nelsona-
I agree that the treaty supersedes the law, although in many cases the treaty will have a phrase like "subject to the limitations of the law of the United States".
Indeed this exact phrase is found in article XXIV (Elimination of double taxation) paragraph 1:
"In the case of the United States, subject to the provisions of paragraphs 4, 5, and 6, double taxation shall be avoided as follows: In accordance with the provisions and subject to the limitations of the law of the United States (as it may be amended from time to time without changing the general principle thereof), the United States shall allow a citizen or resident of the United states, or to a company electing to be treated as a domestic corporation, as a credit against the United States tax on income the appropriate amount of income tax paid or accrued to Canada;..."
Which paragraph of the treaty are you relying on to take a US credit for a Canadian CPP contribution? Is there some applicable paragraph of treaty besides the one quoted above, which is itself subordinate to the law??
Foreign Tax Credit on 1040
Moderator: Mark T Serbinski CA CPA
Nelsona-
I spent 2 days doing nothing but investigating this matter.
I see nothing in this or the other thread that definitively resolves it.
If you have a specific provision in the treaty to cite then please say so! Simply saying "the treaty" resolves the issue is insufficient, because I have made a great effort to find something in the treaty that agrees with you, and I have failed.
I would be very happy to be wrong about this, but I would like a definitive reference to a government-supplied source, not simply a statement of opinion.
I spent 2 days doing nothing but investigating this matter.
I see nothing in this or the other thread that definitively resolves it.
If you have a specific provision in the treaty to cite then please say so! Simply saying "the treaty" resolves the issue is insufficient, because I have made a great effort to find something in the treaty that agrees with you, and I have failed.
I would be very happy to be wrong about this, but I would like a definitive reference to a government-supplied source, not simply a statement of opinion.
Nelsona-
Again, the treaty XXIV (elimination of double taxation) paragraph 1 explicitly states that the paragraph is subject to the limitations of the laws of the United States.
If you are using some other paragraph in the treaty to actually take a US credit, then please say exactly which paragraph you mean. I do not dispute that article II considers the CPP contributions to be a tax, I simply dispute that anything in the treaty allows a US credit for such tax.
Again, the treaty XXIV (elimination of double taxation) paragraph 1 explicitly states that the paragraph is subject to the limitations of the laws of the United States.
If you are using some other paragraph in the treaty to actually take a US credit, then please say exactly which paragraph you mean. I do not dispute that article II considers the CPP contributions to be a tax, I simply dispute that anything in the treaty allows a US credit for such tax.
Nelsona-
This matter was NOT resolved on this tread.
What is resolved on this tread is that Article II and the treasury technical explanation refer to CPP contributions as a tax.
However, what was NOT resolved is whether the treaty actually allows a US tax credit for this tax!
Again, article XXIV(1) of the US-Canada tax treaty, which appears to be the treaty provision which you erroneously take to provide for the US tax credit, explicitly states that it is "subject to the limitations of the law of the United States".
Unless you can specify with a different treaty paragraph providing for the US tax credit for CPP contributions which does not explicitly name itself "subject to the limitations of the law of the United States" then your position is untenable.
Your bluster is BS.
This matter was NOT resolved on this tread.
What is resolved on this tread is that Article II and the treasury technical explanation refer to CPP contributions as a tax.
However, what was NOT resolved is whether the treaty actually allows a US tax credit for this tax!
Again, article XXIV(1) of the US-Canada tax treaty, which appears to be the treaty provision which you erroneously take to provide for the US tax credit, explicitly states that it is "subject to the limitations of the law of the United States".
Unless you can specify with a different treaty paragraph providing for the US tax credit for CPP contributions which does not explicitly name itself "subject to the limitations of the law of the United States" then your position is untenable.
Your bluster is BS.
I know of someone who has an ongoing cross order situation and they always use cpp as a foreign tax credit on 1116
So do what you think is best.......
Also, want to see really messed up us tax returns............let a CPA who has no knowledge of cross border stuff do it..........they can really screw up your return and associated filings
So do what you think is best.......
Also, want to see really messed up us tax returns............let a CPA who has no knowledge of cross border stuff do it..........they can really screw up your return and associated filings
Jjon-
The erroneous discussion on this board from 2004 is still sending people on wild goosechases. The reason this board is public is so that everyone may benefit.
If there is an error (and clearly there is because 2 people contradict each other) then it should be cleared up by the incorrect party admitting his error.
However, nelsona as of yet refuses to clarify what mysterious treaty paragraph he is invoking for his position, preferring to bluster and accuse me of not reading the thread.
We are all waiting for his answer.
-fresnarus
The erroneous discussion on this board from 2004 is still sending people on wild goosechases. The reason this board is public is so that everyone may benefit.
If there is an error (and clearly there is because 2 people contradict each other) then it should be cleared up by the incorrect party admitting his error.
However, nelsona as of yet refuses to clarify what mysterious treaty paragraph he is invoking for his position, preferring to bluster and accuse me of not reading the thread.
We are all waiting for his answer.
-fresnarus
I doubt you will get much more of a reply from Nelsona at this point
I would guess
"Article II
Taxes Covered
1. This Convention shall apply to taxes on income and on capital imposed on behalf of each Contracting State, irrespective of the manner in which they are levied.
2. Notwithstanding paragraph 1, the taxes existing on March 17, 1995 to which the Convention shall apply are:
(a) in the case of Canada, the taxes imposed by the Government of Canada under the Income Tax Act;
and from the technical explanation:
However, the Convention
has the effect of covering the Canadian social security tax in certain respects because under
Canadian domestic tax law no such tax is due if there is no income subject to tax under the
Income Tax Act of Canada.
So it seems like cross border accountants (some, anyway) use CPP as a foreign tax credit.
I did a quick search and noticed that the CFL players association has advice from BDO for US football players regarding foreign taxes. They state:
"A direct credit against your U.S. federal tax on can be claimed for the federal and provincial income tax paid to Canada on your Canadian- source salary, plus your Employment Insurance (EI) premiums paid. The credit is based on the lesser of the Canadian tax and the U.S."
So, according to BDO, I guess, CPP is not used for foreign tax credit....cflpa.com
Don't mean to further muddy any waters...........
As I stated above, I know someone with an ongoing cross border situation who uses a cross border accountant and they always use CPP as a foreign tax credit
I would guess
"Article II
Taxes Covered
1. This Convention shall apply to taxes on income and on capital imposed on behalf of each Contracting State, irrespective of the manner in which they are levied.
2. Notwithstanding paragraph 1, the taxes existing on March 17, 1995 to which the Convention shall apply are:
(a) in the case of Canada, the taxes imposed by the Government of Canada under the Income Tax Act;
and from the technical explanation:
However, the Convention
has the effect of covering the Canadian social security tax in certain respects because under
Canadian domestic tax law no such tax is due if there is no income subject to tax under the
Income Tax Act of Canada.
So it seems like cross border accountants (some, anyway) use CPP as a foreign tax credit.
I did a quick search and noticed that the CFL players association has advice from BDO for US football players regarding foreign taxes. They state:
"A direct credit against your U.S. federal tax on can be claimed for the federal and provincial income tax paid to Canada on your Canadian- source salary, plus your Employment Insurance (EI) premiums paid. The credit is based on the lesser of the Canadian tax and the U.S."
So, according to BDO, I guess, CPP is not used for foreign tax credit....cflpa.com
Don't mean to further muddy any waters...........
As I stated above, I know someone with an ongoing cross border situation who uses a cross border accountant and they always use CPP as a foreign tax credit
Jjon-
I do not care if someone you know has been claiming CPP contributions as a US credit. I might care if I wanted to do anything I could get away with, but I actually like to do my taxes in accordance with the law.
Yes, I am aware that a regular accountant would mangle my international taxes. Unfortunately, I have also found out that international tax specialists also mangle international taxes. That's why I do it myself. If you blindly trust accountants (many of whom may see there job as providing legal cover for their clients' illegal activities) then I have some Enron shares to sell you.
:)
I do not care if someone you know has been claiming CPP contributions as a US credit. I might care if I wanted to do anything I could get away with, but I actually like to do my taxes in accordance with the law.
Yes, I am aware that a regular accountant would mangle my international taxes. Unfortunately, I have also found out that international tax specialists also mangle international taxes. That's why I do it myself. If you blindly trust accountants (many of whom may see there job as providing legal cover for their clients' illegal activities) then I have some Enron shares to sell you.
:)
How much for the enron shares? :)
OK, so I think you have your answer......... the conservative route would be to NOT use CPP as a credit. So don't use it since you are not satisfied that it can actually be used for credit. Fair enough. Others are comfortable using it. Fair enough also.
You may find going forward that the amount of the CPP would always amount to a carryforward amount anyway.......so you don't lose out and those who claim it don't "really" get to use it.
OK, so I think you have your answer......... the conservative route would be to NOT use CPP as a credit. So don't use it since you are not satisfied that it can actually be used for credit. Fair enough. Others are comfortable using it. Fair enough also.
You may find going forward that the amount of the CPP would always amount to a carryforward amount anyway.......so you don't lose out and those who claim it don't "really" get to use it.
Jjon-
I do not care about what is conservative or aggressive. In this case it seems there is only one legal option. If nelsona do something illegal then he should stop muddying the waters for the rest of us.
In my case I'm in a profession that can send me to countries of all tax rates (as distinct as Canada and Singapore), so I might actually use that carryover.
-fresnarus
I do not care about what is conservative or aggressive. In this case it seems there is only one legal option. If nelsona do something illegal then he should stop muddying the waters for the rest of us.
In my case I'm in a profession that can send me to countries of all tax rates (as distinct as Canada and Singapore), so I might actually use that carryover.
-fresnarus
Let's not be overly concerned with the term"subject to the limitations of the law of the United States..." found in Article XXIV.1 as to somehow nullify the treaty or its definitions. This simply means that the credit might not be a 100% dollar for dollar credit, due to the limitations put in place on Form 1116, which, as we know, limit the credit available to the lesser of: effective US tax owed, and Cdn tax paid or accrued. Without this wording every penny of CD tax would be credited on ones US return, which we know is not the case.
In fact, XXIV.2(a) has exactly the same wording applied to canada: "subject to the provisions of the law of Canada", and the FTC calculation in canada has about the same mechanisms as 1116.
This does NOT have the effect of suprseding the treaty. In fact, both clauses specify that any change to the manner of giving double tax relief must adhere to the general principles already in force.
So, the presumptive argument recently brought here that somehow the IRS regulation on the crediting of foreign social security tax, overrides the treaty because of this wording really has no basis.
In fact, XXIV.2(a) has exactly the same wording applied to canada: "subject to the provisions of the law of Canada", and the FTC calculation in canada has about the same mechanisms as 1116.
This does NOT have the effect of suprseding the treaty. In fact, both clauses specify that any change to the manner of giving double tax relief must adhere to the general principles already in force.
So, the presumptive argument recently brought here that somehow the IRS regulation on the crediting of foreign social security tax, overrides the treaty because of this wording really has no basis.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
"Subject to the laws of the United States" means exactly what it says. It doesn't nullify the treaty or superceed the treaty, IT IS THE TREATY. And the treaty gives the power to lawmakers to define the credits referred to under XXIV.1 with laws.
Publication 514 is written based on the laws of the united states, and publication 514 says "No deduction or credit is allowed, however, for social security taxes paid or accrued to a foreign country with which the United States has a social security agreement"
Therefore article XXIV.1 does not allow a credit for CPP.
Again, if you have an paragraph that does allow a credit for CPP then by all means point it out.
-fresnarus
Publication 514 is written based on the laws of the united states, and publication 514 says "No deduction or credit is allowed, however, for social security taxes paid or accrued to a foreign country with which the United States has a social security agreement"
Therefore article XXIV.1 does not allow a credit for CPP.
Again, if you have an paragraph that does allow a credit for CPP then by all means point it out.
-fresnarus