Entrepreneurship & Small Business

Anyone do CORP to CORP with a US company?

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[OP]
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Jul 3, 2006
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Anyone do CORP to CORP with a US company?

Hi,

Anyone do CORP to CORP with a US company? Provide services to US company. Do you have to register anything on the US side or pay taxes on US side? What if the US company wants you to come on site once every other week? w2 is not worth it for me.

Thanks
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Through my consulting company, I regularly provide services to some U.S.-based and multinational companies in support of their own work for other U.S. and non-U.S. companies. There are a couple of issues, and if it's a major part of what you do, you need professional advice to avoid pitfalls. My (limited, and don't depend on it) understanding is that some of the key points are the following.

1. There is nothing inherently wrong about a U.S. company purchasing services from a Canadian one, and no registrations are absolutely necessary. The biggest headache will however typically be that the U.S. company may not be used to dealing with this situation, and you will need to fight all sorts of bureaucratic battles (what do you mean you don't have a *&%&^ number from the IRS? What do you mean you're neither an LLC nor an S-corp? Please send us your company's [U.S. of course] banking direct deposit info! Which state is your company's employee health and safety insurance company based in?), which cost you time, delay payment, and can create insurmountable roadblocks though they shouldn't.

2. If the U.S. company has a Canadian subsidiary, it is therefore easier on everyone if you contract with -- and invoice -- their Canadian sub, and they take care of it on their end with internal accounting. That's even if you invoice them and they pay you in USD. You will (likely) need to charge them HST, but they can use it as an ITC and get it back.

3. From the U.S. taxation side, the important thing is you (=both you personally, and your Canadian company) don't have a "permanent establishment" or even "conduct business" in the U.S. Don't have your own office there; don't work regularly from their offices. Don't even sign contracts or submit invoices there; do that when you're in Canada. If your service includes specific paper/electronic deliverables, send the main/final deliverables from Canada, not from the U.S. If you do have a permanent establishment or conduct business there, that's when you would have to pay -- and even worse file -- U.S. taxes.

4. From the INS/Immigration side, the above matter, but also the Substantial Presence test applies. And look into whether you need a business visa, which may be very hard/expensive to get btw. Of course be truthful, but do your utmost so that your trips to the U.S. are infrequent, short, incidental, and legitimately describable that You, as an employee being paid by YourCanadianCorp, is attending a meeting with USCorp. Not that you are regularly travelling to the US, or present for significant amounts of time, to provide services to USCorp or otherwise conduct business there.

As I said, there are various complexities, and in fact various aspects that are unclear and/or subject to interpretation. In particular, there seem to be situations where a literal interpretation of the rules would have you jumping through hoops (that would ultimately probably lead to a positive result for you) that practitioners suggest you just don't jump through, though that of course carries some risk. That's part of the reason I suggest to consult a professional if important enough. I did; and determined my situation has enough specific to it to not warrant dealing with some of the issues more deeply than yours might.
Last edited by houska on Feb 19th, 2018 1:02 pm, edited 1 time in total.
[OP]
Deal Addict
Jul 3, 2006
1966 posts
588 upvotes
houska wrote: Through my consulting company, I regularly provide services to some U.S.-based and multinational companies in support of their own work for other U.S. and non-U.S. companies. There are a couple of issues, and if it's a major part of what you do, you need professional advice to avoid pitfalls. My (limited, and don't depend on it) understanding is that some of the key points are the following.

1. There is nothing inherently wrong about a U.S. company purchasing services from a Canadian one, and no registrations are absolutely necessary. The biggest headache will however typically be that the U.S. company may not be used to dealing with this situation, and you will need to fight all sorts of bureaucratic battles (what do you mean you don't have a *&%&^ number from the IRS? What do you mean you're neither an LLC nor an S-corp? Please send us your company's [U.S. of course] banking direct deposit info! Which state is your company's employee health and safety insurance company based in?), which cost you time, delay payment, and can create insurmountable roadblocks though they shouldn't.

2. If the U.S. company has a Canadian subsidiary, it is therefore easier on everyone if you contract with -- and invoice -- their Canadian sub, and they take care of it on their end with internal accounting. That's even if you invoice them and they pay you in USD. You will (likely) need to charge them HST, but they can use it as an ITC and get it back.

3. From the U.S. taxation side, the important thing is you (=both you personally, and your Canadian company) don't have a "permanent establishment" or even "conduct business" in the U.S. Don't have your own office there; don't work regularly from their offices. Don't even sign contracts or submit invoices there; do that when you're in Canada. If your service includes specific paper/electronic deliverables, send the main/final deliverables from Canada, not from the U.S. If you do have a permanent establishment or conduct business there, that's when you would have to pay -- and even worse file -- U.S. taxes.

4. From the INS/Immigration side, the above matter, but also the Substantial Presence test applies. And look into whether you need a business visa, which may be very hard/expensive to get btw. Of course be truthful, but do your utmost so that your trips to the U.S. are infrequent, short, incidental, and legitimately describable that You, as an employee being paid by YouCorp, is attending a meeting with USCorp. Not that you are regularly travelling to the US, or present for significant amounts of time, to provide services to USCorp or otherwise conduct business there.

As I said, there are various complexities, and in fact various aspects that are unclear and/or subject to interpretation. In particular, there seem to be situations where a literal interpretation of the rules would have you jumping through hoops (that would ultimately probably lead to a positive result for you) that practitioners suggest you just don't jump through, though that of course carries some risk. That's part of the reason I suggest to consult a professional if important enough. I did; and determined my situation has enough specific to it to not warrant dealing with some of the issues more deeply than yours might.
I have a company in US that is willing to pay my Canadian corp but they want me to be on site every other week for 3 months....I am not sure if TN Visa will work if I do this as my company would hiring me not the one giving the contract to my company. Wouldn't the US want to make money on the business being sent to Canada?
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Feb 25, 2007
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J_u_n_i_o_r_3 wrote: I have a company in US that is willing to pay my Canadian corp but they want me to be on site every other week for 3 months....I am not sure if TN Visa will work if I do this as my company would hiring me not the one giving the contract to my company. Wouldn't the US want to make money on the business being sent to Canada?
Apparently these are exactly the situations where YMMV whether your visa application will be accepted. And I've been asked (reasonable, and in my case easily answerable!) questions at U.S. preclearance at a Canadian airport for flying the same Canada-New York flight 3x in 2 months as a B-1. I will PM you contact info for the US Canada immigration/Canada lawyer I (resp, my company) consulted in these issues who is quite knowledgeable (no connection with me). Cost $500 which was money well spent for me to clarify my business growth strategy (i.e. what can and can't I do to avoid getting onto thin ice), but may or may not be worth it for you.
[OP]
Deal Addict
Jul 3, 2006
1966 posts
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houska wrote: Apparently these are exactly the situations where YMMV whether your visa application will be accepted. And I've been asked (reasonable, and in my case easily answerable!) questions at U.S. preclearance at a Canadian airport for flying the same Canada-New York flight 3x in 2 months as a B-1. I will PM you contact info for the US Canada immigration/Canada lawyer I (resp, my company) consulted in these issues who is quite knowledgeable (no connection with me). Cost $500 which was money well spent for me to clarify my business growth strategy (i.e. what can and can't I do to avoid getting onto thin ice), but may or may not be worth it for you.
Hey to confirm you got B-1 VISA?
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Feb 25, 2007
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Unless my memory is faulty, B-1 is sort of the default. You cross the border, esp with Nexus/Global Entry, and you automatically get a B-1 or B-2 (if you're a Canadian citizen) depending if you're entering for business or pleasure. The issue is if what you're doing is actually effectively working there, you *should* have something else, whether TN or H, or ... If they interview you, and decide you shouldn't be doing what you're doing, they'll turn you back, i.e. effectively deny you the B-1/B-2 and so you can't enter. There's a lot of discretion involved.
[OP]
Deal Addict
Jul 3, 2006
1966 posts
588 upvotes
houska wrote: Through my consulting company, I regularly provide services to some U.S.-based and multinational companies in support of their own work for other U.S. and non-U.S. companies. There are a couple of issues, and if it's a major part of what you do, you need professional advice to avoid pitfalls. My (limited, and don't depend on it) understanding is that some of the key points are the following.

1. There is nothing inherently wrong about a U.S. company purchasing services from a Canadian one, and no registrations are absolutely necessary. The biggest headache will however typically be that the U.S. company may not be used to dealing with this situation, and you will need to fight all sorts of bureaucratic battles (what do you mean you don't have a *&%&^ number from the IRS? What do you mean you're neither an LLC nor an S-corp? Please send us your company's [U.S. of course] banking direct deposit info! Which state is your company's employee health and safety insurance company based in?), which cost you time, delay payment, and can create insurmountable roadblocks though they shouldn't.

2. If the U.S. company has a Canadian subsidiary, it is therefore easier on everyone if you contract with -- and invoice -- their Canadian sub, and they take care of it on their end with internal accounting. That's even if you invoice them and they pay you in USD. You will (likely) need to charge them HST, but they can use it as an ITC and get it back.

3. From the U.S. taxation side, the important thing is you (=both you personally, and your Canadian company) don't have a "permanent establishment" or even "conduct business" in the U.S. Don't have your own office there; don't work regularly from their offices. Don't even sign contracts or submit invoices there; do that when you're in Canada. If your service includes specific paper/electronic deliverables, send the main/final deliverables from Canada, not from the U.S. If you do have a permanent establishment or conduct business there, that's when you would have to pay -- and even worse file -- U.S. taxes.

4. From the INS/Immigration side, the above matter, but also the Substantial Presence test applies. And look into whether you need a business visa, which may be very hard/expensive to get btw. Of course be truthful, but do your utmost so that your trips to the U.S. are infrequent, short, incidental, and legitimately describable that You, as an employee being paid by YourCanadianCorp, is attending a meeting with USCorp. Not that you are regularly travelling to the US, or present for significant amounts of time, to provide services to USCorp or otherwise conduct business there.

As I said, there are various complexities, and in fact various aspects that are unclear and/or subject to interpretation. In particular, there seem to be situations where a literal interpretation of the rules would have you jumping through hoops (that would ultimately probably lead to a positive result for you) that practitioners suggest you just don't jump through, though that of course carries some risk. That's part of the reason I suggest to consult a professional if important enough. I did; and determined my situation has enough specific to it to not warrant dealing with some of the issues more deeply than yours might.
HI,

Just to confirm point 3 since you had no permanent residence you didnt have to pay corp/tariff taxes in US?

Thanks
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Feb 25, 2007
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J_u_n_i_o_r_3 wrote: HI,

Just to confirm point 3 since you had no permanent residence you didnt have to pay corp/tariff taxes in US?

Thanks
The issue is not whether *you* as an individual have permanent residence in the U.S., but whether your corporation has a permanent establishment in the U.S. An outline of the issues informed also by the Canada-US tax treaty is available at http://agtax.ca/corporate/taxation-of-p ... blishments See especially the sentence on signing contracts and the section on "Permanent Establishments from Services". My own work in the U.S. or related to U.S. clients is a sufficiently small proportion that I am fine on these criteria, but you might run in to trouble, especially if your project is extended.
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houska wrote: Unless my memory is faulty, B-1 is sort of the default. You cross the border, esp with Nexus/Global Entry, and you automatically get a B-1 or B-2 (if you're a Canadian citizen) depending if you're entering for business or pleasure. The issue is if what you're doing is actually effectively working there, you *should* have something else, whether TN or H, or ... If they interview you, and decide you shouldn't be doing what you're doing, they'll turn you back, i.e. effectively deny you the B-1/B-2 and so you can't enter. There's a lot of discretion involved.
I cross the US border regularly to Buffalo, NY to visit my logistics warehouse that receives, stores and ships my inventory. I have no permanent establishment or employees. I file a US tax return and pay NY State sales tax for sales shipped within NY State. What I have been told by US border officers is that all I am allowed to do is to supervise someone doing something but not do anything myself except count and verify inventory status. I have corroborated this. You can also give a seminar, speech or observe things happening in a company environment but as for lifting a finger and doing anything that is expressly prohibited. You need to apply for a special visa to do that. I think the only exemption is if you have a contract to provide a warranty on a specific product and have to cross to do the warranty work.

As such, when I cross I technically get a B-1 but no border officer has ever said "here's your B-1". I typically often cross with commercial goods in the commercial lane along with the paper-work required.

So, the pertinent question no one has asked is "What are you actually going to be doing for the US entity?"
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houska wrote: Unless my memory is faulty, B-1 is sort of the default. You cross the border, esp with Nexus/Global Entry, and you automatically get a B-1 or B-2 (if you're a Canadian citizen) depending if you're entering for business or pleasure. The issue is if what you're doing is actually effectively working there, you *should* have something else, whether TN or H, or ... If they interview you, and decide you shouldn't be doing what you're doing, they'll turn you back, i.e. effectively deny you the B-1/B-2 and so you can't enter. There's a lot of discretion involved.
Actually there is not a lot of discretion involved except in terms of how many questions they ask. If you are doing, or rather admit to doing, anything other than what I enumerated in my post above, you will be denied entry. If they suspect you are engaging in activities that require a formal visa, even if you don't answer in that respect, then you will be sent for a 'secondary', which is you are directed to park on the side and to go into the office to be grilled by CBP and then either let to go on your way or turned back.

That has happened to me twice now in 3 years.
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@eonibm , your answer makes sense to me from the perspective of working/processing goods, and it's at least superficially easy to ask "who did labour where to create/transform/add value to the goods". I think the interpretation gets a lot messier when the work is services, in particular advice. If I make a couple of visits to the U.S., plus a couple of phone calls from Canada to the U.S., plus some emails, whose end result in the end is expert advice to a company in the U.S. how to go about its business better, where was the actual "product" created and the "work" done?

As a pragmatic solution, and I think consistent with what you wrote, I make sure that:
1. When I am crossing the border, it is always to interview my client or to participate in a workshop for them, never to myself do any of the activities an employee of theirs would do. I am not entering to "do work"; I am a B-1 business visitor as part of my company in Canada doing its work.
2. I sign contracts and submit invoices in Canada and send to my client in the U.S., I never do that in the U.S. because that could mean I have a U.S. Nexus.
3. Likewise I always send my final deliverables from Canada.
4. I make sure that any business invoiced to U.S. companies are <<50% of my company's annual revenue...
5. ...and that I, as an individual and employee of my company, spend <<183 days in any 12 month period in the U.S. and stay on the good side of the U.S. substantial presence test

1. and 5. are to keep the INS happy and not be turned back; 2-5 are to keep the IRS happy and so that neither I nor my company owe US tax.
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houska wrote: @eonibm , your answer makes sense to me from the perspective of working/processing goods, and it's at least superficially easy to ask "who did labour where to create/transform/add value to the goods". I think the interpretation gets a lot messier when the work is services, in particular advice. If I make a couple of visits to the U.S., plus a couple of phone calls from Canada to the U.S., plus some emails, whose end result in the end is expert advice to a company in the U.S. how to go about its business better, where was the actual "product" created and the "work" done?

As a pragmatic solution, and I think consistent with what you wrote, I make sure that:
1. When I am crossing the border, it is always to interview my client or to participate in a workshop for them, never to myself do any of the activities an employee of theirs would do. I am not entering to "do work"; I am a B-1 business visitor as part of my company in Canada doing its work.
2. I sign contracts and submit invoices in Canada and send to my client in the U.S., I never do that in the U.S. because that could mean I have a U.S. Nexus.
3. Likewise I always send my final deliverables from Canada.
4. I make sure that any business invoiced to U.S. companies are <<50% of my company's annual revenue...
5. ...and that I, as an individual and employee of my company, spend <<183 days in any 12 month period in the U.S. and stay on the good side of the U.S. substantial presence test

1. and 5. are to keep the INS happy and not be turned back; 2-5 are to keep the IRS happy and so that neither I nor my company owe US tax.
Yes it gets messier when it is services, but actually:

1. You can cross the border to do activities an employee would do but it is restricted to specific activities. That is not the general test because if it were I could not supervise or count inventory myself in the US which I am specifically allowed to do. Do you actually do the activities that would require a visa but just say you aren't? I couldn't quite figure that out from what you said. It could obviously get you into trouble if that is the case.
2. You are allowed to sign a contract in the US. That does not mean you have US Nexus.
4. 90 % of my company's annual revenue is to US and it is immaterial.
5. That applies to anyone who does not have a visa, whether work or play. Also, the INS has no clue how long you have been in the US as data on individuals returning is not, as yet, shared with the US but at some point in the future is planned to be. Having said that I don't either regardless.

Paying US tax does not necessarily happen even if you have to file a US tax return because of the tax treaty.
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Jan 9, 2012
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houska wrote: Through my consulting company, I regularly provide services to some U.S.-based and multinational companies in support of their own work for other U.S. and non-U.S. companies. There are a couple of issues, and if it's a major part of what you do, you need professional advice to avoid pitfalls. My (limited, and don't depend on it) understanding is that some of the key points are the following.

1. There is nothing inherently wrong about a U.S. company purchasing services from a Canadian one, and no registrations are absolutely necessary. The biggest headache will however typically be that the U.S. company may not be used to dealing with this situation, and you will need to fight all sorts of bureaucratic battles (what do you mean you don't have a *&%&^ number from the IRS? What do you mean you're neither an LLC nor an S-corp? Please send us your company's [U.S. of course] banking direct deposit info! Which state is your company's employee health and safety insurance company based in?), which cost you time, delay payment, and can create insurmountable roadblocks though they shouldn't.

2. If the U.S. company has a Canadian subsidiary, it is therefore easier on everyone if you contract with -- and invoice -- their Canadian sub, and they take care of it on their end with internal accounting. That's even if you invoice them and they pay you in USD. You will (likely) need to charge them HST, but they can use it as an ITC and get it back.

3. From the U.S. taxation side, the important thing is you (=both you personally, and your Canadian company) don't have a "permanent establishment" or even "conduct business" in the U.S. Don't have your own office there; don't work regularly from their offices. Don't even sign contracts or submit invoices there; do that when you're in Canada. If your service includes specific paper/electronic deliverables, send the main/final deliverables from Canada, not from the U.S. If you do have a permanent establishment or conduct business there, that's when you would have to pay -- and even worse file -- U.S. taxes.

4. From the INS/Immigration side, the above matter, but also the Substantial Presence test applies. And look into whether you need a business visa, which may be very hard/expensive to get btw. Of course be truthful, but do your utmost so that your trips to the U.S. are infrequent, short, incidental, and legitimately describable that You, as an employee being paid by YourCanadianCorp, is attending a meeting with USCorp. Not that you are regularly travelling to the US, or present for significant amounts of time, to provide services to USCorp or otherwise conduct business there.

As I said, there are various complexities, and in fact various aspects that are unclear and/or subject to interpretation. In particular, there seem to be situations where a literal interpretation of the rules would have you jumping through hoops (that would ultimately probably lead to a positive result for you) that practitioners suggest you just don't jump through, though that of course carries some risk. That's part of the reason I suggest to consult a professional if important enough. I did; and determined my situation has enough specific to it to not warrant dealing with some of the issues more deeply than yours might.
Can you explain how you can get back HST/GST? What is ITC?
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Feb 25, 2007
1323 posts
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houska wrote: Through my consulting company, I regularly provide services to some U.S.-based and multinational companies in support of their own work for other U.S. and non-U.S. companies. There are a couple of issues, and if it's a major part of what you do, you need professional advice to avoid pitfalls. My (limited, and don't depend on it) understanding is that some of the key points are the following.

[...]

2. If the U.S. company has a Canadian subsidiary, it is therefore easier on everyone if you contract with -- and invoice -- their Canadian sub, and they take care of it on their end with internal accounting. That's even if you invoice them and they pay you in USD. You will (likely) need to charge them HST, but they can use it as an ITC and get it back.
skipper1979 wrote: Can you explain how you can get back HST/GST? What is ITC?
I/my company doesn't get back the HST, but the company contracting for my services does.

HouskaCo provides services to IntlCo to the tune of $10,000 (figuratively speaking).
IntlCo owns CanSub. HouskaCo invoices CanSub for $10,000 + $1,300 HST.
Meanwhile CanSub does business for IntlCo in Canada, as a result of which it collects and remits HST of $gazillions to the Canadian tax authorities.
It takes the $1,300 HST it paid HouskaCo and subtracts it as an input tax credit (ITC) from the $gazillions of HST it is remitting.
IntlCo's accountants take care of the internal invoicing between IntlCo and CanSub, but importantly for my clients, the $1,300 HST is not a cost to them since it is taken off the HST remittance CanSub is making, and so is not charged back to the budget of whoever in IntlCo hired me. CanSub still pays its $gazillions of HST, only $1300 of that is paid indirectly through HouskaCo and its HST remittance.

Now, there is perhaps a question there for IntlCo in that the input tax credit they are claiming is -- I believe -- intended for HST paid on goods and services used to generate revenue in Canada, revenue on which HST is charged by CanSub to its Canadian customers. One could debate to what extent exactly the services I provided to IntlCo are directly related to this part of their overall business. It is possible that a fraction of the HST they paid to me should not be offset as an input tax credit in Canada, but rather as a credit for foreign tax paid against their respective national taxes owing by IntlCo or its other subsidiaries. I leave this up to IntlCo, its accountants, and auditors, but I know for a fact for several IntlCos I work with are not worried about this and just go the Canadian ITC route. Mind you, the services I provide are of a pretty general, corporate-center level nature, and the HST I charge CanSub is a drop in the bucket versus the total HST they collect and remit. It might be trickier if I were providing value-add to specific products or services completely unrelated to any business they do through CanSub in Canada, for instance.

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