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Taxes taken in Canada not Florida.

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Lexit   Monday, 04/02/07 10:52:00 PM
Re: None
Post # of 12962 
Taxes taken in Canada not Florida.

According to GLXI:

14) The Company announced moving its headquarters to Orlando, Florida. I heard that the decision was largely based on management's desire to bask in the sun, please explain?

"Buster" The first reason why the Company is moving to Orlando, Florida is to facilitate bank transactions and operations between a US Corporate account to a Canadian operating account. The Royal Bank of Canada offers combined services allowing management to receive proceeds and investments in the State of Florida, and easily wire funds to our Northern Quebec offices for operational purposes. Secondly, the relevant corporate tax rate in Florida is below 30% as opposed to more then 50% in Quebec. So when the Company begins to generate profits it will have a serious impact on shareholders' dividends.

Not so fast, Jose, the Canadian Taxman says otherwise:

Elimination of country double taxation: A Canadian resident is entitled to relief from double taxation in the form of a foreign tax credit or exemption from tax in respect of foreign source income. This relief is intended to prevent economic double taxation that would otherwise occur from subjecting the same income to tax both in the source and residence countries. This corresponds to the international norm, which gives priority of taxation to the country in which the income is generated.

Permanent establishment: A foreign entity operating in Canada through a permanent establishment (i.e., an entity not legally separate from its parent corporation) is liable for tax only on income generated in Canada.

Source: Government of Canada


Or worse, possibly DOUBLE Taxation because of the current Can-US tax treaties:

"Article XIII(8) of the Canada–U.S. Tax Convention–What It Was Then and What It is Now

A substantial proportion of international M&A activity in Canada involves transactions between Canadian and U.S. business enterprises. Due to the divergence of domestic tax legislation in the two countries, cross-border corporate reorganizations, or similar transactions that are otherwise tax-deferred in the U.S., can result in the recognition of profit, gains or income in Canada under the Income Tax Act (Canada) (the "Act") in respect of dispositions or deemed dispositions of Canadian subsidiaries, assets or business operations of a U.S. resident. In many instances, the Canada–U.S. Tax Convention (1980) (the "Convention") will not preclude Canadian taxation of such profits, gains or income at the time of these dispositions or deemed dispositions. If a disposition or deemed disposition is not taxable in the U.S. in the same taxation year as they are in Canada, a timing mismatch occurs, and foreign tax credit relief for the Canadian taxes may not be available in the U.S. in that year or a future year, potentially giving rise to double taxation.

Article XIII(8) of the Convention attempts to harmonize Canadian and U.S. tax rules applying to corporate reorganizations, or similar transactions, and allows for a deferral of the recognition of the profit, gain or income resulting from the disposition of property for Canadian income tax purposes. If requested by the acquirer of the property, the Canadian Competent Authority may enter into an agreement with the acquirer to defer the recognition of the profit, gain or income in accordance with Article XIII(8) of the Convention and section 115.1 of the Act. However, allowing such a deferral is entirely at the discretion of the Competent Authority."


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