15% Canadian Withholding -
QUESTION:
I have a question and am hoping you can answer it or put my in touch with someone that can. I am a US Citizen an own a small consulting company in XXXXXXXX, I am incorporated and have a US tax ID for my company. Currently there is a project that I have been asked to join in Toronto. To further complicate matters, the company that is requesting my services is a US based company as well. Essentially it works as follows: The customer (a Canadian Company) has engaged a US company for consulting services, the US company has contracted my company for some of that consulting services (i.e. they sub-contracted some of the work to my company). The project will last at least 12 months and the resource from my company (this is a US citizen as well)will be onsite for 12 months.
My question is this, since the Canadian Customer is paying Consulting Company "A" who then is paying My Company do we still need to pay the 15% withholding tax?
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Someone or something has to pay Canadian Tax if you and your company and / or another person is working in Canada just as you would usually have to pay if you were working in another state. For instance, every reporter who covered the first O J Simpson trial was required to file a California tax return.
Being onsite for 12 months will constitute a fixed base under the treaty and your company must file a Canadian return and pay tax on the Canadian earnings just as it would have to pay tax to New York or California in the same circumstances. Your employee will also be taxable in Canada and you should be deducting Canadian Income Tax, CPP (Canada Pension Plan) and EI (Employemnt insurance). For instance, New York state requires a Canadian Trucking Company to file a New York State return if it makes three or more deliveries in the state in a year. Pennsylvania requires a Canadian Trucking company to file a Pennsylvania return if the Canadian company's trucks drive more than 50,000 miles through the state. (I am also aware that many US companies and employees ignore the requirement to file other state returns but it is just not worth it if you get caught).
Remember, you also have to get a visa for that employee and that a computer programmer does NOT qualify for a NAFTA visa. If the employee you send to Canada is a regular employee who is being transferred to Canada for less than 5 years, you can write to the CPP board and ask for an exemption from the CPP deduction. If you do this, you must continue to pay US FICA payments for that employee.
If you hire a new person for this job and it is not a transfer of an employee who was already working for you, this CPP exemption provision does not apply.
Your US employee must file a Canadian and if based in Quebec, a Quebec return. He or she must also file a US return but any Federal and Provincial taxes plus CPP and EI is a foreign tax credit on the US return by filing form 1116. It would be rare for the US employee to owe more tax to the US and if they have children and their income is not TOO high, they will even qualify for the child tax benefit of up to $1,000 per child.
If the 15% withholding is too little, you will owe more at the end of the year and that would be the usual situation. However, that tax paid to Canada is then a foreign tax credit on your US 1120 return and will be credited on a pro-rata basis.
Hope this helps.
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On November 10, 2007, David Ingram
wrote:
It is very unlikely that blind or unexpected email to me will be answered. I receive anywhere from 100 to 700 unsolicited emails a day and usually answer anywhere from 2 to 20 if they are not from existing clients. Existing clients are advised to put their 'name and PAYING CUSTOMER' in the subject line and get answered first. I also refuse to be a slave to email and do not look at it every day and have never ever looked at it when I am out of town. e bankruptcy expert US Canada Canadian American Mexican Income Tax help
However, I regularly search for the words"PAYING CUSTOMER" and
always answer them first if they did not get spammed out. For the last two
weeks, I have just found out that my own email notes to myself have been spammed
out and as an example, as I write this on Oct 18, 2007 since June 16th (124
days), my 'spammed out' box has 34,939 unread messages, my deleted box has 11854
I have actually looked at and deleted and I have actually answered 1078 email
questions for clients and strangers without sending a bill. I have also
put aside 622 messages that I am maybe going to try and answer because they look
interesting. -e
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$1,700 would be for two people with income from two countries
Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be $150 to $500.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc.
Just a guideline not etched in stone.
David Ingram expert income tax and immigration help and preparation of US Canada Mexico non-resident and cross border returns with rental dividend wages self-employed and royalty foreign tax credits family estate trust trusts income tax convention treaty advice on bankruptcy
It is very unlikely that blind or unexpected email to me will be answered. I receive anywhere from 100 to 700 unsolicited emails a day and usually answer anywhere from 2 to 20 if they are not from existing clients. Existing clients are advised to put their 'name and PAYING CUSTOMER' in the subject line and get answered first. I also refuse to be a slave to email and do not look at it every day and have never ever looked at it when I am out of town. e bankruptcy expert US Canada Canadian American Mexican Income Tax help
Therefore, if an email is not answered in 24 to 36 hours,
it is likely lost in space. You can try and
resend it but if important AND YOU TRULY WANT OR NEED AN ANSWER from 'me', you
will have to phone to make an appointment. Gillian Bryan generally accepts
appointment requests for me between 10:30 AM and 4:00 PM Monday to Friday
VANCOUVER (Seattle, Portland, Los Angeles) time at (604) 980-0321.
david ingram
expert US Canada Canadian American Mexican Income Tax
help.
david ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
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My Home office is at:
david ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325
North Vancouver, BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325
Calls welcomed from 10 AM to 9 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office) expert US Canada Canadian American Mexican Income Tax help.
Disclaimer: This question has been answered without detailed
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Canada Canadian American Mexican Income Tax
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David Ingram gives expert income
tax & immigration help to non-resident Americans & Canadians from
New York to California to Mexico family,
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Phone consultations are $400 for 15
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product remains in Canada or is to be returned to Canada or a phone consultation
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This is not intended to be definitive but in
general I am quoting $900 to $2,900 for a dual country tax
return.
$900 would be one T4 slip one W2 slip one or two
interest slips and you lived in one country only (but were filing both
countries) - no self employment or rentals or capital gains - you did not move
into or out of the country in this year.
$1,100 would be the same with one rental
$1,300 would be the same with one business no
rental
$1,300 would be the minimum with a move in or out
of the country. These are complicated because of the back and forth foreign tax
credits. - The IRS says a foreign tax credit takes 1 hour and 53
minutes.
$1,600 would be the minimum with a rental or two in
the country you do not live in or a rental and a business and foreign tax
credits no move in or out
$1,700 would be for two people with income from two countries
$2,900 would be all of the above and you moved in
and out of the country.
This is just a guideline for US / Canadian
returns
We will still prepare Canadian only (lives in
Canada, no US connection period) with two or three slips and no capital
gains, etc. for $200.00 up.
With a Rental for $400, two or three rentals for
$550 to $700 (i.e. $150 per rental) First year Rental - plus
$250.
A Business for $400 - Rental and business likely
$550 to $700
And an American only (lives in the US with no
Canadian income or filing period) with about the same things in the same range
with a little bit more if there is a state return.
Moving in or out of the country or part year
earnings in the US will ALWAYS be $900 and up.
TDF 90-22.1 forms are $50 for the first and $25.00
each after that when part of a tax return.
8891 forms are generally $50.00 to $100.00
each.
18 RRSPs would be $900.00 - (maybe amalgamate a
couple)
Capital gains *sales) are likely $50.00 for
the first and $20.00 each after that.
Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be $150 to $500.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc.
Just a guideline not etched in stone.
This from "ask an income trusts tax and immigration expert"
from www.centa.com or www.jurock.com or www.featureweb.com. David Ingram deals on a daily
basis with expatriate tax returns with multi jurisdictional cross and
trans border expatriate problems for the United States, Canada, Mexico,
Great Britain, United Kingdom, Kuwait, Dubai, Saudi Arabia, Thailand,
Indonesia, Japan, China, New Zealand, France, Germany, Spain, Italy, Russia,
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