Canadians with US/Euro companies for CC Processing - How do taxes work?
 

From what i can gather you're forced to pay double taxes.

1) Taxes to the country where the company resides
2) Taxes when you bring the money into Canada


Am i wrong here?

Yep, hence the reason a lot of people came up with other solutions.

UK gov. DT(double taxation) link

http://www.inlandrevenue.gov.uk/cnr/app_dtt.htm

Any decent accountant can set this up properly so that you don't pay taxes twice. At least not on the same income.

If you are coming out Saturday, we can talk.

I have contacts in the UK, and I can easily set up and manage a billing company. If there is enough interest in Canada, I would be willing to set up a billing processing agency.

notjoe, could you contact me via ICQ when you get a chance? 161375873

Get a US accountant. I have one in Plattsburgh ($ 75.00 a month, takes care of filing all the shit paperwork).

You pay taxe once if you do it right. You can also charge your expenses ( servers, models, equipment etc...) to lower your net income.

And on members, don't forget that Canadian GST will knock at your door to collect 15.16% of ALL your income from members....

I may be wrong, though I dought I am. Being Canadian(quebec) and operating a non resident corperation in the UK or USA there is NO GST & QST to collect.

Even if the company was operating out of Quebec, you would have to charge GST and QST to your Canadian members ONLY.

If your $75/month accountant is making you pay GST and QST to non Canadian sales, I suggest you look into. You could of paid a shit load of cash for nothing.

Surprise is coming:

If you operate as an individual or as a canadian corp. the gov will want to tax all of your members, even if they are in Portugal. They take the approach that he could have been in Canada at that time, so taxable.

If you feel like reading:

St/HST and Electronic commerce , July 2002

http://www.ccra-adrc.gc.ca/E/pub/gm/b-090/b-090-e.pdf


Better, get your accountant to give you an opinion: you will see.
This document is a revised one from July 2001, so nothing new.

BTW, my US accountant takes care of my US corp, operating a US site located on a US server, charging in US dollars. The only thing I don't do is wave the flag....

I have a canadian accountant for my local sell-thru operations.



:2 cents:

Very interesting read indeed. Hmmm, let me take a better look.

Well, I read that link. Here is what it sais:

The GST/HST applies at a rate of 15%(that number is outdated) to taxable supplies of intangible property
and services made in Canada, including such supplies made by electronic means(web). The legislation includes
place of supply rules to determine whether a supply is made in Canada...bla bla bla

Go to page 16
http://www.ccra-adrc.gc.ca/E/pub/gm/b-090/b-090-e.pdf

Generally a supply or service made outside of Canada is not subject to GST/HST.

Bottom line, from what I know and I was thought, a Canadian company can charge GST/QST (if applicable) to Canadian consumors only. Therefore if one owns a UK or USA corperation there is no Canadian sales tax(NOT income tax) to worry about.

I'm not sure exactly how Canada works but I see absolutely no reason you should pay double tax. I think this would work.........

You have a corporation in country X. Your corp only pays taxes on net income. Well, if you take a check to yourself from the corp for $x.xx that is a write of to the corp. So if the company paid you $5,000 you would pay personal tax where you live on $5000. You'd write the $5000 off as an expense so the corp wouldn't pay taxes on it.

I really don't see why this wouldn't work, a corporation is a seperate entity taxwise.

That makes perfect sense, hell Its a great plan :thumbsup

The only problem I see with that is, If you make yourself small checks here and there, its cool. You wont pay much taxes on it. However, a smallish paysite can make a shit load of cash(im sure you already know that), once you start making check to yourself of 100K, 200K 300K.... a year, your gonna be paying personal income tax out the wazzoo! But then again, its taxes and everyone has to pay taxes. Your fucked if you do, fucked if you dont.

canadian incorporated (LLC) in the US for cc processing needs to pay taxes in the US?

Yes, just got my " package" 1120 .

If the server is located in Canada, then the sale occured in Canada and is subject to GST.

If the web server is located outside Canada, it is not so clear.

To be absolutely safe, you should incorporate in the country where the server is located, and book the sales in that corp.

It *may* be sufficient to establish a business presence in the country where the server is located. Problem is, whether you have a business presence is open to arguement.

Having a mailing address *might* be enough. Being able to show that you rent space, and incur costs associated with it, should do the trick. Have a "custodian of records" in the country of the server, pay rent, and get a rebate when you holiday there.

Big corps do shit like this all the time.

whats the % they ask?

Be careful if you are a Canadian and try to set up a corporation in some other country.

Revenue Canada (CCRA) doesn't want people to be able to just avoid income taxes by setting up a corp in some other country.... so they have a rule to determine;
"where control and/or ownership of the company resides"

I.E. if you are the owner of a U.S. corporation and you are a Canadian resident for tax purposes, you could be in doo-doo if you don't pay Canadian tax on that corporation's income.

Also, re: the HST/GST issue;

If you have a paysite and you have a system in place that can tell where your subscribers are from, then you will not have to pay GST/HSt on 100% of your income. You will determine the amount of subscriber revenue from Canadian subscribers and pay HST on that amount.

Nope, totally wrong.

Control is an issue for corp to corp transfers of funds, but a corp is a secure way of controlling where income is taxable.

bzzzzt..... try again. Where did you get your information?

This is exactly why you need to consult a lawyer & accountant. If they fuck up, you can at least defend yourself on the fact that you did what was required by them.

:2 cents:

http://www.carrco.com/international.htm

... talks about the issue of control and the fact that a Canadian resident cannot have control over the foreign corp.

...you have to jump thru hoops of creating foreign trusts and giving up legal control of your assets... tricky stuff!!!

And even then Revenue Canada, if they look at it closely, will probably look thru the " legal " control to see who has control " in fact"

Basically, if you are not very rich, you will never be because you will be tax raped....

The Reichman got away with it because of their buddies in Ottawa....

There are several issues that need to be considered when structuring your business and it is best to seek legal/tax advice from a professional that has experience dealing in these issues.

One example that isn't addressed in these threads is the fact that if you are the Canadian owner of a US Corp. and you declare your transactions/revenues through the US Corp. then you most likely are subject to 22% withholding taxes by the IRS. You will get most of this money back at tax time, but why on earth would you want 22% of your revenue tied up with the IRS until the year end? There are simple methods to setup your US Corp. in order to avoid this and several other relevant issues.

This is just an example, but my point is that it is critical that you consult legal/tax professionals that have direct experience dealing with not only the US/Canada issue, but also Internet-based business issues in general.

Stay away from your buddies too! If you have a friend who is a lawyer/accountant, the best and most sound advice they can give you is to refer you to someone who is not only arms length, but also experienced in the above issues.

Its nice to finally see some threads on this board that are actually relevant. I hope to see more discussion on these sorts of issues. My two cents ...

DEFINITELY seek professionals to help you....

and contrary to what somebody mentioned above.... it will not be a defence in Revenue Canada's eyes to say that you just followed your accountant's advice... YOU are responsible .... so get GOOD professionals to help you... a national firm.... not some JoeBlow who hangs his shingle outside his door and thinks he knows everything.