Foreign Corporation owned by Canadian Resident

[amerincana]

Hello Experts
This is my first post in the forum and its for my own situation. Hope someone here can help.
I am dual Tax resident in US and Canada and own a single member LLC in the US which is a pass through entity. 100% of the income in the LLC is derived in the US, by consultation work and is taxable to me as an Individual in the US.
I understand I have to file my taxes declaring my global income in Canada but I am not sure how CRA treats the LLC.
Does this LLC have any tax obligation in Canada, owing to my Tax residency in Canada, even if the LLC per se has no income in Canada?

Please help
Thanks in advance

[snoplowguy]

The CRA does not recognize US flow through LLC’s the same way the IRS does. Flow through LLC’s are treated purely as a corporation by the CRA. Whether or not the corporation has any obligation to the CRA would depend primarily on whether it provided any goods or services in Canada, disposed of any Canadian property, or whether the corporation was deemed to be resident of Canada.

https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/businesses-international-non-resident-taxes/income-tax-information-non-resident-corporations.html

https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/businesses-international-non-resident-taxes/residency-a-corporation.html

Assuming you can make it over those hurdles and conclude that your US LLC has no filing obligation in Canada you may still, as an individual, be obligated to file a T1134 Information Return for a Controlled Foreign Affiliate.

[joe.justjoe1]

Sounds to me fairly likely that the corp needs to file a T2.
Either way, not an issue to be taken lightly, and all details should be examined.

[amerincana]

Thank you all for pointing me in the right direction.
From my initial reading, I believe the LLC does not have any tax obligation in Canada, since all of its business, legal registrations, books, bank accounts etc. are in the US.
However, I am not sure about the requirement to file T1134 for my individual return. There appears to be exemption that states "Do not file Form T1134 if the total cost amount to the reporting entity at any time in the year of the interest in all foreign affiliates was less than $100,000 and the entity is dormant.
The definition of dormant includes assets less than 1 Million dollars.
Since there was really no ‘cost’ to me to acquire the LLC and the entity will not have assets more than 1 Million dollars, can I interpret it to mean, I do not meet this requirement either.
Thanks again for your insight
Thanks

[snoplowguy]

@amerincana

There appears to be exemption that states "Do not file Form T1134 if the total cost amount to the reporting entity at any time in the year of the interest in all foreign affiliates was less than $100,000 and the entity is dormant.
The definition of dormant includes assets less than 1 Million dollars.

… AND the entity has gross receipts of less than $100,000 Cdn (75,543.42 US) during the year.

Reporting requirements for foreign affiliates that are “dormant” or “inactive”
Do not file Form T1134 Supplement in respect of a foreign affiliate if the total cost amount
to the reporting person at any time in the year of the interest in that foreign affiliate was
less than CAD $100,000 AND that foreign affiliate is "dormant’ or “inactive” for the
affiliate’s taxation year ending in your taxation year. Instead, you are only required to
provide base level information as required in Part I Section 3. D. To be considered
“dormant” or “inactive”, the Canadian dollar (CAD) thresholds noted below must be met
regardless of functional currency election made. For purposes of completing Form T1134,
a dormant or inactive foreign affiliate means, for a taxation year of the affiliate, one that:
– had gross receipts (including proceeds from the disposition of property) of
less than CAD $100,000 in the year; and
– at no time in the year had assets with a total fair market value of more than
CAD $1,000,000.

[joe.justjoe1]

“since all of its business, legal registrations, books, bank accounts etc. are in the US.”
.

However, its mind and management are Canadian resident.
.

"“the real business is carried on where the central management and control abides.”

[amerincana]

Thank you snowlowguy and Joe for your advise. This was very helpful and really appreciated.