How do I get profits from my overseas company back to Canada?
The money can come home as a dividend, as interest, as a fee for services, or as a repayment of capital, and those four are taxed differently at both ends. The choice is constrained, because the character has to match the substance of what the entities actually did: a fee needs a service behind it and interest needs a loan. On the Canadian side, the foreign affiliate surplus rules decide how much of a dividend arrives without further tax. On the other side, the treaty sets the withholding on the way out. Settle the character first, then the route, then the timing.
Is a dividend or a loan repayment better for taking money out?
They are not alternatives you can pick between at will, because each depends on something that already exists. A repayment of capital only goes as far as capital that was genuinely contributed. A loan repayment only goes as far as a loan that was genuinely made and recorded. A dividend has no such ceiling, but it is the route the surplus rules and the treaty withholding both bear on. In practice the work is to establish what is available under each heading first, and only then to choose the order in which those headings are used.
Will I pay withholding tax when the money leaves the other country?
Usually something is withheld, and the treaty between the two countries is what sets the rate for each type of payment, since dividends, interest and service fees are not treated alike. Two points decide the outcome. The character of the payment must match the substance of the arrangement, because a reduced rate is claimed for a specific kind of income. And the entity receiving it must qualify for the treaty in its own right. Both have to be in place at the time of payment, because withholding is deducted when the money moves rather than settled afterwards.
Can I charge a management fee instead of paying a dividend?
Only if management services were actually provided and can be shown. A service fee is deductible to the payer and taxable to the recipient, which is why it is attractive and why it is examined closely. The test is substance: which people did what work, for which entity, and on what basis the amount was set. Where the services exist and the pricing is documented, the fee is a legitimate route home. Where they do not, the payment is recharacterised, so you end up with the dividend treatment anyway, plus the withholding difference and the argument.
Should I bring all the profits home in one year?
Sequencing across years usually beats a single distribution. Taking everything at once puts the whole amount into one period at both ends, stacks the withholding, and leaves no room to use the surplus balances in the order that suits them. Spread across periods, the character of each tranche can be matched to what is available at the time, and the credit for foreign tax has somewhere to go. The right sequence depends on what has accumulated in each entity and how it is characterised, so that schedule is the first piece of work rather than the last.
Does the treaty reduce withholding on a dividend paid to Canada?
A treaty commonly reduces the domestic withholding rate on dividends, and the reduction is claimed for that specific kind of payment. Three things have to hold. The payment must genuinely be a dividend rather than something recharacterised later. The recipient must qualify for the treaty benefits in its own right. And the claim has to be in place when the payment is made. Separately, the Canadian surplus rules decide how much of the dividend, once received, is taxed here. The withholding rate and the domestic treatment are two different questions with two different answers.
Does a remote employee create a permanent establishment?
It can. One employee working from home in another country may be enough where the arrangement gives the company a fixed place at its disposal, or where that person habitually concludes contracts. Seniority and function matter more than headcount: a salesperson closing deals is a far greater risk than a developer. The exposure is corporate tax and payroll registration in that country, which is why it is worth testing before the hire rather than after. See PE risk review.
Why should a Canadian rarely own a US LLC?
Because the two systems classify it differently. The United States generally treats a single-member LLC as transparent while Canada treats it as a corporation, so the income is taxed in different hands in each country and the foreign tax credit does not line up. The result is tax paid twice with no relief to claim. Other structures reach the same commercial outcome without the mismatch. See why a Canadian should rarely own an LLC.
