Jan 19, 2022
As we advised in Tax Tip 20-04 , significant additional disclosure and filing requirements for trusts were announced in the 2018 Federal Budget and are scheduled to apply for trust’s 2021 and subsequent tax years.
Both the U.S Republican House and Senate tax plans (The Tax Cuts and Jobs Act, H.R. 1) propose to lower the maximum U.S. federal corporate tax rate from 35% to 20%. This U.S. Tax Tip looks at the effective overall tax rate for Canadians shareholders who are doing business in the U.S. through a U.S. subsidiary (C-corporation) of their Canadian operating company (CCPC).
This example assumes the following:
|U.S .Taxable Income
U.S. federal tax
U.S. state income tax (@5%)
|Cash available for distribution
U.S. nonresident withholding tax (@5%)
|After (U.S) tax cash in Canadian company
Canadian corporate Part I tax
Personal tax on dividend (@46.65%)
|After tax cash in shareholder’s hand
Effective overall tax rate
There still is no integration between the Canadian and United States tax systems. While the proposals would lower the U.S. corporate tax by some 15%, the overall impact for Canadian’s doing business through regular U.S. corporations will only drop 7.2% from 68.7% to 61.5%. Overall there is still a high total effective tax rate. If you plan on doing business in the U.S. other structures may be more tax efficient.
TAX TIP OF THE WEEK is provided as a free service to clients and friends of the Tax Specialist Group member firms. The Tax Specialist Group is a national affiliation of firms who specialize in providing tax consulting services to other professionals, businesses and high net worth individuals on Canadian and international tax matters and tax disputes.
The material provided in Tax Tip of the Week is believed to be accurate and reliable as of the date it is written. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements. Neither the Tax Specialist Group nor any member firm can accept any liability for the tax consequences that may result from acting based on the contents hereof.
U.S. TAX TIP is provided as a free service to clients and friends of Cadesky U.S. Tax.
The material provided in this U.S. Tax Tip is believed to be accurate and reliable as of the date of posting. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements. Neither Cadesky Tax nor Cadesky U.S. Tax can accept any liability for the tax consequences that may result from acting based on the contents hereof.