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February 10, 2018

Tax Cuts and Jobs Act (TCJA) – Tax Implications

A significant tax reform bill was signed into law in the US on December 22, 2017 – referred to as the Tax Cuts and Jobs Act.  This new Act has significant implications to anyone doing business in the US and to anyone who is subject to US taxes (referred to as “a US person”) but does not live in the US (i.e. a US Citizen who is resident in Canada). 

Transition Tax

U.S. persons who own at least 10% voting stock in a foreign corporation may be subject to this “transition tax”.  A US citizen/Canadian resident with a Canadian company (except passive foreign investment companies) will be subject to this tax based on the Earnings and Profits balance of the Canadian company. The tax rate will range from 15.5% to 8% based on the greater of the value of the assets held at November 2, 2017 and December 31, 2017.

Tax on Global Intangible Low-Rate Income (“GILTI”)

If a US person owns shares of a Canadian resident company and that Canadian company does not have a significant amount of tangible assets (equipment etc.) the US person could be subject to the GILTI tax on the Canadian company’s earnings.  This is an issue for US Persons who are resident in Canada and who owns shares in a company that provides services (i.e. doctors or dentist etc.).

These are just a few of the significant tax implications of this new Act on US persons who are resident in Canada. 

The above content is believed to be accurate as of the date of posting. Canadian and US Tax laws are complex and are subject to frequent changes. Professional tax advice should be sought before implementing any tax planning. Manning Elliott LLP cannot accept any liability for the tax consequences that may result from acting based on the information contained therein.