Industry News

Canadian MPs to raise impact of tax reforms in Washington

Tuesday, 15 May, 2018

A committee of Canadian MPs are due to speak with their US counterparts this week about the impact of US tax reform on thousands of Canadian residents.

Many Canadian corporation owners with US or dual citizenship are currently facing the consequences of the reform’s one-time, retroactive repatriation tax.

The measure was introduced into the Tax Cuts and Jobs Act with the aim of cracking down on large multinational corporations that have been investing billions of dollars in foreign subsidiaries – however it is having a significant impact on residents north of the border.

Canadians to whom this tax applies are facing having to pay thousands of dollars in US tax on retained earnings in their corporations as far back as 1986.

Such residents have to declare these earnings in their 2017 personal tax return, due to be filed by June 15, 2018. Those affected can choose to pay the tax over eight years – however payments will start this year.

If they elect to pay by taking money out of their corporation, they will also have to pay tax to the Canadian government on this amount.

Liberal MP Wayne Easter, co-chair of the Canada-United States Interparliamentary Group, said of the tax, “I think…there's a lot of collateral damage or unintended consequences. There will have to be more government-to-government discussions and we'll be able to tell members of Congress how problematic this is for Canadians or Americans who are in Canada who set up retirement plans with the best intentions based on the rules that were already in place.”

Meanwhile, O’Sullivan Estate Lawyers has given a detailed insight to how the US tax reform might more widely impact on pension, estate and succession planning for Canadian residents with US connections, including a discussion on what assets are considered part of a worldwide estate and are therefore taxable.

Sources

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