For multinationals with branches in both Canada and the United
States, there’s one big tax challenge that’s impossible
to ignore: U.S. tax rates are generally higher than Canadian tax
rates. Companies wrestling with this issue are always looking for
ways to reduce U.S. income and maximize Canadian income (within the
existing rules), lowering their overall tax burden. Some strategies
include financing, transfer pricing, inter-company charges, and
reducing tax liability through tax planning. To make the most of
these options, it’s important to take the following
steps.
Take advantage of deduction options
Are your accounting, HR and legal departments all based in
Canada? If part of their work is for the U.S. operation, you can
charge that to your U.S. subsidiary and get a deduction in the U.S.
If this is taxed at 40% in the U.S., but only 28% in Canada,
that’s a lot of tax savings. The same thing happens with
interest when you loan funds to the U.S. side of your
