Is anyone here versed in cross-border corporate tax?
We are a U.S. Delaware C corporation interested in setting up a fully owned Canadian subsidiary corporation to conduct R&D activities in Canada. The Canadian corporation is not expected to generate a significant profit (revenue/grants minus research expenses ~ $0).
What are the implications (and approximate increase in yearly filing costs or accountant hours) on either side of the border as a result of this new cross-border relationship?
On the U.S. side, at a minimum, 5472, and potentially other informational reporting?
On Canadian side, ...?
Thank you!
Canadian subsidiary
Moderator: Mark T Serbinski CA CPA
Re: Canadian subsidiary
You say its a Canadian Subsidiary owned by a Delaware US C Corp meaning you will not be considered as a CCPC ( Cnd Controlled Private Corp) unless you are not controlled meaning less than 50 % ownership by a US corp both de facto and other types of factors o see if you can control the sub or not
By not being a CCPC your R& D expenditures up to $ 3Million a year CND do not get the 35% refundable tax credit only get the15% tax credit for R&D
Quebec also gives you an extra RD refundable credit on wages directly linked to RD so refund is higher if in QC oteher provinces have similar but Qc has its own stax filings
yo have to structure it differently to achieve max R&D tax credits in hand refundable.
Scientific cost of structuring the activities consultants usually come in and ask for 20 to 30% of the refund but once you qualify you can can do it your self each year and the accounting work COA at year end to do the filings like I do its about $ 3500. Depends on the business most of my guys are into software easy to qualify manf is more complex once your on board say $ 3500 to do the accounting
A Canadian subsidiary if yo go this route keep ownership under 50% de juris or de facto or you get far less refunded tax credits
By not being a CCPC your R& D expenditures up to $ 3Million a year CND do not get the 35% refundable tax credit only get the15% tax credit for R&D
Quebec also gives you an extra RD refundable credit on wages directly linked to RD so refund is higher if in QC oteher provinces have similar but Qc has its own stax filings
yo have to structure it differently to achieve max R&D tax credits in hand refundable.
Scientific cost of structuring the activities consultants usually come in and ask for 20 to 30% of the refund but once you qualify you can can do it your self each year and the accounting work COA at year end to do the filings like I do its about $ 3500. Depends on the business most of my guys are into software easy to qualify manf is more complex once your on board say $ 3500 to do the accounting
A Canadian subsidiary if yo go this route keep ownership under 50% de juris or de facto or you get far less refunded tax credits
JG
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oakweather
- Posts: 27
- Joined: Thu Oct 15, 2020 1:00 pm
Re: Canadian subsidiary
No, it's not intended to be CCPC, we understand that.
We're interested in learning the required informational or tax filings on both sides of the border and their approximate total cost per year.
For example, in the U.S., I believe Form 5471 is required that can be quite intrusive (maybe a few hours / a few hundred dollars for an accountant), and potentially FBAR (maybe?). Are there other required reporting either in the U.S. or Canada?
We're interested in learning the required informational or tax filings on both sides of the border and their approximate total cost per year.
For example, in the U.S., I believe Form 5471 is required that can be quite intrusive (maybe a few hours / a few hundred dollars for an accountant), and potentially FBAR (maybe?). Are there other required reporting either in the U.S. or Canada?
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Bubba Gums
- Posts: 55
- Joined: Tue Jul 15, 2014 7:20 am
Re: Canadian subsidiary
Conducting R&D activities in Canada would not create a permanent establishment under article V6e.