Hi all - I just moved back to Toronto after 20 years in California. My employer in Cali has agreed to allow me to work remotely, however, only if I set up a US corp to bill them.
The thought process is to open a Can corp for the work I do in Ontario (I am freelance in the entertainment industry) and a US corp for the work in Cali.
The Can corp can then invoice the US corp to zero it out each year.
Is this strategy flawed? If so, any advice on how to proceed?
Also is there a specific type of corp needed in the US?
Thank you
Dual US/Cdn back in Canada need advice
Moderator: Mark T Serbinski CA CPA
As a CND resident and also a Us citizen your plan does not work at all , if anything you are subjecting your self to a reporting nightmare 2 corp reporting in both jurisdictions . Any profit made by CND corp then expensed to a US corp ( forget about the justification of why and on what basis that is needed ) you as the shareholder will simply pay tax eventually in the one corp that ends up showing the profit. You may think that you are getting a deal but Cali corp tax rates of 41% vs Ontario at 28% where is the savings let alone the costs involved. Then don't forget you got to take this money out of the corp pay tax in both jurisdictions since you are USC less applicable tax credits.
JG
The Ontario corp tax rate for non qualifying business income is the general rate of 28%. If the US employer pays the Canadian Corp it must withold on the federal level 30% unless you file a w 8 Ben to reduce this since you are a non resident but this means that you are not physically present in the US but as you know this is federal not Cali witholding tax, so you would have to see what the foreign tax credit in Canada would work out to be on this tax if it is lower than 28% then you will be Ok . You would still have to file tax return in the US for your treaty position.
JG
Resolution?
Hi grte8888. Just wondering if you finally resolved this. I am in a similar situation and looking for some advice. Thx.