Can I move my company somewhere with a lower rate to cut tax?
You can move a company. Whether the move achieves anything depends on whether the people, decisions and risk move with it. Planning that starts from a rate comparison ends badly, because the rate applies to profits the other country has to accept are earned there. The framework that matters is residence, source, treaty entitlement and substance, applied to a real business plan. If the plan is real, with customers, staff and decisions taken in the new place, the analysis can support the outcome. If the entity is a name on a register, the analysis will not hold, and unwinding it later costs more than the arrangement was ever worth.
What is the main purpose test and does it affect small companies?
Anti-abuse tests now ask whether obtaining the benefit was a main purpose of an arrangement. That question is asked of the arrangement, not of the size of the business, so a small group is not outside it. In practice it changes what the file has to contain, because the commercial rationale becomes part of the tax analysis rather than background to it. The useful discipline is to be able to say, in ordinary words and at the time, why the structure is shaped as it is for reasons other than the tax result. If that sentence cannot be written honestly, the structure needs rethinking.
Do I need employees in a country to claim a treaty benefit?
Not always, but you need the activity the benefit assumes. Substance is the question behind most treaty challenges: where the decisions are taken, who takes them, who carries the risk, and what is actually done in the place claiming the entitlement. An entity with no people may still be entitled to something, but the further the facts sit from the ordinary picture, the more the file has to explain. Rather than asking how little is enough, describe what the entity genuinely does and then test whether the entitlement fits it.
Where is my company resident if I run it from another country?
Frequently where you are, rather than where it was incorporated. Residence for a company tends to follow the place where its real decisions are taken, and that is a question of fact about meetings, mandates and who actually decides. Founders who incorporate in one country and then run the business from home in another create exactly this problem, often without noticing, and the result can be a company resident in both places with a treaty tie-breaker deciding between them. If the management has moved, treat the residence question as live and settle it before the second country raises it.
Will putting a holding company in the middle reduce withholding?
Sometimes, and the reason it might is also the reason it gets examined. Interposing an entity to reach a better treaty position is the arrangement anti-abuse tests were written for, so the question asked is whether obtaining that benefit was a main purpose. A holding company that exists for a commercial reason, such as collecting an investment, holding a group together or meeting a funder's requirement, stands on different ground from one inserted at the point a distribution was due. Decide what the entity is for first, and check the treaty position second, not the other way round.
How do I document the commercial reason for my structure?
Write it down while it is true. Board papers, the business plan, a note of who decided what and where, correspondence with funders or customers that shows the commercial driver: all of it is ordinary business material, and it is worth far more than a memo prepared once the structure has been challenged. The test is whether an outsider reading the file years later can see why the structure was shaped this way without being told. Keeping that evidence is not a tax task, which is why it tends to be the thing that is missed.
Do Canada and the United States share tax information?
Yes, through more than one channel. The treaty has an exchange-of-information article that supports both routine and on-request exchange. Separately, an intergovernmental agreement has Canadian financial institutions identify US-reportable accounts and report them to the CRA, which passes them to the IRS, with the reverse flow for Canadian residents. Most other country pairs use the Common Reporting Standard for the same purpose. See FATCA reporting.
What is cross-border tax?
Cross-border tax is what applies when income, assets or people touch more than one tax system at once — someone living in one country and earning in another, a company selling or hiring abroad, a family holding property in a second country. The work is rarely one country's rules applied harder; it is reconciling two sets of rules and claiming the relief that stops the same income being taxed twice at full rates. See what we do.
