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Cross border tax
Cross-Border Tax Services for Canadian and Foreign Businesses
Lepore & Company assists U.S. and foreign companies entering Canada, Canadian companies expanding abroad, and businesses hiring employees or contractors across borders, along with the lawyers and accountants who advise them. Cross-border operations frequently touch several areas of Canadian tax law at once — corporate tax filings, treaty relief, payroll withholding, non-resident withholding, GST/HST, transfer pricing, and provincial requirements — and the right approach depends on the specific structure and transaction involved. This page covers business cross-border tax matters. Individuals relocating personally, rather than for business reasons, should ask us separately about personal emigration and immigration tax planning.
Who We Help
U.S. and foreign companies entering Canada
Assessing entity structure, permanent establishment exposure, and initial filing obligations before or shortly after starting Canadian activity.
Canadian businesses expanding abroad
Structuring foreign operations and coordinating Canadian reporting on foreign activity.
Businesses hiring employees or contractors across borders
Payroll withholding, Regulation 102, and Regulation 105 considerations.
Lawyers, accountants, and corporate advisors
Needing Canadian tax input on a cross-border file for their own client.
Cross-Border Business Services
Canadian Entity and Registration Review
Before operating in Canada, a foreign company should review whether to operate through a Canadian subsidiary, a branch, or another structure. Each carries different tax, liability, and compliance consequences, and the right choice depends on the nature and scale of the planned activity — we do not recommend one structure universally.
Permanent Establishment and Treaty Analysis
A foreign company carrying on business in Canada may have Canadian corporate tax and filing obligations under domestic law. Where an applicable tax treaty applies, Canada’s ability to tax the company’s business profits will generally depend on whether its Canadian activities create a permanent establishment. The analysis is fact-specific and depends on the treaty, the company’s physical presence, personnel, contracting activity and operating arrangements.
Canadian Corporate Tax Filings
A non-resident corporation carrying on business in Canada generally must file a Canadian T2 corporate income tax return, even where it claims that its business profits are exempt from Canadian tax under an applicable treaty. The treaty position and supporting information are reported through the T2 return and relevant schedules, including Schedule 91 where applicable. Canadian subsidiaries are separate Canadian taxpayers and file their own T2 returns.
Payroll and Regulation 102
Employers with employees performing services in Canada generally have Canadian payroll withholding obligations. Depending on the employer, employee, assignment, and applicable treaty, relief may be sought through an employee-specific Regulation 102 waiver or the qualifying non-resident employer certification regime. We assess the available route and filing requirements without predicting CRA approval or processing times.
Regulation 105 Withholding and Waivers
Payments to non-residents for services performed in Canada are generally subject to 15% withholding under Regulation 105, calculated on the gross payment for services performed in Canada and remitted by the Canadian payer. A waiver or reduced-withholding application may be available depending on the payee’s expected Canadian tax liability and treaty position.
GST/HST Registration and Compliance
Whether a foreign company must register for GST/HST turns on a separate “carrying on business in Canada” analysis from the income-tax permanent-establishment test — registration is not automatic for every foreign company with Canadian activity. We review the specific facts against the carrying-on-business, taxable-supply, small-supplier, and voluntary-registration rules to determine whether registration is required.
Transfer Pricing and T106 Reporting
Cross-border related-party transactions — management fees, intercompany loans, royalties, and services — must reflect arm’s-length pricing and may require Form T106 reporting. We assist with documentation and reporting for Canadian corporations with non-arm’s-length cross-border dealings.
Provincial and Operational Compliance
Provincial registration, payroll, and compliance requirements vary by jurisdiction and by the nature of the activity. We help identify which provincial obligations apply alongside federal requirements.
Common Situations
- A U.S. company is sending employees to Canada.
- A foreign company signed a Canadian customer contract.
- A Canadian business is establishing a foreign subsidiary.
- A non-resident company is providing services in Canada.
- Payroll or Regulation 105 withholding has already started.
- CRA requested information about related-party transactions.
- The company is unsure whether GST/HST registration is required.
How the Rules Interact
These areas overlap in practice. A single Canadian engagement can raise a treaty question, a corporate filing obligation, payroll withholding, Regulation 105 withholding, a GST/HST registration question, and a transfer-pricing documentation requirement at the same time — and the position taken in one area often affects the analysis in another. For example, the permanent-establishment and treaty analysis affects the corporate tax position and may also be relevant to the Regulation 102 analysis for accompanying employees. Where CRA has already raised questions about a cross-border filing or related-party transaction, that is a dispute matter best handled through our CRA Audit and Appeals service (linked below) rather than as a standalone cross-border issue.
Related International Tax Services
This page focuses on the operational and transactional side of doing business across the Canada–U.S. border and internationally. For the full picture of our Canadian international-tax practice — including foreign affiliates, FAPI, foreign tax credits, and non-resident personal tax — see our Canadian International Tax Services.
FAQ
Does a U.S. company need to file a Canadian corporate tax return?
A non-resident corporation carrying on business in Canada generally must file a Canadian T2 corporate income tax return. Where the corporation claims that its business profits are exempt under the Canada–U.S. treaty, it reports that treaty position through the T2 return and the applicable schedules. Whether Canadian tax is payable depends on the facts and the treaty analysis.
What creates a permanent establishment in Canada?
Generally, a fixed place of business in Canada, or an agent who habitually concludes contracts on the company’s behalf. The precise definition depends on the applicable tax treaty and must be assessed against the specific facts.
What is Regulation 105 withholding?
A 15% withholding requirement on payments to non-residents for services performed in Canada, which the Canadian payer must remit to CRA. Reduced withholding or a waiver may be available depending on the recipient’s circumstances and treaty position.
When is a Regulation 102 waiver relevant?
Regulation 102 relief is not automatic and is not the only route available. Depending on the employer, employee, assignment, and applicable treaty, relief from Canadian payroll withholding may be sought through an employee-specific Regulation 102 waiver or, where its requirements are met, the qualifying non-resident employer certification regime. Either route requires an application to CRA in advance; we do not predict approval or processing times.
Does a foreign company need to register for GST/HST?
Not automatically — GST/HST registration turns on a “carrying on business in Canada” analysis that is separate from the permanent-establishment test used for income tax. Whether registration is required depends on the specific activity, taxable supplies made, and rules such as the small-supplier threshold and voluntary registration.
What is Form T106?
An information return reporting non-arm’s-length transactions between a Canadian corporation (or certain other Canadian entities) and non-resident related parties, required where reportable transactions exceed prescribed thresholds.
Planning to start operations in Canada, or already dealing with a payroll, withholding, or filing question on a cross-border transaction? Contact Lepore & Company before the activity begins where possible, or as soon as a filing or withholding issue arises.
Contact us to discuss your cross-border tax situationThis page provides general information about Canadian cross-border tax rules and does not constitute tax advice. Rules vary by treaty, transaction, and jurisdiction, and outcomes depend on the specific facts involved. Contact Lepore & Company for advice specific to your situation.