As a general rule, a U.S. resident carrying on business in Canada will be exempt from Canadian income tax on any profits from that business unless there is a “permanent establishment” (“PE”) in Canada. This is provided in Article VII(1) of the Canada-U.S. Tax Convention (“the Treaty”). There are exceptions to this general rule. The… Continue Reading
Author Archives: Michael Atlas
TAX CONSIDERATIONS WHEN CORPORATIONS RESIDENT IN CANADA BECOME NONRESIDENT
It is relatively difficult for a corporation that is resident in Canada (“Canco”) to become a nonresident. This is because of the fact that, if Canco was incorporated in Canada, it will be deemed, under the Income Tax Act (“the Act”) to remain resident in Canada, even if its “central management and control” (“CMC”) is… Continue Reading
CROSS-BORDER COLLECTION OF CANADIAN INCOME TAX LIABILITIES
It is well established that, as a general rule, a country cannot collect a liability for income tax in a foreign jurisdiction. Thus, a government will only be able to seize assets located within its borders to satisfy an outstanding tax liability. This, in part, is the reason that the Canadian income tax system depends… Continue Reading
CANADIAN TAXATION OF DEATH BENEFITS FROM A U.S. IRA
A Canadian resident would not normally expect to pay any Canadian income tax on an inheritance received from a family member living in the U.S. However, that is exactly what can happen if a Canadian resident receives a payment as a beneficiary of a (conventional) Individual Retirement Account (“IRA”). That is because of the fact… Continue Reading
DECISION IN CONRAD BLACK TAX CASE SHOWS “FLIP SIDE” OF ANTI-AVOIDANCE RULE FOR CANADIAN EMIGRANTS
Many tax practitioners were quite surprised by the decision of the Federal Court of Appeal (Black vs. Canada-2014 FCA 275) and the previous decision of the Tax Court of Canada, both in 2014, regarding Lord Conrad Black. On the face of it, I think most people were shocked by the notion that a Canadian expat who… Continue Reading
FOR CANADIANS MAKING OFFSHORE VOLUNTARY DISCLOSURES, SLOPPINESS WITH CORPORATE RESIDENCY MAY BE A BLESSING!
With all the furor arising from the now infamous “Panama Papers”, more and more Canadians with undeclared offshore holdings will become very nervous about their situations. Whether they have been clients of Mossack Fonseca or not, the prospect of heightened levels of scrutiny and disclosure regarding offshore holdings is certainly a reality. It seems more… Continue Reading
CANADIAN FOREIGN TAX CREDITS AND TAX TREATIES-MYTH VS. REALITY
CANADIAN FOREIGN TAX CREDITS AND TAX TREATIES-MYTH VS. REALITY Ever since I can remember, I have heard people reiterate what appears to be a common misconception regarding the ability of Canadians to claim a credit, for foreign taxes that they pay, against their Canadian tax liability. This myth seems to be widespread among accountants who… Continue Reading
MARCH 22, 2016 CANADIAN FEDERAL BUDGET TARGETS TREATY SHOPPING AND OTHER PERCEIVED ABUSES
For many years now, the Canada Revenue Agency (“CRA”) and the Ministry of Finance seem to have been fighting a losing battle to combat what they perceive to be the abusive use of tax treaties to reduce Canadian taxes. In recognition of the concern regarding this area, the “General Anti-Avoidance Rule” (“GAAR”), found in section… Continue Reading
HOW CANADIAN “STARTUP” ENTREPRENEURS CAN USE A CROSS-BORDER STRATEGY TO ELIMINATE TAX ON CAPITAL GAINS
It is hard these days to pick-up the pages of a business magazine or the financial pages of a newspaper without reading something about “startups”. Either there will be advice for people involved with startups, or stories about some nerd, still in his 20’s, who became a gazillionaire (at least on paper) when his startup… Continue Reading
CANADA’S “BRANCH” TAX ON FOREIGN CORPORATIONS-AN OVERVIEW
A corporation that is not resident in Canada may still be subject to corporate income tax in Canada if it has income from carrying on business in Canada. Such tax is levied under Part I of the Income Tax Act (“the Act”) and if the corporation’s profits are attributable to a permanent establishment (“PE”) in… Continue Reading