US 'S' Corporation doing business in Canada Tax questions

scutr02 · Post by **scutr02** » Wed Sep 30, 2009 9:25 am

I'm confused on my return for next year. Here's my situational information, and hopefully someone can knock some sense into it:

*I am a US Citizen who will work in Canada more than 183 days this year. The schedule is 3 weeks in Canada for work, 1 week in the US for personal time off.
*I am an officer (100% stock owner) of an S Corporation registered in the United States (and in Connecticut).
*My contract to do business in Canada is in the name of the business; therefore i am an American citizen doing business for an American company, performing the work in Canada.
*The Canadian company who i provide service for has supplied me an office to work from, but i do not own any part of it.
*The project is slated to last four years, but my contract is renewed yearly (and can be terminated at any time by any party, etc.).

My questions are:
*Do i need to file a canadian return next year?
*Will i have to pay Canadian income tax? (other than the normal 15% w/h)

Any help would be greatly appreciated!

Thanks!

nelsona · Post by **nelsona** » Wed Sep 30, 2009 9:31 am

1. Yes, because you will be in Canada more than 183 days. The period is a rolling one, so it doesn't matter whether its in same calendar or not. Your Cdn taxation would start day one.
2. The 15% withholding is only an estimate. When you file, it may be less or more.

You would report this money on your US return as well, asnd take credit for the Cdn tax.

scutr02 · Post by **scutr02** » Wed Sep 30, 2009 10:58 am

Thanks for your response nelsona.

Will i have to file tax for the corporation in addition to my individual filing? Or does Canada only concern itself with the individual because the corporation is founded in the US rather than Canada?

nelsona · Post by **nelsona** » Wed Sep 30, 2009 11:04 am

Likely only the wages will need to be reported in Canada, since you will still be non-resident of Canada, by treaty.

However, you need to keep strong residential ties in US and week ones in Canada, otherwise you will be considered resident of Canada for tax purposes and this would require reporting ALL worldwide income, and may include corporate filing.

scutr02 · Post by **scutr02** » Wed Sep 30, 2009 12:31 pm

Thanks again for your assistance. This is very helpful!

scutr02 · Post by **scutr02** » Fri Oct 02, 2009 8:53 am

Alright i have another one for you.

The 183 Day rule (according to the CRA) States that days worked apply, and days commuting do not.

If i commuted in the morning, and worked that same afternoon, would that day count toward the 183?

scutr02 · Post by **scutr02** » Fri Oct 02, 2009 10:05 am

Here is the link to the CRA website if needed:

http://www.cra-arc.gc.ca/tx/nnrsdnts/nd ... d-eng.html

nelsona · Post by **nelsona** » Fri Oct 02, 2009 10:16 am

For commuters, the 'nights' in canada is whayt counts.

scutr02 · Post by **scutr02** » Fri Oct 02, 2009 10:25 am

Do you know of any piece of literature that outlines this (pages of the treaty, CRA policy, etc.)?

I need to provide this to my employer.

nelsona · Post by **nelsona** » Fri Oct 02, 2009 11:26 am

US canada treaty.

Atricle V defines permanent establishment , Article VII describes the taxation of income from such establishment, and
http://garygauvin.com/WebDocs/Canada-US ... Treaty.pdf

scutr02 · Post by **scutr02** » Fri Oct 02, 2009 11:44 am

Sorry for being unclear, i was looking for a published document outlining the 183 day rule and how the "nights in canada are what counts for commuters," that you suggested.

nelsona · Post by **nelsona** » Fri Oct 02, 2009 12:16 pm

http://www.cra-arc.gc.ca/tx/nnrsdnts/nd ... g.html#183

It says daya and aparts of days ALL count.

So, you arrive on Monday morning and leave on friday night counts FIVE days. What does not copunt is driving up on manday morning and retrrning at night. THAT is commuting.

I was giving you a break by saying counting the nights, but, technically, its parts of any day that you do not enter and leave on that same day.

But, really, you relaize that you will be taxed on this income, be it split between canada and US or only in US, so I wouldn't overworry about it.

scutr02 · Post by **scutr02** » Fri Oct 02, 2009 1:23 pm

The reason i was looking for a better definition of the 183 day rule is because depending on how you interpret the rule, I can fall under 183 days so as to not be deemed a resident in Canada. Thanks again for your information.

nelsona · Post by **nelsona** » Fri Oct 02, 2009 2:13 pm

As I said, by treaty you will remain US resident, deemed resident does not apply to US residents.