S. Canadians who have carried on business in the U.S., sold U.S. property, or worked in the U.S. must also file. Here’s what you need to know about U.S. personal returns.
Cross-Border Estate Planning
Do you need to do estate planning in both Canada and the U.S.? Cross-border estate planning is challenging because you’re dealing with two different estate and trust regimes. The good news is that we know how to help with everything from pension plans to estate tax to gift tax and more.
Sale of U.S. Property
If you’re selling U.S. property and live in Canada, you’ll need to do some tax planning to ensure you only pay the least amount of tax possible. We advise on withholding tax and filing tax returns during the sale of U.S. property.
Why companies choose Achen Henderson for cross-border tax services
FAQs and more information
If you have started doing business with U.S. customers, you may be required to file a U.S. corporate tax return and pay U.S. taxes. You may also have additional information reporting requirements that carry penalties for non-compliance.
As a general rule, under the Canada – U.S. Tax Treaty, you are only subject to U.S. tax on the income from a “permanent establishment”—a fixed place of business in the U.S. or a project to which you regularly send employees to the U.S. to conduct business. See U.S. Corporate Tax Return for more details.
If you’re planning to do business in the U.S., advance planning is required to set up a proper tax-effective structure, including determining whether or when you may require a U.S. subsidiary or affiliate.
To learn if you need to file a personal tax return in the US, please visit our personal tax page here.
If you have additional questions, please do not hesitate to reach out and we will set up a consultation with you to determine your tax compliance obligations.
U.S. Limited Liability Corporations (LLCs) are simple, flexible structures that are very effective for U.S. business activities. For U.S. tax purposes, LLC earnings may flow through to the LLC’s partners or owners, rather than being taxed in the entity.
Your U.S. business partners may suggest an LLC as your business structure. However, Canada does not recognize the flow-through provisions of the LLC so your Canadian corporation could face double taxation on U.S. activities. We can set up a more effective corporate structure for these situations and mitigate the tax if an LLC is required.
A loan or transfer of funds from a U.S. corporation to a Canadian subsidiary, or from a Canadian corporation to a U.S. subsidiary, is subject to rules limiting the amount of interest that can be deducted. Both Canada and the IRS impose reporting requirements governing the transfer of funds, and severe penalties may be imposed for non-compliance, especially by the IRS. Dividends to a parent company located in the other country are subject to withholding taxes, Canada’s foreign affiliate tax rules, and new U.S. laws introduced at the end of 2017. It is crucial to understand the applicable laws and get early advice in order to cost-effectively transfer funds.
Transfer pricing—the price charged between related parties in the U.S. and Canada for services and goods—can be subject to scrutiny by the CRA and IRS, although the focus is generally on larger corporations and significant amounts.
To date, Canadian corporations preferred to charge relatively higher prices to U.S. related companies to maximize Canadian income, since Canada’s corporate tax rates were lower than U.S. corporate rates. However, the transfer pricing rules mitigate the transfer of tax between the jurisdictions as they require corporations to adopt an arm’s length principle in dealing with related international corporations. It is important to document the basis for the transfer pricing. The new 2017 US tax rules may also affect the preference for allocation between the countries.
Establishing transfer prices that will be acceptable to the CRA and IRS requires careful planning. Talk to an experienced cross-border accountant early in the process to reduce your risk of being penalized, or contact us today.