US Service agreement for Candian company

[tbitz]

My business partner and I are in an odd work situation. Here are some details. BTW, I have gone through the archives looking for similar situations and I am still confused as to what situation applies.

My partner and I have registered a Canadian company. We do two types of business with a US based company. One is a fixed price contract to do some hardware and software design work. All this is done in Canada. The contract is paid out by the US company. Part of the contract is to go down for a week and test out the final product in the US and train them.

The second part is a service agreement. We perform tasks in Canada as needed by them and bill by the hour. However the US based company can ask us to go down to the US and help them as needed with engineering type work. Here again we would just bill on an hourly rate. The company that pays our company for this service agreement work is actually a Canadian company they have setup as they have other Canadian full time employees.

Two questions.

1) What type of visa applies here for my business partner and I for both situations. Is it a TN visa? But we don't directly work for them. what do we need from them to get a TN visa? They have offered to help in anyway to obtain the proper visa.

2) What are the tax implications? Do we only report to CRA, or need to report to IRS also?

It is all a bit confusing.

Thanks for any help,

Tony

[agnelson]

1) Sounds more like just a simple B1 entry. You are giving post-sales engineering support. This is textbook B1.

2) For IRS, you would only need to report this income if you spent more than 180 days in a rolling 12-month period in the US. Each state might have different requirements. Any tax that you did owe would be recovered by takling the foreign tax crdit on your Cdn return.

[howard2009]

Hi Agnelson,

Your posting is very helpful. In the 2) item for IRS, can you please explain more detail? you mean in this situation, someone needs to claim tax on Canada firstly and based on CRA return(ie, as self-employed), claim US tax for IRS, is that right? Thanks a lot in advance.

[agnelson]

Youyr US income would be US-sourced, so they would get full tax rights. The foreign tax credit lines on your Cdn return, on which you would also report the income, would then be the tool used for reducing your Cdn tax by roughly the tax you paid in US.