Non resident US corporation ,Canadian Corporation Tax filing

pms151 · Post by **pms151** » Fri Mar 08, 2013 4:59 pm

Hello Nelsona,
I've been working in Canada through a continuance of my US LLC (with s-corp status in the US). The days worked were less than 100.
I have completed and remitted the GST payments for monies received but wondering what to do about my corporate tax return in Canada. I will, of course, be filing corporate return and personal return in the US. As I understand it, I will just be filing a non-resident treaty based return for the US LLC in Canada and my taxes will effectively be zero.
Does this sound correct?
Thanks

JGCA · Post by **JGCA** » Sat Mar 09, 2013 2:11 pm

You have to file also a T2 corp tax return for the LLC in Canada since it is denied traety benefits, you can not file a treaty based return for an LLC. For this all you need to do is look at schedule 97 on the T2 return it clealy indicates this you will be subject to Part 1 tax and not allowed to use teh small business rate, also you are subject to branch tax Part 13 ( But there is an overal $ 500K exemption ) ypu need to look at sch 20 of teh T@ for this .

If the corp LLC has paid US tax on the same income then yoiu can claim this as a credit on the T2 also. If you are located in Quebec you also need to file a C-17 corp tax return. You most probabky require an accoutant to do it for you since schedule 20 is only available on specialized software packages like I use, yoiur regular CA does not have this or will not invest in the extra $$$ to upgrade to this software unless he doe at least a few of these every year. Cost is about $ 2,500 for a basic LLC with little activity.

pms151 · Post by **pms151** » Sun Mar 10, 2013 4:40 pm

Thanks for the response, I am taxed as a corporation in the US though. I got s-corp status and check the box on the US tax retun to be treated as a corporation for US tax purposes? With this in mind, I'm reading that the LLC is eligable for treaty benefits

JGCA · Post by **JGCA** » Sun Mar 10, 2013 6:06 pm

Since you are a sinle member LLC having elected S-corp status, then you are entitled to Treatry Based filings because of the new Article 1V(6) of teh protocol in that the income in Canada was derived by a Us resident and the LLC was US based and the income derived in the LLC was passed throught to you as a resident iof teh US and taxed to you personally ( S-corp). Then you can simply file a T2 and check off teh first box on Sch 97 TREATY BASED RETURN and ignore the complications of Sch 20.

bizdriver · Post by **bizdriver** » Thu Mar 14, 2013 9:25 am

Great and helpful string here. My situation is very similar: US Cit living in Canada as P.R. w Canadian wife. If I can do so without any incurring double taxes or tax inefficiencies at the hands of Canadian gov't, there are many good reasons for me to keep my US S corp running. The US IRS and my State say this is just fine w them. I'm not an LLC, just an S corp. I ask many US/Canadian tax questions to lots of sources and seem to get so many opposite answers. Any guesses on the following? :)

1- If I choose to keep my US S corporation open, instead of opening a Canadian equivalent corp or just closing it and reporting income as a sole proprietor, am I passing on any obvious Canadian tax advantages?

2- can I still enjoy "Treaty benefits" for the corporation if my wife gets involved with the S corporation? ... if it went from "just me" to the two of us? Our businesses are closely related, dovetailed, and it may aid simplicity for her to receive her self-employed royalties, speaking fees through it. Is this permissable?

3- I've heard recently that the US does not allow non-citizen / non-residents to be S corp shareholders or officers... Could I either make her a Secretary/Director or even just have her as an employee and have her income received through it?