tax cards | 2018 - agn home · a nonresident for u.s. tax purposes unless he or she qualifies as a...

A summary of tax facts of countries in the North America region

Tax Cards | 2018

2 | Tax Card 2018 - AGN North America

“This publication has been prepared for the purpose of quick information dissemination. Its contents should not be used as a basis for advice or formulating decisions under any circumstances.”

AGN International - North America

Tax Cards | 2018 The AGN North America Tax Surveys of:

Index

United States of America 03

Canada 07


UNITED STATED OF AMERICA2018 TAX CARD (in US Dollars)

1.Basis of Taxation

The United States levies tax on its citizens and residents on their worldwide income. Non-resident aliens are taxed on their US-source income and income effectively connected with a US trade or business. As a general rule, a foreign citizen is treated as a nonresident for U.S. tax purposes unless he or she qualifies as a resident. A resident is an individual who is a lawful permanent resident of the U.S. (the “Green Card” test), or who meets the “substantial presence” test.A lawful permanent resident is an individual who has been officially granted the right to reside permanently in the United States. These individuals are often referred to as Green- Card holders. An individual who meets the substantial presence test is an individual who has been physically present in the United States for at least 31 days in the current calendar year and has at least 183 days of presence counting all the days of physical presence in the current year, one-third of the days in the first preceding year, and one-sixth of the days in the second preceding year.

2.Corporate Tax

Generally a corporation is treated as a domestic corporation if it is created or organized under the laws of the United States, any State, or the District of Columbia. No other criteria related to place of management will cause a corporation to be domestic. There are, however, specific statutory provisions that treat certain foreign corporations as domestic. US corporations are U.S. tax residents and are taxed on their worldwide income. The US corporate tax rate is 21%. In addition to the US federal tax rate of 21%, each state has the right to tax the corporation based on certain criteria (sales, property or payroll in the state).

3. Withholding tax rate (non-treaty)

Resident Non-resident Individual/Corporation

Dividends NA 30%

Interest NA 30%

Royalties/know-how NA 30%

Rents (for movable property) NA 30%

Management fees NA 30%

Technical fees NA 30%

Directors’ fees NA 30%

4.Residential individual tax rates

Capital gains tax rate is 15% or 20%, ordinary tax rates are based on a graduated rate system- 10%, 12%, 22%, 24%, 32%, 35% and 37%.


5.Non-residential individual tax rates

Fixed Determinable Annual Periodic income is subject to a flat 30% tax rate on a gross basis. If income is treated as effectively connected income then it is taxed on a graduated rate system similar to US residents.

6.Goods and Services tax

The US does not have a GST tax but instead imposes a state sales tax. Each state imposes their own sales tax and the rates range from 3% to 8%.

7.Estate duty

Estate and gift taxes are imposed by the federal government and certain states on the transfer of property from person to another, either at death (estate tax) or while the giver of the property is still alive (gift tax). The tax rates are based on a graduated rate system from 18% to 40%.

Estates are required to file a federal estate tax return if the value of the “gross” estate, minus certain deductions, ($11.18M million in 2018 for US Domiciles and $60,000 for Non-US Domiciles on US situs assets). The gross estate includes the value of all property in which the decedent had an interest at the time of his or her death -- including such items as real estate, stocks and bonds, mortgages, notes and cash, insurance on the decedent’s life, and jointly owned property. If spouses own property in joint tenancy, and one dies, one half of the value of the jointly held property is included in the gross estate of the deceased spouse.

8.Property tax

Each county within the state has the ability to impose a property tax. The rates vary depending upon each county.

9.Income tax filing deadlines

Types of Form Deadlines*

Form 1040 Residential individual April 15

Form 1040NR Non-residential individual June 15

Form 1120 Corporations April 15

Form 1065 Partnerships March 15


11.Double Tax Agreements

Certain payments by resident in USA on US source income to non-residents are subject to domestic withholding tax rates. The rates of taxes may be reduced under the terms of a double tax agreements with a treaty country as those listed below.

Country Dividends % Interest %* Royalties %

Australia 0/5/15 0/10 5

Austria 5/15 0 0/10

Bangladesh 10/15 5/10 10

Barbados 5/15 5 5

Belgium 0/5/15 0 0

Bulgaria 5/10 5 5

Canada 5/15 0 0/10

China 10 10 10

Cyprus 5/15 0/10 0

Czech Republic 5/15 0 0/10

Denmark 0/5/15 0 0

Egypt 5/15 15 15

Estonia 5/15 10 5/10

Finland 0/5/15 0 0

France 0/5/15 0 0

Germany 0/5/15 0 0

Hungary 5/15 0 0

Iceland 5/15 0 0/5

India 15/25 10/15 10/15

Indonesia 10/15 10 10

Ireland 5/15 0 0

Israel 12.5/25 10/17.5 10/15

Italy 5/15 0/10 0/5/8

Jamaica 10/15 12.5 10

Japan 0/5/10 0/10 0

Kazakhstan 5/15 10 10

Korea (ROK) 10/15 12 10/15

Latvia 5/15 10 5/10

Luxembourg 5/15 0 0

Malta 5/15 10 10

Mexico 0/5/10 0/4.9/10/15 10

Morocco 10/15 15 10

Netherlands 0/5/15 0 0

New Zealand 0/5/15 0/10 5

Norway 15 0/10 0

Philippines 20/25 10/15 15

Poland 5/15 0 10


11.Double Tax Agreements(cont.)


Portugal 5/15 10 0/10

Japan 10 10 10/15

Romania 5/10 0 0

Russia 5/15 0 0/10

Slovakia 5/15 0/5 5

South Africa 5/15 0 0

Spain 10/15 0/10 0/5/8/10

Sri Lanka 15 10 5/10

Sweden 0/5/15 0 0

Switzerland 0/5/15 0 0

Thailand 10/15 10/15 5/8/15

Tunisia 14/20 0/15 Royalties 10/15

Turkey 15/20 10/15 Royalties 5/10

Ukraine 5/15 0 Royalties 10

United Kingdom 0/5/15 0 Royalties 0

Venezuela 5/15 4.95/10 Royalties 5/10

*Where the rate of withholding under the DTA is greater than 10%, the 10% rate. applies.

Firm: Daszkal Bolton LLP Contact: Christopher J. Galuppo, CPA - [email protected]


CANADA 2018 TAX CARD (in Canadian Dollars)

1.Basis of Taxation

Canada imposes taxation based on residency. Residents are taxed on world-wide income. Non-residents are taxed on Canadian source income, subject to treaty exemptions. Personal tax returns are filed on a calendar year basis and due by April 30th of the following year. This deadline is extended to June 15th for self-employed individuals and their spouses. Individuals pay provincial tax based on the location of their primary residence on the last day of the calendar year. For example, if an individual moves from Alberta to Ontario at any during the year, the individual will pay Ontario provincial tax for the entire year and pay no Alberta tax. Combined federal and provincial personal tax rates are as low as 20% for low income taxpayers and as high as 55% for high income earners. The highest rates generally apply to income in excess of about 200,000, though this highest bracket varies somewhat from province to province.

Non-residents are taxed only on Canadian source income. Earned income, such as employment income or business income, necessitates the filing of a Canadian tax return. Tax on passive income, such as dividends, is generally satisfied by withholding tax at source. Non-resident recipients of certain types of Canadian income, such as rental or pension income, have the option to be taxed by withholding at source or elect to file a tax return to be taxed on a net income basis.

Canada has a wide network of tax treaties that reduce or eliminate Canadian tax on many types of Canadian source income. Canada does not generally relinquish its right to tax income or capital gains from Canadian real property.

2.Corporate Tax

The general federal corporate tax rate of 15% is reduced to 10% for small Canadian-owned businesses. Provincial corporate tax rates vary from 11% to 16% (0 to 12% for small Canadian-owned businesses). Canada offers many federal and provincial tax credits for qualifying activities such as R&D, manufacturing, employee apprenticeship training, film and television production, to name a few. Many of these credits are available to both Canadian owned and foreign owned companies, although in most cases the credits are less generous for foreign owned companies.

3. Withholding tax rate (non-treaty)

ResidentNon-resident Individual/

Corporation

Dividends 0 25%

Interest 0 0 / 25%

Royalties/know-how 0 25%

Rents (for moveable property) 0 25%


3. Withholding tax rate (non-treaty) (cont.)

Resident Non-resident

Management fees 0 25%

Directors’ fees Payroll withholding rates Payroll withholding

* 0% applies if recipient is arm’s length to the payor.

4.Test or Basis of tax residence

Corporate residence

Under domestic law, a corporation is resident in Canada if incorporated in Canada or “mind and management” is in Canada. Canada’s treaties generally override the “mind and management” rule and deem a company to be resident in Canada only if the company is incorporated in Canada.

Under domestic law, a non-resident corporation with “mind and management” outside Canada is taxable on Canadian business profits from “carrying on business in Canada. ” Carrying on business in Canada includes soliciting orders or offering anything for sale in Canada though an agent or servant. Canada’s treaties generally exempt a foreign company from income tax unless the company has a permanent establishment in Canada. The definition of permanent establishment varies from treaty to treaty but most treaty definitions generally reflect OECD guidelines.

Individual residence

Under domestic law, an individual is a resident of Canada for tax purposes if the person ordinarily resides in Canada. An individual who has no residential ties to Canada can is deemed to be a resident of Canada if the individual sojourns in Canada for 183 days or more in a calendar year. Canada’s treaties generally provide that an individual is resident in Canada only if the individual ‘s primary place of residence is in Canada.

5. Individual tax rates for residents

Tax rates and income brackets vary from province to province. The summary below is an approximate average of combined federal and provincial tax rates and brackets.

Taxable income Tax payable

0 to $12,000 nil

$12,000 to $46,000 0 to $7,500

$46,000 to 92,000 $7,500 to $22,000

$92,000 to 143,000 $22,000 to $45,000

$143,000 to $203,000 $45,000 to $73,000

Over $203,000 $73,000 plus 53% on amount over $203,000


6.Individual tax rates for non-residents

Non-residents are taxed on earned income at the same rates and brackets as residents but are generally denied personal tax credits available to residents. The summary below is a general average of combined federal and province rates and brackets.

Taxable income Tax payable

0 to $12,000 0 to $2,500

$12,000 to $46,000 $2,500 to $9,400

$46,000 to 92,000 $9,400 to $24,000

$92,000 to 143,000 $24,000 to $46,000

$143,000 to $203,000 $46,000 to $75,000

Over $203,000 $75,000 plus 53% on excess over $203,000

7. Goods and Services tax (“GST”)

The GST rates in Canada vary from 5% to 15% depending on the province in which taxable supplies are made. There are detailed place of supply rules that determine where supplies are made for GST purposes. Goods are generally deemed to be supplied at the location where the goods are delivered to the customer. The place of supply for services can depend on the type of service. A personal service (such as a haircut) is supplied where the service is provided. Non-personal services, such as consulting services, are generally deemed to be supplied in the province where the customer is located.

GST registration is voluntary for “small suppliers”. A small supplier is a business that has annual world wide revenue less than $30,000 ($50,00 for charities and non-profits). Revenues of associated companies are included in the $30,000 test. Foreign companies often mistakenly fail to register for GST because they assume the $30,000 test is based on Canadian revenues. Few, if any, foreign companies selling into Canada would qualify as small suppliers.

Provinces of British Columbia, Saskatchewan, Manitoba and Quebec have a separate sales tax system. The province of Alberta does not impose a sales tax.

8.Estate duty

When a Canadian resident dies, the executor must file the deceased’s “terminal return” and report a deemed disposition at fair market value of the deceased’s assets. Tax deferred plans, such as retirement funds, are deemed to have been liquidated at fair market value on the date of death. The terminal return is intended to mirror the amount of tax that would have been payable if the deceased had sold all assets and collapsed all retirement funds before death. Tax on the terminal return is the only tax on death and assets can be distributed to beneficiaries without further estate, inheritance or gift tax.


8.Estate duty [cont.]

Assets that pass to a surviving spouse are exempt from deemed disposition at fair market value. However, the executor may elect to report fair market value deemed disposition. This election is often beneficial if the deceased has unused losses available to offset the elected gain and the surviving spouse thereby inherits the asset with a cost base stepped up to fair market value.

The executor for the estate of a non-resident deceased individual must file a Canadian terminal return if the deceased owned taxable Canadian property, such as a Canadian rental property or vacation home. The requirement for a foreign executor to file a Canadian terminal return is often overlooked. Failure to file the terminal return in a timely manner can give rise to substantial penalties. Double taxation can also arise if the time limit to claim a foreign tax credit on the deceased’s home country terminal return has expired.

9. Stamp duty

Stamp duty (referred to in Canada as “land transfer tax”) is calculated by reference to the value of consideration paid for Canadian real property and is assessed at the provincial level. Provincial rates vary from a low of 0% to as high as 2% of the selling price of property. Some Canadian cities impose a municipal level city land transfer tax. Gifts of real property are generally not subject to land transfer tax because there is no consideration paid.

10.Property tax

Property taxes are calculated across Canada on the assessed value of Canadian real estate. Residential property tax rates are generally lower than commercial rates. Property taxes are collected by the local municipalities where real estate is located. Rates vary widely. For example, Moncton’s rate is over 16% of the assessed value of a property while Vancouver’s rate is under 3%.

Income tax filling deadlines:

Type of forms Deadlines

Deadlines Residential individual April 30 *

T1 income tax return Non-residential individual April 30 *

T2 income tax return Companies 6 months after year-end

T3 income tax return Estates and trusts 90 days after year-end

T5013 return Partnerships March 31 **

* June 15th for self-employed individuals and their spouses** assumes partnership has a calendar fiscal year and partners are individuals


11.Double Tax Agreements

Canada has entered into tax treaties with about 100 other countries. Below is a list of some of the countries with which Canada has a treaty and the treaty rates that apply:

Note: The above is not an exhaustive list, please visit http://www.linfang.com/doubletax/doubletax.asp for information of other countries


Australia 5 / 15 10 10

Austria 5 / 15 10 10

Bangladesh 15 15 10

Barbados 15 15 10

Belgium 5 / 15 10 10

Brazil 15 10 / 15 15

China 10 / 15 10 15

Cyprus 15 15 10

Denmark 5 / 15 10 10

France 5 / 15 10 10

Germany 5 / 15 10 10

Greece 5 / 15 10 10

Hong Kong 5 / 15 10 10

India 15 / 25 10 10

Ireland 5 / 15 15 10

Israel 5 / 15 10 10

Italy 5 / 15 10 5 / 10

Japan 5 / 15 10 10

Luxembourg 5 / 15 10 10

Malaysia 15 10 15

Malta 15 15 10

Mexico 5 / 15 15 10

Netherlands 5 / 15 10 10

New Zealand 5 / 15 10 5 / 10

Norway 15 10 10

Pakistan 5 / 15 15 / 25 5 / 10

Poland 10 / 15 10 10

Portugal 10 / 15 10 10

Russia 15 10 15

Singapore 5 / 15 15 10

Spain 5 / 15 10 10

Sri Lanka 5 / 15 10 10

Switzerland 15 10 10

Thailand 5 / 15 10 / 25 10

United Kingdom 5 / 15 10 10

United States 5 /15 10 10

Vietnam 5 / 15 10 10

Firm: Adam & Miles LLP www.adamsmiles.com Contact: Glen MacMillan - [email protected]

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AGN InternationalEmail: [email protected] | Office: +44 (0)20 7971 7373 | Web: www.agn.org

AGN International Ltd is a company limited by guarantee registered in England & Wales, number 3132548, registered office 24 Greville Street, London EC1N 8SS, United Kingdom. AGN International Ltd (and its regional affiliates; together “AGN”) is a not-for-profit worldwide membership association of separate and independent accounting and advisory businesses. AGN does not provide and is not responsible for services to the clients of its members. Members provide services to their clients under their own local agreements with those clients. Members are not in partnership together, they are neither agents of nor obligate one another, and are not responsible for the services of other members. 04

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tax cards | 2018 - agn home · a nonresident for u.s. tax purposes unless he or she qualifies as a...

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