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Hi David,
I have a client who is a Canadian citizen and resident who is in a Band =
and is spending more and more time in the US. He has a Canadian =
agent/manager who receives the CDN and US source income (including the =
SOCAN receipts - although the T5's are issued in the client's name) and =
pays the expenses, takes a fee and then pays the balance to his =
Canadian Ltd Co (BandCo). BandCo is issuing T-4 slips to each of the =
members. This year he expects to be in and out of the US for various =
appearances totaling 3-4 months. He also expects to spend an additional =
3 months visiting his girlfriend in the US.=20
He has a P1 visa.=20
2 Questions: a) Does he have to file a 1040NR if he is in US under 183 =
days? Or does BandCo have to file something? b) will visiting the =
girlfriend push him over 183 days an mean he should file on his world =
income?
I also gave your number to "Karim" today and he will presumably be =
calling you in the near future with a US tax question.
Thanks for your clarification on this.
Rxxxxxxxxx
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david ingram replies:
Your client is working in the US and owes tax to the US for his U S =
earnings if he is only in the US for ONE day as an entertainer.. His =
first tax liability oin the US earnings is to the US. At the least, he =
should file a 1040NR and report the US earnings less agent's fees and =
other expenses and pay the tax. =20
Then he reports the same money in Canada and claims a foreign tax credit =
on the Canadian return for the tax paid to the US. Since he is an =
entertainer, he should also be filing a state return for each and every =
statre he has performed in witht he exception of the seven states that =
do not have a tax return like Washington, Florida, Nevada, Alaska, etc.
On the other hand, his more than 183 days in the USA is an interesting =
conundrum. Article IV of the US Canadian Income Tax Convention makes =
him taxable in the country with which his personal and economic ties are =
greater. If he is in the US for personal reasons and the larger part of =
his income is in the US AND he has a P1 visa, he would be taxable on his =
world income in the USA first and should file a 1040 rather than a =
1040NR. =20
Article IV of the US Canada Income Tax Convention (1980) with amending =
protocols reads as follows:
Article IV - Fiscal Domicile - (it is the same number in most treaties) =
For the purposes of this Convention, the term "resident of a Contracting =
State" means any person who, under the law of that State, is liable to =
taxation therein by reason of that person's domicile, residence, =
citizenship, place of management, place of incorporation or any other =
criterion of a similar nature, but in the case of an estate or trust, =
only to the extent that income derived by the estate or trust is liable =
to tax in that State, either in its hands or in the hands of its =
beneficiaries. For the purposes of this paragraph, a person who is not a =
resident of Canada under this paragraph and who is a United States =
citizen or alien admitted to the United States for permanent residence =
(a "green card" holder) is a resident of the United States only if the =
individual has a substantial presence, permanent home or habitual abode =
in the United states and that individual's personal and economic =
relations are closer to the United states than any other third State. =
The term "resident" of a Contracting State is understood to include:=20
(a) the Government of that State or a political subdivision or local =
authority thereof or any agency or instrumentality of any such =
government, subdivision or authority, and=20
(b) (i) A trust, organization or other arrangement that is operated =
exclusively to administer or provide pension, retirement or employee =
benefits, and=20
(ii) A not-for-profit organization that was constituted in that =
State, and that is, by reason of its nature as such, generally exempt =
from income taxation in that State.=20
2. Where by reason of the provisions of paragraph 1 an individual is a =
resident of both Contracting States, then his status shall be determined =
as follows:=20
(a) he shall be deemed to be a resident of the Contracting State in =
which he has a permanent home available to him. If he has a permanent =
home available to him in both Contracting States, he shall be deemed to =
be a resident of the Contracting State with which his personal and =
economic relations are closer (centre of vital interests);=20
(b) if the Contracting State in which he has his centre of vital =
interests cannot be determined, or if he has not a permanent home =
available to him in either Contracting State, he shall be deemed to be a =
resident of the Contracting State in which he has an habitual abode;=20
(c) if he has an habitual abode in both Contracting States or in neither =
of them, he shall be deemed to be a resident of the Contracting State of =
which he is a national;=20
(d) if he is a national of both Contracting States or of neither of =
them, the competent authorities of the Contracting States shall settle =
the question by mutual agreement.=20
Hope this helps=20
ingram
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