Living in Canada & Consulting in USA < 183 days - tax

muzza90 · Post by **muzza90** » Tue Nov 18, 2014 2:45 pm

Hi all.
New to the forum. I've looked but can't find an exact match for my question.

I have a corporation for management consultancy set up in Montreal, Canada and my current clients clients are in Europe and Canada. Now, I have a new 1 year contract in the USA for a corporation that has no entity in Canada. I will work for them a lot during the year, including many trips to their offices, but mostly it will be remote from Montreal and certainly not more than 183 days actually in the US in any one year.

I will invoice the US corporation from my corporation and then be paid by wire into a CDN bank account, in CDN dollars. So...

1) Do I need a TN visa - Management Consultant or will a B1 suffice at POE?
2) Do I need to file any kind of tax return in the USA?

Many thanks if anyone can help advise.

JGCA · Post by **JGCA** » Wed Nov 19, 2014 9:24 pm

Normally a B1 busines visa allows you to attend meeings, negotiate contracts etc no actual work. If you do plan on doing actual work for one specific client then a TN visa is needed.

Since you have no permanent establishment in US and will be in the US less than 183 days in any 12 month period no US tax return is needed. I would suggest however that you file a treaty based 1120F US tax return to protect yourself from any interpretation that you did have a US PE in case of any future audit by the IRS. This is a simple procedure Treaty Based Return filed by clients such as yourself to protect their filing position.

For Canada remember your US based clients receipts do not qualify for the small business deduction in QC this means no 19% corp tax rate on this income instead it will be at 28% so incase you were doing a dividend to yourself based on 19% TR you now are offside it would be beter to do salary.

muzza90 · Post by **muzza90** » Wed Nov 19, 2014 9:32 pm

Great reply, thanks JGCA. It solves my tax return question but it did raise another interesting point - my accountant has never mentioned I can't apply 19% to clients in the US, maybe that's his oversight. Is that the same for European customers then? i.e. does 19% only apply to Canadian clients?

JGCA · Post by **JGCA** » Thu Nov 20, 2014 2:50 pm

The 19% is what we call the small business corp tax rate on active business income earned in Canada, if the income comes from anywhere else other than Canada like USA, Europe then it does not qualify for SBD.

I have seen thgis more often than not.

JGCA · Post by **JGCA** » Thu Nov 20, 2014 3:02 pm

Just to clarify, I meant I have seen this type of income get booked as active business income incorrectly all the time and CRA is now starting to assess with penalties these type of files. Your accountant is suppose to know this this is basic tax 101 it has to be from Canadian sources to qualify not earned in Canada but from Canadian source income.