Donald Trump’s proposal to lower U.S. federal corporate tax rates to 15% will be welcome news for Canadians who are shareholders of a profitable U.S. corporation (“Usco”). However, in certain cases, the Canada Revenue Agency will have its hands outstretched for a piece of the tax savings. In cases where Usco is a “controlled foreign… Continue Reading
Author Archives: Michael Atlas
UNWINDING CANADIAN “DEPARTURE TAX”
When, at any time, a Canadian resident ceases to be a resident, there is generally a deemed disposition and reacquisition of all property at the fair market value at that time. This is provided in paragraph 128.1(4)(b) of the Income Tax Act (“ITA”). The resulting tax on deemed capital gains is commonly called “departure tax”.… Continue Reading
NEW TAX TREATY BETWEEN CANADA AND ISRAEL CLOSES LITTLE-KNOWN LOOPHOLE
On September 23, 2016, I got an email from the Ministry of Finance announcing a new tax treaty between Canada and Israel. The actual posting on the Ministry’s website contained the following statement: “A new Convention between the Government of Canada and the Government of the State of Israel for the Avoidance of Double Taxation… Continue Reading
CANADIAN CORPORATIONS DOING BUSINESS IN U.S. VIA LLCs FACE BIG TAX PENALTY!
A Canadian corporation (“Canco”) which earns profits from carrying on business in the U.S. through a “permanent establishment” (“PE”) there will generally be subject to US federal taxes on its income derived from that PE. In addition to the normal federal income taxes on that income, as well as possibly state taxes, there is the… Continue Reading
BIG CANADIAN TAX HIT CAN RESULT FROM SALE OF CERTAIN PARTNERSHIP INTERESTS TO FOREIGN BUYERS
Many types of businesses (including the ownership of real estate) are structured as partnership. The partners can be individuals, corporations or even other partnerships. If the interest in the partnership is sold, then normally a capital gain or loss will result from the disposition of the partnership. It is well established that an interest in… Continue Reading
CANADIAN TAX ISSUES WHEN EXPATS SELL THEIR FORMER RESIDENCE
It is not uncommon for former Canadian residents to retain and rent their personal residence when they emigrate, rather than selling it before they leave. As long as the property is rented on an arm’s length basis under terms that do not allow the expat to reoccupy on short notice, the retention of this property… Continue Reading
NON-RESIDENTS INVESTING IN CANADIAN REAL ESTATE CAN CUT TAXES ON CAPITAL GAINS BY PROPER USE OF FORCO
In this troubled, chaotic world we are living in, Canada remains a politically and financially stable locale that is an attractive destination for foreign investment. I have little doubt that, in the years ahead, investment in Canadian real estate by non-residents will continue to be quite substantial. Over the years, I have found that most… Continue Reading
CANADIAN TAX ISSUES WITH ALIMONY PAYMENTS TO AND FROM NON-RESIDENTS
Under the Income Tax Act (“the Act”) alimony[1] paid by a separated or divorced spouse will generally be deductible in computing income of a Canadian resident. This assumes that it is paid pursuant to a written agreement or court order, and paid as an “allowance” on a periodic basis. Similarly, a Canadian resident recipient of… Continue Reading
CANADIANS CAN DEDUCT US TAX PAID RE LLCs EVEN IF NO INCOME REPORTED
As a general rule, a Canadian resident can claim of credit against his/her/its Canadian income tax liability for foreign income taxes paid (“foreign tax credit”-“FTC”). The rules relating to claiming FTCs are generally found in section 126 of the Income Tax Act (“the Act”). Unless the foreign tax is related to a business carried on… Continue Reading
CANADA’S OFFSHORE TAX INFORMANT PROGRAM-THE CRA PROVIDES SOME UNIMPRESSIVE STATISTICS ON RESULTS
On January 15, 2014, the CRA launched the Offshore Tax Informant Program (OTIP). As described on CRA’s website, this program “offers financial rewards to individuals with specific and credible information about major cases of international tax non-compliance resulting in more than $100,000 of additional federal tax being assessed and collected.” In that connection, Question 14… Continue Reading