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Learning, Sharing, and Teaching => Taxes => Topic started by: deathandtaxes on December 23, 2018, 12:14:37 AM

Title: Corporate structure
Post by: deathandtaxes on December 23, 2018, 12:14:37 AM

Current scenario:

•$150,000 CAD yr taxable sole-prop income (Canadian sourced)
•US/CA citizen
•Canadian resident

Wishful scenario:

•Canadian Corp (SBD) tax rate (15%)
•$47,630 Non-Eligible Dividend Salary (6.87%)


Not sure if Canadian Corp is viable because CFC and Subpart F / GILTI tax. With "current scenario" whats the most economical tax strategy? Is a Canadian Corp still advantageous tax wise?

This is a scenario im asking for advice on potential future income. All I want is to create dialogue on this scenario.

It appears I can deduct Canadian Corp tax (15%) from US subpart F tax liability which would be ordinary dividends. This "works" for lower incomes but gets bad as income increases. Between ~$38,000 - $500,000 USD tax brackets ill be paying 7% - 20% in additional taxes after deducing the 15% Canadian corp FTC.

Subpart F "High Tax Exemption" is 18.9%. Decline the Small Business Deduction for Federal corp taxes the corps tax rate would be 18.5%. If I could increase that >18.9% this could be one solution.

Title: Re: Corporate structure
Post by: SeattleCPA on December 27, 2018, 08:09:42 PM

The international tax stuff is really complicated. Most CPAs don't deal in this area.

Here's a blog post from one of the CPAs in our firm that explains some of the Section 951A (aka "GILTI") tax planning issues:

Section 951A GILTI Tax Avoidance: Ten Tricks
 (https://evergreensmallbusiness.com/section-951a-gilti-tax-avoidance-ten-tricks/)

FWIW, owning a CFC seems like a terrible situation to me...