Do we file Form 1120-F if the treaty says we owe no US tax?
Usually yes, and the treaty position is the reason to file rather than a reason not to. The return is where a foreign corporation claims its position, so a conclusion reached in a memorandum and never filed is a conclusion nobody has been told about. There is a second reason that matters more. Filing on time preserves deductions and treaty positions even where the outcome is that no US tax is due, and a return filed late can lose the deductions altogether, which turns a nil position into tax on a gross figure. That asymmetry is the whole argument for filing.
What is a protective return and do we need one?
It is a return filed by a foreign corporation that believes it has no US tax liability, filed precisely so that the belief is on the record and the positions behind it are preserved. You need one whenever the answer to whether the company is taxable in the United States is arguable rather than obvious — a project site, people travelling in, an agent acting on the company's behalf, a subsidiary whose activities might be attributed to it. The cost of filing one is known in advance. The cost of being wrong without one is that deductions and treaty positions may no longer be available to you.
Does having a salesperson in the US create a filing obligation for us?
It can, and the answer turns on what the person actually does rather than on their job title or where their contract was signed. Someone who solicits and concludes business, or who habitually acts for the company in a way that binds it, points towards US business activity and a permanent establishment. Someone gathering information does not. This is a facts exercise: diaries, correspondence, authority to sign, where negotiations happen. Because the conclusion is arguable in most real cases, the sensible course is to document the facts as you go and file on the position they support, rather than settle it in hindsight.
All our US income was withheld on already — do we still file 1120-F?
It depends on whether the income is connected with a US trade or business, and on whether you want to claim anything. The return covers income effectively connected with a US trade or business and US-source income that was not fully withheld on, so income correctly withheld on at the right rate, unconnected with any US business, may need nothing further. Two things commonly change that answer: withholding taken at a higher rate than the treaty allows, which is reclaimed on a return, and US activity that the group had never recognised as a business at all.
Does a US warehouse or a US contractor make our company taxable?
Both are live questions rather than settled ones, and the analysis is about the function performed, not the label used. A storage facility used for delivery sits differently from one where orders are fulfilled and customers served. A contractor working for many principals sits differently from one working only for you, on your instructions, for years. What we do in practice is describe the arrangement as it actually operates, test it against the permanent establishment question, and then decide whether to file and on what basis. Where it is arguable, a protective return keeps the positions available.
Which company in our group files Form 1120-F?
The foreign corporation that has the US activity or the US income, in its own name. It is not the group's ultimate parent by virtue of being the parent, and it is not the US subsidiary, which files its own return as a US corporation. In groups where several foreign companies touch the United States the answer can be more than one of them, because the company that contracted, the company whose staff travelled and the company that received the income are often different. We map the flows and the people company by company, then file for each company the facts put in scope.
Do I need to report a foreign business I own?
Almost certainly, and on more than one form. Canada requires reporting of foreign affiliates on the T1134; the United States has a family of returns keyed to the entity type and your level of control, and several carry penalties that apply whether or not any tax is owed. These are information returns, so the obligation follows the ownership rather than the profit. See T1134.
What is a foreign trust for US tax purposes?
A trust that is not a domestic trust — broadly, one that fails the tests looking at whether a US court can exercise primary supervision and whether US persons control the substantial decisions. The classification decides everything downstream: whether the settlor is taxed on the income as owner, how distributions to US beneficiaries are taxed, and which annual information returns are due. Many ordinary foreign arrangements, including some pension and education savings vehicles, land inside the definition. See Form 3520-A.
