Canada: Trump tax changes impacting north of the border

Tax changes implemented in the United States in late 2017 under the Trump administration are having unintended consequences on U.S. or dual U.S.-Canadian citizens living in Canada. The tax reform involves a one-off repatriation tax, which applies retroactively, and applies to all corporations.

While aimed at preventing large multinationals from exploiting tax loopholes by transferring funds to foreign subsidiaries, the measure is having an unintended impact on American citizens that have corporations – particularly those leveraging corporations to save for retirement.

The measure also represents a double-blow for affected Canadians – any funds removed from the corporation to pay taxes in the US will be again taxed by the Canadian government. According to Conservative Senator Michael MacDonald, this is “double taxation” and will need to be addressed during NAFTA negotiations. However, MacDonald is skeptical as this tax has “been signed into law by the U.S. government, by the president.”

The uncertainty from south of the border is reflected in data from RFi Group’s H1 2018 Canada Priority & Retail Banking Council study, with 26% of Canadians concerned about the US economic outlook affecting them over the next 12 months.

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