Investing 50% in a Canadian corporation

[princesultan]

Hello everyone,

What would the implications be for a US corporation to have a 50% stake in a Canadian corporation? I read that double taxation will arise with no offsetting credits, does anyone know if this is true or have any first hand experience?

[JGCA]

The double taxation applies to the fact that as a 50% owner( Shareholder) you will be picking up 50% of the dividends even if they are not paid to you since you will be accruing this annually on your 1120 return, you get no credit for the tax the Canadain corp pays since it is a dividend and the cnd corp get no deduction for this dist. This is not because of the fact you are US based its how the corp tax system works with respect to dividends vs say management fees paid. Of course as a non resident the Cnd corp will need to withold tax on the dividends it pays to you for which you do get a credit for. If you receive no didvidends no witholding tax applies but yoiu may still be required to reporet your shr of the income in the US depending on the capital structure.