As of 2015, the United States was home to the largest consumer market in the world by a wide margin. In fact, nearly 30 percent of total global consumer spending takes place in America, or almost four times as much as the second-largest consumer market, Japan. Canada ranks 10th with approximately 2.25 percent of global spending.
It makes sense that a lot of Canadian businesses owners – and other non-American owners – want access to American shoppers. In fact, plenty of business owners attempt to relocate their business to a U.S. jurisdiction, although this is not necessary if all you want are American customers.
Tax Obligations for Leaving Canada
You don’t have to give up your Canadian citizenship to emigrate to the United States. You do have to show that you have severed ties with Canadian residency, which includes closing your Canadian bank accounts (except any tax-free savings account), canceling your drivers license and selling property in Canada.
You must also file a final tax return for your final year in Canada, regardless of when you move during the year. Through this process you will also notify the Canada Revenue Agency about when you plan to leave permanently and that you are no longer eligible for Canadian tax benefits.
Pay any capital gains taxes for property you own based on the current fair market value. This is true even if you did not actually sell the property.
The U.S. government puts up roadblocks to control the supply of businesses (and workers) migrating to only those who comfortably project profitability – or at least enough financial viability to not end up on government social programs. For example, to come to the United States and open your business, you must:
- Prove that you have at least $1 million (USD) or, in some special cases, at least $500,000.
- Demonstrate that your business will increase the net output of the U.S. economy. This severely restricts the ability of nonprofits to emigrate to the United States.
- Create no fewer than 10 permanent full-time jobs for individuals that are already U.S. citizens or permanent residents.
- Declare intent to become a U.S. citizen or permanent resident.
Reporting Obligations If You Only Conduct Some Business in the United States
You do not have to leave Canada to provide products or services to U.S. customers. However, some international business transactions are subject to U.S. taxes (federal, state and local). Depending on your situation, you may be required to report and pay taxes to the U.S. government and then claim those taxes on your Canadian return.
The Canada-U.S. Tax Treaty of 1980 goes a long way to prevent double taxation for cross-border trade. The U.S. tax code can still be complicated for Canadian small business owners. Consult a tax expert or stay abreast of changes through the websites of the Department of Finance Canada and the U.S. Internal Revenue Service.