Brad Rolph is a Partner at Grant Thornton LLP in Toronto. He is one of Canada’s leading transfer pricing experts and was the first economist hired by any of the Big Four accounting firms in Canada to practice exclusively in the area of transfer pricing.
US citizens residing in Canada are not taxable on their US social security for US tax purposes in accordance with Article XVIII of the Canada/U.S. tax treaty. The country of residence taxes the other countries social security payments to 85%. Likewise CPP or OAS from Canada is excluded on the US 1040 if you reside in the US. If the particular social security payment is included in a country’s tax return, generally the maximum income inclusion is 85% to the taxable income computation.
The foregoing also applies to part-year residents which would require using these concepts.
Many returns are incorrectly prepared not recognizing this treaty provision generally resulting is additional tax paid more so for those in higher marginal tax bracket due to significant other sources of income subject to tax. Read More
Individual contractors from Canada providing services in the U.S. in the capacity of self-employed individuals or utilizing their Canco should be aware that depending on the number of days present and percentage of U.S. gross business income, Article V, paragraph 9 of the Canada/U.S. Tax Treaty may deem them or Canco to have a permanent establishment in the United States. This stems from the 2007 Protocol that in this respect was effective commencing in 2010.
Since 2010, this means that income will be subject to U.S. taxation requiring the filing of U.S. federal and possibly State returns, however foreign tax credit is available on the Canadian tax return.
Previously, independents had to demonstrate that they were not carrying on business in the U.S. through a Read More
Introduction – what this post is about …
I attended the hearing in Vancouver, B.C. on August 4, 5 2015. At that time I wrote a group of posts (here and here) discussing my perception of the hearing. Those posts included expressions of my opinion that Justice Martineau was highly engaged, was working hard on understanding the issues, and was affording all parties a fair hearing. Although, disappointed with his decision (handed down on September 16, 2015), and not agreeing with his conclusions, I reaffirm my sentiments in the previous posts.
This post is more about the “system” than it is about Justice Martineau specifically. In a judicial system, it is possible for “reasonable people” to have “reasonable Read More
This post is Part 1 of my thoughts on Justice Martineau’s decision.
I left my root canal appointment this afternoon to a message announcing that Justice Martineau had rendered his decision. We did not win round 1. Notice that I did NOT say that the Government won round 1.
Here is the decision:
T-1736-14 decision sept-16-2015
Before, I comment specifically on the decision, I want to be clear on the following points: Read More
Often, U.S. citizens who move to Canada are shareholders of U.S. S Corporations. This can potentially create double tax problems.
Under Canadian tax law, the S Corporation is just like any other foreign corporation. Dividends received are generally fully taxable. In addition, if the S Corporation is a “controlled foreign affiliate”, the shareholder can be taxable on his or her share of underlying investment income and capital gains under Canada’s “foreign accrual property income” (“FAPI”) rules.
Double taxation can arise because of the fact that Canada will generally only grant limited foreign tax credit relief for the U.S. taxes paid by the shareholder on the S Corporation Read More
Investment income may be subject to refundable tax of 26.67% of investment income. Portfolio dividends may be subject to Part IV tax of 33.33%. Part IV tax is added to the refundable dividend tax account. Investment income includes net rental income, taxable capital gains.
For non-CCPCs, the tax rate is 26.5% on investment and active business income.
| Active business income up to $500K | Active business income exceeding $500K | Investment income |
| 15.50% | 26.50% | 46.17% |
OverviewFor a number of years, provincial governing bodies of regulated health professionals (1) and other professional organizations (2) have allowed the incorporation of the professional practice. The major tax advantage of incorporation, is the ability to defer tax by retaining income in the corporation that would otherwise be taxed at a much higher personal tax rate if you earned the same income as a sole proprietor or as a partner.
Commencing in 2006, family members of doctors and dentists may hold non-voting shares of the professional corporation. Other professional corporations may not have family members as shareholders.
Non-voting shares may include both non-voting common and non-voting special shares. Common shares participate in the value of the corporation, preferred or special shares do not. The advantage in having family members as shareholders is that the corporation may pay your parents, adult children and spouse, dividends taxed at lower tax rates to finance tuition and other personal expenditures as opposed to you receiving the income and having to pay more tax at your marginal tax rate to finance the same expenditure. Dividends are not paid to minor children because they will be subject to tax at 32.57% (ie., kiddie tax). Read More
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