Should we open a US subsidiary or just sell into the States?
It depends on whether your US activity will create a taxable presence there, and how soon. Selling in without an entity works only while there is no taxable presence, so the first piece of work is to describe honestly what the US operation will look like in its opening years: who will be there, how often, what they will be allowed to agree, and whether stock will sit in the country. If that description contains people, premises or a settled pattern of activity, the question of whether to form an entity has already been answered for you, and the real decision is which form it takes. If it does not, forming a US company early buys protection you may want for other reasons, at the cost of annual filings you do not yet need.
Does a Canadian company pay US tax if it has no US office?
Not automatically, but an office is not the only trigger. Selling into the US without an entity works only while there is no taxable presence, and presence can be created by people acting for you, by where contracts are actually concluded, and by the pattern of what you do in the country rather than by a lease. A short visit is not the same as a person based there, and a person based there is not the same as a person who can commit you. The useful exercise is to write down what your people do on US soil, how often, and what they are permitted to agree, then test that description rather than relying on the absence of premises.
What is the tax difference between a US branch and a US subsidiary?
A branch is the Canadian company operating in the US, so the Canadian company itself files there and can face branch-level charges on what it earns and sends home. A subsidiary is a separate US taxpayer: the Canadian parent is insulated, US results do not sit directly on the Canadian return, and money coming home is a payment between two companies, which brings withholding into the picture. The trade is the same one in both directions. The branch is cheaper to run and less protective; the subsidiary is more protective and more administratively expensive. Which is better depends on whether you expect early losses, and on how soon you want cash back in Canada.
Do we owe state tax even if we owe no federal tax?
Yes, and that combination is common. State obligations follow their own rules regardless of the federal position, and a state can assert registration, filing or tax where the federal analysis finds no taxable presence. Each state sets its own tests, so the answer is per state rather than for the US as a whole. The practical consequence is that the state review has to be run separately, state by state, against where your people go, where your stock sits and where your customers are. Companies that treat the federal conclusion as the whole answer usually discover the state side later, when a registration has been outstanding for some time.
How are profits brought back to Canada from a US subsidiary taxed?
A subsidiary ring-fences the US business, and the price of that is withholding on profits coming home. How much is withheld, and on what, depends on the form the payment takes. A dividend, interest on a loan from the parent, and a fee for something the Canadian company genuinely supplies are not treated alike. That is why the funding decision and the repatriation decision are really one decision, taken at the start. If the US company is capitalised entirely with share capital, the only route home is a distribution. If part of it is debt, or if there are real intercompany services, other routes exist, provided the arrangements are documented before they are used.
Can we change from a branch to a subsidiary later?
You can, but it is not a costless switch. Converting means moving the US activity into a new entity, which raises its own questions about what is being transferred and at what value, and it undoes nothing that has already happened. The choice made in the first month sets the US tax profile for years, and it is made before any revenue exists to justify it, which is exactly why it deserves more attention than it usually gets. If you genuinely cannot tell which route fits, the useful work is narrowing down what the US activity will be, not deferring the structure in the hope that it stays reversible.
Is "fund transfer pricing" the same thing as transfer pricing?
No — and if you came here to calculate FTP, this is not it. Fund transfer pricing is a bank's internal allocation of funding costs and benefits between its own business units, a treasury and asset-liability management discipline used to measure branch or product profitability. Tax transfer pricing is about prices between legally separate related parties across borders, and about which country taxes the resulting profit. The words overlap; the fields do not. See our transfer pricing work.
Is moving money between my own accounts in two countries taxable?
Moving your own capital between your own accounts is not itself income, so the transfer is not what creates tax. What can create tax or reporting is the income the money earned before it moved, a foreign-exchange gain on certain holdings, and the reporting obligations the balances themselves trigger — foreign account and asset reports keyed to balances rather than income. Remittances out of some countries also need certification before the bank will send them. See foreign account reporting.
