OTTAWA: While much of the commentary on U.S. tax reform has focused on the impact on business, some nasty surprises are in store for individual Canadians, particularly those with dual citizenship or who hold a U.S. green card.
“The Americans have fundamentally changed the way that foreign income is taxed for U.S. citizens and residents,” says Roy Berg, director, U.S. Tax Law at Moodys Gartner Tax Law LLP. “For example, a doctor who is a dual citizen and practising in Canada and has $2 million of accumulated earnings in a private Canadian corporation, would have a one-time U.S. tax liability of $300,000 this year.”
The tax is part of the “participation exemption system” that allows income earned abroad to be repatriated to the U.S. without penalty.
“What it means it that foreign income is not taxed again when it comes into the U.S.,” Berg says. “That’s why Google, Apple and a host of other tech companies are bringing cash back in container loads.”
