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Tag Archive for CRA

The Basics of Offshore Tax Planning For Canadian Corporations – Part 4

Transfer Pricing Issues

As is the case with most major counties, Canada has rules in its tax laws aimed at preventing income from being shifted to other jurisdictions by unreasonable transfer pricing [1].

To date, most of the activity of the CRA and reported tax cases has focused more on inbound transfer pricing issues involving charges by multi-national corporations to Canadian subsidiaries. However, the rules can certainly be applied in connection with outbound tax planning of the type being outlined in this series [2].

If the CRA successfully applies these rules, they could lead to a reassessment of Read more

Americans Earning Rental Income In Canada Have To Carefully Follow The Rules!

Many Americans hold interests in income-producing properties in Canada. In many cases, when they acquire them, they do not obtain proper advice regarding the Canadian tax implications and requirements.

This can be quite costly-in the absence of following certain procedures, an American resident earning rents from Canadian real estate can be subject to a 25% Canadian tax on GROSS rents (that is, no deduction for related expenses). This can apply even if no profit is being earned from renting the property.

As a general rule, a non-resident who earns rents for the use of Canadian real estate is subject to 25% tax on the gross rents under Part XIII of the Income Tax Act (“the Act”). This Read more

United States LLCs And Canadian Residents – A Bad Combination!

There is a big problem for Canadian residents who use U.S. LLCs- the Canada Revenue Agency (“CRA”) considers them to be corporations, even if they are considered disregarded entities (if only one shareholder) or partnerships (with two or more shareholders) for US tax purposes.

Furthermore, the CRA does not consider the LLC itself to be a resident of the US for the purposes of the Canada-U.S. Income Tax Convention (“the Treaty), since the LLC is not liable to tax (assuming it has not elected to be treated as a corporation under the US “check the box rules”).

In fact, in many cases, US LLCs that are controlled by Canadians will be considered Read more

A Pitfall For Americans Using Canadian ULCs

Unless you are very active in Canada-US cross-border tax planning, you probably are not aware of the fact that, a few years ago, the 5th Protocol to the Canada-U.S. Tax Convention (“the Treaty”) created a problem in connection with the ownership of Canadian Unlimited Liability Companies (“ULCs”) by U.S. Residents.

ULCs are a strange feature of corporate law-they are corporations with unlimited liability. At one time, Nova Scotia was the only jurisdiction in Canada that had these entities, and they were modeled after similar entities existing under UK corporate law. However, some years ago Alberta and British Columbia jumped on the ULC bandwagon.

From a Canadian tax perspective, ULCs are taxed in the same way as “normal” Canadian Read more

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