U.S. Repatriation Tax and the Impact for U.S. Citizens in Canada

As part of Trump’s tax reform plan that was introduced this past December, there was included a provision that was intended to force large multi-national companies to bring home offshore funds to be reinvested within the U.S..  The unintended consequence is that U.S. citizens resident in Canada with a controlling interest in a Canadian corporation are also subjected to the tax measures.  Generally, the tax is applied to post-1986 accumulated earnings & profits (generally retained earnings) accumulated within the corporation with different rates ranging from 8% - 15.5% applying depending on the type of assets held.  This one-time repatriation tax could impact the personal tax filings of the individual tax payer in either the 2017 or 2018 taxation year depending on the fiscal year end of the corporation and could be significant.   An election is available to spread the resultant tax balance over an 8 year period.  A key date for taxpayers impacted by these measures is June 15, 2018, which is the last day available to make an election to pay the related tax balance over 8 years if an extension of the return is not obtained.  Where the U.S. filing deadline has been extended, the election to spread the tax burden would be due October 15, 2018.  Below is a link which provides more information on the repatriation tax. 

http://www.cbc.ca/news/politics/transition-tax-trump-corporations-1.4639020

If you believe you may be impacted by these measures, please contact us as soon as possible.  Although Hendry Warren does not provide U.S. tax advice, we do have affiliations with U.S. CPA firms with whom we work to ensure that taxes are minimized on both sides of the border, for our clients.