Is my Canadian corporation a controlled foreign corporation if I hold a US passport?
Possibly, and your passport alone does not decide it. The test looks at how much of the company is held by US shareholders taken together, so the answer depends on who else is on the share register and what their status is. A single US citizen holding the whole company is the clear case. A US citizen holding part of a company alongside Canadian family members may or may not produce the same result, and the same shareholding can move in and out of the status as other shareholders come and go. What the passport does decide is that the question has to be asked at all, and asked every year rather than once at incorporation.
Do my spouse's shares count towards the control test?
They can. Shares held by certain related persons and entities are attributed for the purposes of the test, so ownership is counted on a wider basis than the share register shows on its face. Family holdings, trusts, partnerships and other companies in the same group are all capable of being pulled in. This is where people reach the wrong answer honestly. They count their own shares, see a minority, and stop. The work is to map the whole register, identify the status of every holder and of every entity above them, apply the attribution rules to what that produces, then repeat it for any year in which the register changed.
Can a company still be caught if I own only a minority?
Yes. The status is a property of the company, not of your particular holding. Control is measured across all the US shareholders together, so several unconnected US persons each holding a modest stake can produce the status when none of them could alone. The practical consequence is that you can be affected by a co-shareholder's citizenship or green card without ever being told about it, and by a change in that status part-way through a year. Where a company has shareholders in more than one country, establishing the position means asking every holder directly rather than assuming from names and addresses.
Does this status mean I am taxed before taking a dividend?
On some of the company's income, yes. That is the purpose of the regime. Defined categories of the company's earnings are attributed to its US shareholders for the year the company earns them, whether or not anything is distributed, and a later regime reaches active earnings above a routine return on the company's tangible assets. What is not caught by either stays untaxed in the United States until it is paid out. So the annual question is not whether the company made a profit but what kind of income produced it, which is a classification exercise on the company's own trial balance rather than anything visible on a Canadian return.
Does my company being a CFC change my Canadian tax?
Not directly. Canada taxes the company on its profits and taxes you when it distributes them. The difficulty is timing. Where the United States attributes some of those profits to you before Canada taxes the distribution, the two charges fall in different years, and relief for tax paid in one country is generally available only against the other country's tax on the same income in the same period. Credits can therefore sit in a year where they are of no use. It is worth looking at the remuneration pattern with both systems in view, rather than settling the Canadian side and then reporting whatever the other one does with it.
What if my company has been a CFC for years and nobody knew?
The status is a fact about the shareholding rather than something claimed or elected, so it applied to the past years too, and the position is that those years were reported incorrectly. What matters next is the character of the omission. The correction routes differ depending on whether the failure was inadvertent, how many years are involved, and whether tax is actually owing once relief for tax paid elsewhere is taken into account. In a fair number of files less is owing than the shareholder fears, because the company's income turns out to be mostly of a kind the regime does not reach. Establish that first, then choose the route.
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.
Do I get credit for all of the foreign tax I paid?
Only up to your own country's tax on that same income, and only for tax you were legally obliged to pay. Two consequences follow. Living somewhere that taxes you more heavily than your residence country does leaves an excess that becomes a carryover rather than a refund. And withholding suffered above the treaty rate is not creditable — the route back to that money is a refund claim in the country that took it. See claiming the credit.
