Dual Citizen, moving back to Canada -

From:           David Liu
Reply_To:       dliu@inlandimaging.com
My_question_is: Applicable to both US and Canada
Subject:        Dual Citizen, moving back to Canada
Expert:         taxman@centa.com
Date:           Tuesday May 13, 2008
Time:           03:54 AM -0000


I am a naturalized US citizen and a Canadian citizen as well.  I am a practising physician but do a lot of consulting work for US companies in addition to my standard work.

I would like to rent a house in vancouver, but create an LLC in florida (where I plan to buy a condo) to manage my consultation fees.  

I would like to file CDN taxes based on my 'regular job' and (small) salary from the LLC based in Florida, and keep the majority of the consultation fees in the LLC.  

If I establish a US based LLC and pay myself and my wife a small salary, would the entire LLC be subject to Canadian taxes?


david ingram replies:

If you are a Canadian resident in Canada for more than 183 days a year, you are taxable on your world holdings including any internal earnings of  offshore (Florida is offshore as far as Canada is concerned)  corporations, trusts, partnerships or other exotic  systems set up by creative tax people.

If you are a Canadian citizen and in Canada for 4 months a year, the US for 4 months a year and travel Europe and Asia  for the other two months, you are also taxable in Canada on your world income because you have not established residency in another country of residence for more than 183 days. 

As a US citizen, you are also taxable on your world income no matter where you live and no matter where the income comes from.

Articles 4, 10, 11, 15, 18 and 24 of the US Canada Tax Treaty deal with who gets most of the tax and the rate you will pay and to whom for things like interest, dividends, pensions and self employed earnings. 

You could come close to your intentions by renting or buying in Blaine or Ferndale or Custer in the state of Washington and commuting to work in Canada.  You would pay full tax to Canada on any earnings in Canada and the tax paid to Canada would offset all or most of any tax owing to the US.  You would NOT in this case qualify for BC Medical or any offshoots.  In other words, if you were on the staff of Peace Arch or Vancouver General Hospitals, you would not be eligible for any of their extended medical benefits which are dependent upon your being a member of the BC Medical insurance Plan.

These older questions speak to that situation.


Me and my husband are US residents (and Canadian citizens) on Washington state working full time in Vancouver. How can we avoid paying Canadian income tax?
Thank you!

david ingram replies:

What an unusual  question.  The answer however, is easy.  You can NOT avoid Canadian tax if you are working in Canada and earning over $10,000 as employees. 

If you were earning less than $10,000 each in Canada, you could file for an exemption under Art XV of the US Canada Income Tax Convention.

The following might help

QUESTION: David, I am a Canadian citizen and just got my green card.   My wife is American and works and resides in the US.  I work in Canada during the week and go back to the US on weekends.  How does this affect my tax filing?  Am I filing as normal in Canada or do I have to file in the US also? 
Your help is appreciated.
Thanks, Vince
david ingram replies:

You will file in Canada first and then report the income again on your US 1040 (maybe a joint return with your wife). Any tax, CPP and EI paid to Canada will be a foreign tax credit on the US return if you fill out form 1116.


My husband is US citizen, I am Canadian. Can we save on taxes by living in US and keeping our jobs in Canada.  Also understand that mtg int. is tax ded. in US. Thx.
david ingram replies:

Living in the US and working in Canada will cost you a lot more in expense although you may make up for it with a cheaper house, gas for your car and some groceries.

For instance, living in Washington State and working in BC will not save you any tax on your wages.  It may save you a little if you have large investment income but it would have to be over $10,000 a year to be meaningful.

The biggest problem is that you would no longer qualify for BC (or other province) medical and it would cost you anywhere from $300 to $1,500 a month to buy your own medical.

The US mortgage interest deduction is of no use to you  if you are working in Canada because you will still pay full Canadian taxes first.

And it is possible for most Canadians to arrange their affairs to make their Canadian mortgage deductible.   Goto www.centa.com  and read the  November 2001 newsletter in the top left hand box.


david ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
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My Home office is at:
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pert  US Canada Canadian American  Mexican Income Tax  service and help.
David Ingram gives expert income tax service & immigration help to non-resident Americans & Canadians from New York to California to Mexico  family, estate, income trust trusts Cross border, dual citizen - out of country investments are all handled with competence & authority.
Phone consultations are $450 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or is to be returned to Canada or a phone consultation is in Canada. ($472.50 with GST if in Canada) expert  US Canada Canadian American  Mexican Income Tax  service and help.
This is not intended to be definitive but in general I am quoting $900 to $3,000 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.
$1,200 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

$3,000 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. However, if you have a stack of 1099, or T3 or T4A or T5 or K1 reporting forms, expect to pay an average of $10.00 each with up to $50.00 for a K1 or T5013 or T5008 or T101 --- Income trusts with amounts in box 42 are an even larger problem and will be more expensive. - i.e. 20 information slips will be at least $350.00
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 from $150 to $600.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc. Note that these returns tend to be informational rather than taxable.  In fact, if there are children involved, we usually get refunds of $1,000 per child per year for 3 years.  We have done several catch-ups where the client has received as much as $6,000 back for an $1,800 bill and one recently with 6 children is resulting in over $12,000 refund. 

Email and Faxed information is convenient for the sender but very time consuming and hard to keep track of when they come in multiple files.  As of May 1, 2008, we will charge or be charging a surcharge for information that comes in more than two files.  It can take us a valuable hour or more  to try and put together the file when someone sends 10 emails or 15 attachments, etc. We had one return with over 50 faxes and emails for instance. 

This is a guideline not etched in stone.  If you do your own TDF-90 forms, it is to your advantage. However, if we put them in the first year, the computer carries them forward beautifully.


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