US Tax Guide for Business Owners Living in Canada

Canada is a popular destination for American business owners, drawn by its proximity to the US, stable economy, and business-friendly environment. Canada's worldwide income taxation and the US-Canada tax treaty create complex filing questions for business owners. FileAbroad helps American business owners in Canada navigate FEIE, FBAR, and the cross-border questions that complicate filing.

Key Tax Issues for Business Owners in Canada

• Canadian tax residency: If you establish significant residential ties (home, spouse, dependents in Canada) or spend more than 183 days there, you are a Canadian tax resident.
• Canadian corporation tax: Canadian companies pay corporation tax on profits (federal + provincial, up to ~26.5%). Dividends are taxed separately.
• US taxation of foreign corporations: If you own a Canadian company, you may have US reporting obligations (Form 5471) and potential GILTI/Subpart F income.
• RRSP/TFSA: RRSP contributions may be deductible on your US return (unique treaty benefit). TFSA is NOT tax-free in the US.
• Totalization agreement: US-Canada totalization agreement prevents double social security taxation.
• FEIE limitations: FEIE only applies to earned income, not dividends or corporate profits.

FEIE vs FTC for Business Owners in Canada

FTC is often more valuable than FEIE due to high Canadian tax rates (up to 53.53%). FEIE applies to earned income (salary from your company). FTC applies to Canadian tax paid on that income.

For corporate profits (dividends, GILTI), FEIE does not apply. FTC may be available for Canadian corporation tax paid.

FBAR & Reporting for Business Owners in Canada

Canadian business bank accounts (RBC, TD, Scotiabank, BMO, CIBC) are reportable on FBAR if you have a financial interest or signature authority. Form 5471 is required for US shareholders of foreign corporations.

RRSP and TFSA accounts are also reportable on FBAR.

Common Mistakes Business Owners Make in Canada

1. Not filing Form 5471 — Required for US shareholders of foreign corporations.
2. Not understanding GILTI — Global Intangible Low-Taxed Income may apply to your Canadian company.
3. Assuming Canadian corporation tax eliminates US tax — It doesn't. US tax still applies, with FTC as relief.
4. Not reporting Canadian business bank accounts, RRSPs, and TFSAs on FBAR — Business accounts are reportable.
5. Not understanding RRSP/TFSA US tax treatment — RRSP may be deductible; TFSA is not tax-free.

When to Get Professional Help

You should consider professional help if you own a foreign company, have foreign accounts exceeding $10,000, or have complex income situations. Business owners with foreign entities need specialized advice beyond individual tax preparation.

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FileAbroad explains U.S. federal tax and U.S. international information-reporting consequences of documented foreign facts. It does not provide foreign-country legal or tax representation, valuation opinions, banking or remittance advice, or advice on what a foreign authority will accept.

Scope statement reviewed 2026-08-30 · FileAbroad product/content owner