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Planning strategies for owning U.S. assets or operating a business in the U.S. Presented by Brent Hoshizaki, CPA, CA, CPA (Washington), Sheryne Mecklai, CPA, CA, Noriko Tunnah, US CPA (New Hampshire) - with Manning Elliott LLP
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Investing in the US
Presented by:
Brent Hoshizaki, CPA,CA, CPA (Washington)
Sheryne Mecklai, CPA, CA
Noriko Tunnah, US CPA (New Hampshire)
November 19, 2014
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1. Tax Environment
2. Estate Tax
3. Investing in US Real Estate
� Vacation
� Rental
4. Investing in US Businesses
5. FATCA
Agenda
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� Canada – Residency
� US – Citizenship
Individual Taxation within a Jurisdiction
Eritrea
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� Corporate
� Personal
US vs. Canadian Tax Rates
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• Tim Hortons/Burger King
• Obama “unpatriotic tax loophole”
• Expatriated US entity (“change of address”)
• If inversion rules apply new foreign parent is treated as a US domestic corporation
• RTO situations as an example
Corporate Inversions
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US Estate Tax
US citizenGreen-card holder
Canadian ResidentNon-US citizenNon resident alien (“NRA”)
Levied on Worldwide property US situs assets - includes:� Real estate� US company shares
Exemption $5.34m per US person (2014) US estate tax reduced by treaty credit which is a proportioned unified credit
US assets x $2.08M (2014)
Worldwide assets
Spouse Port unused portion to US citizen surviving spouse
No ability to transfer unused spousalamount.Marital credit equal to lesser of estate tax or proportioned unified credit
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� Personal
� Corporation
� Personal Trusts
� Partnership
� LLCs
� ULCs
� REIT
Forms of Ownership
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US Vacation Real Estate
CORP TrustLP
LLC
����! !
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US Rental Real Estate
CORP TrustLP
LLC
����! !
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� Sourcing
� Goods
� Services
� Permanent establishment (Treaty)
� Nexus (State)
Am I doing business in the US?
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US Business
CORP
LP
LLCCORP
US
OPS
US
OPS
CORP
US
OPS
CORP
CORP
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US Business – Sole Proprietor
US
OPS
US Sourced Income
Total US Tax
Canadian TaxForeign Tax Credit
Total Canadian Tax
Total IncomeTotal Tax (sum of A)
Fully Distributed Funds
Effective Tax Rate
$100
(35)
(45)35
(10)
100(45)$55
45%
A
A
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US Business-Partnership
LP
US
OPS
US Sourced Income
Total US Tax
Canadian TaxForeign Tax Credit
Total Canadian Tax
Total IncomeTotal Tax (sum of A)
Fully Distributed Funds
Effective Tax Rate
100
(35)
(45)35
(10)
100(45)55
45%
A
A
GP
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US Business – US Branch
CORP
US
OPS
US Sourced Income 100a
US Corp Income Tax (35)
US Corp Branch Tax (3)
Total US Tax (38) A
Canadian Corp Income Tax (25)
Canadian Corp Foreign Tax Credit 25a
Total Canadian Corporate Tax 0a A
Dividends to Individual 62a
Total Canadian Personal Tax (18) A
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US Business – US Branch cont’d
CORP
US
OPS
Total Income $100a
Total Canadian and US Tax (sum of A) (56)
Fully Distributed Funds $ 44a
Effective Tax Rate 56%
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US Business – US Subsidiary
CORP
CORP
US Sourced Income 100a
US Corp Income Tax (35)
US Withholding Tax (3)
Total US Tax (38) A
Dividends to Cdn Corp 65a
Dividend Deduction (65)
Canadian Taxable Income 0a
Cdn Corp Income Tax 0a
Total Canadian Corporate Tax 0a A
Dividends to Individual 62a
Total Canadian Personal Tax (18) A
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US Business – US Subsidiary cont’d
CORP
CORPTotal Income $100a
Total Canadian and US Tax (sum of A) (56)
Fully Distributed Funds $ 44a
Effective Tax Rate 56%
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US Business - LLC
LLC
CORP
CORP
LLC
CORP
LLC
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� US law requiring reporting by:� US taxpayers for specified foreign financial assets
� Non-US financial institutions for financial accounts held by:
� US taxpayers
� Foreign entities where US taxpayers hold substantial ownership
� Does not replace FBAR reporting
� Exempt accounts: RRSP, RRIF, RDSP, TFSA
� Started July 1, 2014
FATCA: Foreign Account
Tax Compliance Act
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� Canada signed a Model 1 Intergovernmental Agreement (“IGA”) on Feb 5, 2014
� Canadian financial institutions CRA IRS
� US financial institutions IRS CRA
� Penalty for not complying: 30% withholding
FATCA cont’d
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Questions???
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