What are the tax forms that a resident of the United States of America (U.S.) may need to file in the U.S. if they are doing business in Canada and what are these forms for?
Although there is a tax treaty between Canada and the U.S., there are information returns required on both sides of the border to inform the respective governments of your dealings in the neighbouring country. Please see below for a discussion of two of these information returns and why you may be required to file them.
Form 8621 Information Return by a Shareholder of a Passive Foreign Investment Company
If you are a resident of the U.S. and are also a shareholder of a Canadian corporation in which more than 75% of the income is passive income or more than 50% of the assets held generate passive income, (for more information on passive income see Domestic FAQ #16) you are required to file a Form 8621 to inform the IRS of your foreign holdings and report details of these holdings.
Form 3520-A Annual Information Return of a Foreign Trust With a U.S. Owner
If you are a resident of the U.S. and have a Canadian pension or are a trustee or beneficiary of a Canadian Trust, you may be required to file a Form 3520-A to inform the IRS of your foreign holdings and report the Trust’s operations and activities each year. A Canadian Registered Retirement Savings Plan or a Canadian Registered Retirement Income Fund do not require you to file a Form 3520-A; however a Canadian Registered Education Savings Plan does require you to file a Form 3520-A. Look for our next International FAQ on new U.S. tax forms that may also be applicable if you are doing business in Canada.
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Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. EPR Maple Ridge Langley, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.