Tax Question:
What are the new tax forms recently drafted that a resident of the United States of America (U.S.) may need to file in the U.S. if you are doing business in Canada and what are these forms for?
Facts:
Although there is a tax treaty between Canada and the U.S., there are information returns required on both sides of the border to inform the respective governments of your dealings in the neighbouring country. The U.S. has recently drafted several forms that may apply to you if you are doing business in Canada. Please see below for a discussion of several of these new forms.
Form 1118 Foreign Tax Credit
If you are a resident of the U.S. and a shareholder of a U.S. corporation. Your corporation may need to file a Form 1118 to claim a Foreign Tax Credit for taxes paid or accrued to Canada.
Form 5471 Information Return of U.S. Persons With Respect to Certain Foreign Corporations or Form 5472 Information Return of a 25% Foreign-Owned U.S. Corporation
If you are a resident of the U.S. and a shareholder of a Canadian corporation or a shareholder of a U.S. corporation that is 25% or greater Canadian owned, you may need to file a Form 5471 or a Form 5472 to report transactions with a Canadian related party.
Form 8858 Information Return of U.S. Persons With Respect to Foreign Disregarded Entities and Foreign Branches or Form 8865 Return of U.S. Persons With Respect to Certain Foreign Partnerships
If you are a resident of the U.S. and an owner of a Canadian corporation or branch that is disregarded as an entity separate from its owner for U.S. tax purposes or an owner of a Canadian partnership, you may need to file a Form 8858 or Form 8868 to report transactions with a Canadian related party.
Form 8992 U.S. Shareholder Calculation of Global Intangible Low-Taxed Income (GILTI)
If you are a resident of the U.S. and a shareholder of a Canadian Controlled corporation, you may need to file a Form 8992 to compute your GILTI inclusion.
If you would like more information on this topic, please contact a member of the Empire CPA team by filling out the contact form below.
Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. Empire, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.
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