Houston's International Workforce
Houston is one of the most international cities in the country. Energy companies move engineers between Calgary, Aberdeen, Lagos and Houston; the Medical Center recruits physicians and researchers from abroad; and many families have relatives and property in Mexico, India, Nigeria, Vietnam or Canada. BOMCAS concentrates on the Canada–U.S. side: Canadians working or investing in Houston, Canadian companies with Houston offices and Americans with Canadian accounts or pensions. We prepare the U.S. filings remotely and coordinate with the advisers who handle the other country.
Treaty, residency and remote seller basics are on our Texas cross-border page; here they meet Houston's international energy workforce.
Canadian Energy Professionals
Canadian engineers and geoscientists often come to Houston on TN status or as L-1 intracompany transferees. Once they meet the substantial presence test, they file U.S. returns as residents on worldwide income. In the year of the move, they may be dual-status and can use the treaty to settle which country taxes which income. Canadian departure tax, the deemed sale of most assets when leaving Canada, has to be considered before the move, not after.
Canadian Accounts Held in Houston
RRSPs and RRIFs keep their tax deferral for U.S. purposes under the treaty, but TFSAs and RESPs do not, and income in them is taxable on the U.S. return. Canadian mutual funds and ETFs held in non-registered accounts are often passive foreign investment companies, with complex reporting on Form 8621. Every account counts toward FBAR and Form 8938 thresholds. Getting these right in the first year in Houston avoids penalties later.
Canadian Companies Opening in Houston
A Canadian service or equipment company that opens a Houston office, sends staff to customers' sites or stores inventory in a local warehouse has a permanent establishment question for federal tax and a separate Texas question. The treaty does not cover the Texas franchise tax, so a Canadian company doing business in Texas usually files the franchise tax report even if no federal tax is owed. Many choose a U.S. subsidiary, which brings its own federal return and transfer pricing.
Mexico and Other Countries
Many Houston families and businesses have ties to Mexico, and there is a U.S.–Mexico tax treaty as well. Our direct work is on the Canadian side, but the U.S. reporting is the same: worldwide income for U.S. residents, FBAR and Form 8938 for foreign accounts, Form 3520 for large foreign gifts or inheritances and Form 5471 or 8865 for foreign companies and partnerships. We prepare those U.S. forms and work with the client's advisers in the other country.
Selling Houston Property as a Nonresident
A nonresident selling a Houston home, rental or commercial building is subject to FIRPTA withholding, generally 15 percent of the amount realised, held by the title company. Filing a U.S. return reports the actual gain and usually returns part of the withholding. Canadian sellers also report the sale in Canada and claim a foreign tax credit.
Returning Expatriates
Americans returning to Houston after years abroad may have foreign pensions, accounts and property to report, and catch-up filings if they missed U.S. returns while away. The IRS streamlined procedures can help non-wilful filers come into compliance with reduced penalties.
Common Filings
- Form 1040 or 1040-NR with treaty disclosures.
- FBAR and Form 8938.
- Forms 8621, 3520, 5471 and 8865.
- Form 8833 for treaty positions.
- FIRPTA withholding refunds.
Houston Cross-Border Tax Questions
Is my TFSA taxed in the U.S.?
Yes. The treaty does not cover TFSAs, so income inside one is reported on your U.S. return.
Does a Canadian company with a Houston office owe Texas franchise tax?
Usually yes. The treaty does not apply to the franchise tax, and having employees or an office in Texas is doing business here.
Do you prepare Mexican returns?
No. We prepare the U.S. side and work with the client's adviser in Mexico.
How much is withheld when a nonresident sells Houston property?
Generally 15 percent of the amount realised under FIRPTA, with part often returned after the U.S. return is filed.
Talk to BOMCAS About Cross-Border Tax in Houston
Canadian-owned companies still file the business return and newcomers a personal return. Local sales tax, books and payroll carry on as for any Houston business. Plan the move before it happens, and use late filing for missed forms. Statewide, we also cover business tax preparation, personal tax preparation, sales and use tax, bookkeeping, payroll, tax planning and back taxes and late filing, all reachable from the Texas overview.
Tell BOMCAS about your Houston business or household and we will reply with next steps and what we need for a quote. Use the contact page or the form below, call 780-667-5250 or email info@bomcas.ca. Every Houston service is on the Houston overview. This page is general information, not advice for your situation.