I'd love any tax efficiency advice about running my S corporation from Canada. It makes sense for me to keep it while I'm here in Canada (maybe 1-2 years more, or more) for several reasons, but I want to structure my income correctly to legitimately avoid any double taxation etc. I understand how it works in the US, just not sure of the impact of S corp income from a Canadian standpoint.
For example, if I'm being paid in US dollars from US sources and have a choice on who the check is made out to, is it more or less efficient to receive payments in my name personally (misc income in Canada) or received into the S corporation? For 2013, it will be less than $20,000 gross receipts probably. Fair bit more in 2014. Best to keep the money in the corporation, or pay it all to myself as a salary? Etc etc.
Would love any thoughts.
Tax efficiency running US S corporation from Canada
Moderator: Mark T Serbinski CA CPA
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usc-in-canada
- Posts: 6
- Joined: Wed Jun 26, 2013 10:55 pm
I do not know who told you its tax efficient to run an s corp while you are the USC owner living in Canada, if anything you have a tax problem vis a vis the matching of income to your US 1040 and CND T1.
Canada does not recognize the s corp flow though mechanism you enjoy in the US, recent changes to the traety have allowed for lower witholding tax to apply when payments are made from Canada to the S corp but this has no impact on your situation.
The income you earn in in The US has to be reported on your CND T1 since as a CND resident you must report world income but of course you get credit for any US tax paid problem is that if your S corp is reporting losses its denied, and diviend income paid to you is treated as a reduction in the stock ACB so no credit available to you and any business income earned is not flowed to you in Canada its treated as a dividend that will reduce your capital stock acb no credit. Only interest and salary is picked up in Canada and matching will occur. You need to make sure you pay yourself salary each year in the US on a W2 then this will be credited to you in Canada and any tax paid will be recovered any business flow though is a dividend and no relief is available.
Also you have mandatory reporting requirements in Canada for teh S-Corp
Form T1134a - Forein Affliliate Non controlled or T1134b Controlled Forein Affiliate return if you are the sole owner then its a controlled forein affiliate that you must disclose to CRA annually.
Canada does not recognize the s corp flow though mechanism you enjoy in the US, recent changes to the traety have allowed for lower witholding tax to apply when payments are made from Canada to the S corp but this has no impact on your situation.
The income you earn in in The US has to be reported on your CND T1 since as a CND resident you must report world income but of course you get credit for any US tax paid problem is that if your S corp is reporting losses its denied, and diviend income paid to you is treated as a reduction in the stock ACB so no credit available to you and any business income earned is not flowed to you in Canada its treated as a dividend that will reduce your capital stock acb no credit. Only interest and salary is picked up in Canada and matching will occur. You need to make sure you pay yourself salary each year in the US on a W2 then this will be credited to you in Canada and any tax paid will be recovered any business flow though is a dividend and no relief is available.
Also you have mandatory reporting requirements in Canada for teh S-Corp
Form T1134a - Forein Affliliate Non controlled or T1134b Controlled Forein Affiliate return if you are the sole owner then its a controlled forein affiliate that you must disclose to CRA annually.
JG