• February 2019
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I would like to incorporate my tech company in Delaware, but operate it out of Canada. My concern is would the company not be considered a residency corporation of Canada, and therefore all Canadian tax law would be applicable?

Your company would still be a resident of Canada. Canadian law looks to where the business operates from to determine its residency, not necessarily its place of incorporation. So, if you are operating your company out of Canada, it should still be considered a resident of Canada and you will be subject to Canadian tax rules.

The taxes that you pay, however, will also depend on where your profit is coming from. If your profit is coming from Canada, you will be subject to Canadian tax laws on that profit. Likewise, if your profits are coming from the US, you will be subject to the tax laws of the individual state from which the profit came. There are also different rules that apply to a company that sells products versus a company that sells only services.

The US-Canada Tax Treaty attempts to solve this situation by providing basically that a resident of both Canada and USA will not be subject to an effective double tax. The double tax would be a result of being subject to the tax laws of both Canada and USA at the same time. I assume this is what you mean by all Canadian tax law being applicable. There are conditions that need to be met, though, before this will apply to a company.

So, the inquiry involves a closer look at your company and the specific tax codes involved. This stuff can be pretty tricky. For that reason, it would be best done with an attorney that has experience complying with these laws and rules. If you still need more help, check out LawTrades for a free consultation with an experienced attorney.

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