Legal news and trends for Canadian in-house counsel and c-suite executives
Issue link: https://digital.canadianlawyermag.com/i/50877
Paying Uncle Sam, with the proper travel documentation. "My position and the company's posi- tion is simple. We want to make sure if you're performing work in the United States or you're an American working in Canada, we want to make sure you have the proper approvals. It's a lot of money and it's a lot of time and an administra- tive burden, but at least if you're going across the border to work, you're not going to jeopardize your future." Teijeira arranges applications for an L1A — intra-company transfer visas for the U.S. — for most Kruger employees required to undertake frequent business. This enables them to access the U.S. to conduct work for seven years. For some professionals with specif- ic expertise, he advises they obtain a TN, non-immigrant professional visa facilitating travel for business under the North American Free Trade Agreement. A rise in trade and the intercontinen- tal nature of corporate structures under NAFTA is heightening awareness by companies and their counsel to ensure employees have the appropriate docu- mentation well in advance of undertak- ing any business travel, says Teijeira. Most large companies like Kruger now have processes in place to ease busi- ness travel. However, companies with a growing workforce and those that have recently undergone a management reorganization, might not recognize the status may have changed for their man- agement. Yusra Siddiquee, a partner special- izing in business immigration at Ogilvy Renault LLP, says there may be some people in an organization with a specific expertise, and that expertise is shared on both sides of the border. "When companies lend personnel across the border to execute a project, they rarely ever change payrolls, but as soon as that foreign company enters Canada to help execute a project, then that employee needs a work permit," she says. "The frequency of travel is irrel- evant. It's the nature of the function." For example, a manager in an the Queen, or both? Tax considerations for cross-border business travellers country, although some of the rules have been relaxed effective this fiscal year after the U.S. Senate ratified a protocol under the Canada- United States Income Tax Convention. One such rule says employ- ees who attend work in the U.S. will not be taxed on earnings under $10,000. They are also exempt from paying tax if their stay is less than 180 days during a 12-month period and the salary is born by the Canadian arm of the company. "That's a really important exemption in the treaty because employ- M ees now do not face double taxation," says Barry Segal, a partner at Ogilvy Renault LLP's tax planning group. The protocol eliminates withholding tax fees on most cross-border interest payments that were previously leveraged on companies deemed to be conducting business in what is described in accounting terms as "at an arms length." The protocol also provides benefits to Americans who receive Canadian-source income through limited liability companies or LLCs. This change is beneficial because Canada traditionally categorized LLCs as corporations and hadn't allowed for reduced withholding rates on payments made to an LLC serving as a "flow-through" for U.S. tax purposes, even if the LLC was wholly owned by one or more U.S. inves- tors. The same benefits don't extend to unlimited liability companies. Elizabeth Harrison, a partner and corporate finance practitioner at Farris Vaughan Wills & Murphy LLP in Vancouver, also warns com- panies conducting certain kinds of transactions could be subject to various other trade regimes in both countries, such as the U.S.' Hart- Scott-Rodino anti-trust laws. "If you're doing something that will trip into other thresholds, you'd have to do an additional filing," she says. Gabrielle Richards, a partner and tax practitioner at McCarthy Tétrault LLP, agrees the new withholding tax provisions for LLCs has been beneficial, enabling companies to secure loans from parent headquarters or subsidiaries in either country. She points to changes in Canada's functional currency tax reporting rules that now allow a company to report income in currency other than Canadian dollars. "That simplifies things a lot," she says. Yet she adds that rules per- taining to transfer pricing, through which Revenue Canada has the right to adjust a company's tax rate based on the market value of a product or service in other jurisdictions where it conducts business, must be considered. Ultimately while the business environment has improved, Richards expects the U.S. will introduce reforms that could impact businesses with foreign-source income with the intention of curbing tax evasion as NAFTA-related corporate structures flourish. "I think there's a little bit more heightened awareness about not only tax evasion, but also to make sure companies pay their fair share." — DLC 32 • DECEMBER 2009/JANUARY 2010 INHOUSE any in-house counsel assist with the tax implications of con- ducting cross-border business. There are tax implications depending on the amount of time spent in each respective