Canada and Dallas
Canadian companies are among the foreign businesses that have chosen Dallas for U.S. offices, attracted by its airport connections, central time zone and lack of state income tax. Canadian investors buy apartments and industrial buildings across North Texas, and Canadian executives move here with their families. BOMCAS focuses on the Canada–U.S. side: Canadian businesses and people in Dallas, and Dallas residents with Canadian accounts, pensions or property.
Treaty and residency basics are on our Texas cross-border page; this page applies them to Canadian business in Dallas.
Canadian Companies Setting Up in Dallas
Most Canadian companies enter the U.S. through a subsidiary, often a Delaware or Texas corporation. The subsidiary files a federal corporate return and a Texas franchise tax report, and transactions with the Canadian parent need transfer pricing support and, in many cases, Form 5472. A Canadian company that sells into Texas without a subsidiary may be protected from federal tax by the treaty if it has no permanent establishment, but the treaty does not cover the franchise tax or sales tax.
Executives and Employees
Canadians come to Dallas on L-1 intracompany transfers, E-2 treaty investor status or TN status. Once they meet the substantial presence test, they file U.S. returns as residents on worldwide income, and the year of the move may be dual-status. Canadian departure tax, stock options granted in Canada and Canadian pension contributions all need attention. Employers may also need to handle shadow payroll in Canada for short assignments.
Canadian Real Estate Investors
Canadians who buy Dallas rentals directly, through an LLC or through a limited partnership face different results in each country. An LLC is a flow-through entity for U.S. tax but a corporation for Canadian tax, which can lead to double tax unless planned carefully. Rental income is reported on a U.S. return, often with an election to be taxed on net income. When the property is sold, FIRPTA withholding of generally 15 percent applies unless reduced by a withholding certificate.
Dallas Residents With Canadian Ties
Former Canadians living in Dallas report RRSP and RRIF accounts, which keep their deferral under the treaty, and TFSAs, which do not. Canadian mutual funds can be PFICs. CPP and OAS paid to a U.S. resident are taxed only in the U.S. Every Canadian account counts toward the FBAR and Form 8938 thresholds.
Mexico and Trade
Dallas is also a hub for trade with Mexico, and many Dallas companies have Mexican suppliers, customers or subsidiaries. Our direct work is on the Canadian side, but we prepare the U.S. forms for Mexican connections, including Form 5471 for a Mexican subsidiary and FBAR for Mexican accounts, and work with advisers in Mexico.
Canadians Retiring in North Texas
Some Canadians who worked in Dallas decide to stay after retirement, while others return to Canada. Staying means continued U.S. residence, with Canadian pensions, RRIF withdrawals and investments reported each year. Returning means ending U.S. residence correctly, which for green card holders may involve the expatriation rules and Form 8854. We plan the retirement year with both countries in mind.
Common Filings
- Forms 1120 and 5472 for Canadian-owned subsidiaries.
- Form 1040 or 1040-NR with treaty disclosures.
- FBAR, Form 8938 and Form 8621.
- Form 1120-F for branches.
- FIRPTA certificates and refunds.
Dallas Cross-Border Tax Questions
Should a Canadian company use an LLC for its Dallas office?
Often not. A U.S. LLC can cause double tax for a Canadian owner, so a corporation is commonly used. We review the facts.
Does a Canadian subsidiary in Dallas file Texas franchise tax?
Yes, like any taxable entity doing business in Texas.
Are CPP and OAS taxable in Dallas?
They are taxed only in the U.S. for a U.S. resident, like Social Security. Texas has no income tax.
What happens when a Canadian sells a Dallas rental?
FIRPTA withholding generally applies, and a U.S. return reports the actual gain.
Talk to BOMCAS About Cross-Border Tax in Dallas
Canadian-owned subsidiaries file the business return and new residents a personal return. Sales tax, books and payroll run as for any Dallas business. Plan the structure before you invest, and use late filing for missed forms. Elsewhere in Texas, our statewide pages explain business returns, individual returns, sales and use tax, bookkeeping, payroll, tax planning and catching up on back taxes, and the Texas page ties them together.
Write to BOMCAS about your Dallas company or household and we will answer with next steps and what we need to prepare a quote. Use the contact page or the form below, call 780-667-5250 or email info@bomcas.ca. You can find every Dallas service on the Dallas overview. This is general information, not advice for your own situation.