A special problem arises where a U.S. citizen (or a green card holder) becomes a tax resident in Canada.
Under the provisions of the U.S. Internal Revenue Code, a U.S. citizen remains subject to U.S. income taxation on his income from worldwide sources even if he takes residence outside the United States. Thus, where a U.S. citizen becomes a tax resident in Canada, his income is subject to income taxation both in Canada and the U.S.
The double-taxation which may arise in this situation is avoided under special provisions of the Income Tax Act and the Canada-U.S. Income Tax Convention (1980). Specifically, pursuant to Article XXIV (Elimination of Double Taxation) of the Canada-U.S. Income Tax Convention, both Canada and the U.S. have agreed to provide foreign tax credits to the U.S. resident residing in Canada.
For further information on this specific area of practice, please contact our specialized and dedicated tax lawyers:
TaxChambers LLP is collaborating with Andersen Global® in Canada.