Hi all,
I am a US TN visa holder (residing in California) who performed some consulting work for a Canadian company remotely (phone and online) who works with Canadian clients (I am therefore a subcontractor). I am a US resident for tax purposes.
I'm looking to invoice the Canadian company and want to guide them towards the proper withholding rate. Would this kind of work be subject to Regulation 105 withholding? 15%? If so, do I need to file a Canadian tax return?
Thanks!
Witholding tax for US TN holder consulting for CAN company
Moderator: Mark T Serbinski CA CPA
Okay, looking into this more...
Sounds like there is no need to file taxes and no withholding since there is no permanent establishment in Canada.
Seems like solution is the following. Please correct if wrong.
File 5103-r non-resident return. Report self-employment income on line 162/135. Claim deduction on line 256.
Claim foreign income on US tax return.
The only thing I'm not clear about is whether the Canadian employer needs to apply the 15% Regulation 105 withholding tax?
Sounds like there is no need to file taxes and no withholding since there is no permanent establishment in Canada.
Seems like solution is the following. Please correct if wrong.
File 5103-r non-resident return. Report self-employment income on line 162/135. Claim deduction on line 256.
Claim foreign income on US tax return.
The only thing I'm not clear about is whether the Canadian employer needs to apply the 15% Regulation 105 withholding tax?
Just to be precise, there is no need for withholding because you are not working in canada.
If you were working in canada, you might still have withholding, regardless of PE or not, and would have to file for a waiver and/or file a non-ressiwnt return and clim the withholding back.
Nothing would need to be indicated on your IRS retunr, since you were applying the treaty to your CRA return, not to your IRS return.
Remember that this income is considered foreign sourced, so would be eligible for any general limit foreign tax that you have been carryingforwrd.
If you were working in canada, you might still have withholding, regardless of PE or not, and would have to file for a waiver and/or file a non-ressiwnt return and clim the withholding back.
Nothing would need to be indicated on your IRS retunr, since you were applying the treaty to your CRA return, not to your IRS return.
Remember that this income is considered foreign sourced, so would be eligible for any general limit foreign tax that you have been carryingforwrd.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
Thanks Nelson. Just realized that as well. Since the services were performed outside of Canada, no withholding necessary.
So it sounds like I simply complete a non-resident return and claim a treaty exemption on my Canadian return and simply claim the foreign income on my US return. Any hints as to what article I claim on my non-resident Canadian return?
Thanks again!
So it sounds like I simply complete a non-resident return and claim a treaty exemption on my Canadian return and simply claim the foreign income on my US return. Any hints as to what article I claim on my non-resident Canadian return?
Thanks again!