International Cross Border Taxation Hamilton

 Companies with employees visiting or residing in the US are often followed by taxation authorities from both borders in a fierce tug of war aiming to tax the same money earned as corporate profit. While there is an active tax treaty between Canada and US to ensure that there is no dollar taxed twice, you still need cross border taxation Hamilton expert to reach this point.

Transfer Pricing

This is a common term in cross-border taxation Hamilton describing the pricing of transactions between all related companies located in different countries but under the umbrella of one multinational company. Transfer pricing also applies to all Canadian companies with a taxable presence in different countries. Due to the nature of their transactions, most tax authorities have made requirements for companies to ensure that their taxable profits in the foreign countries are the same as they would have been if the company was running independently.

The Arm’s Length Principle

The model tax convention has a comprehensive description of this principle. The description states that transfer pricing between two controlled entities should be treated as though they are independent entities and are therefore entitled to negotiate at arm’s length.

The arm’s length principle bases its transactions on real markets and gives one international standard on tax computation. This platform enables different governments to get their share of taxes while creating sufficient provisions to avoid double taxation. Cross-border taxation Hamilton will help you if you have a double taxation issue.

Benefits of Transfer Pricing

1.    It helps in minimizing income and corporate tax, particularly in high tax countries, through overpricing of goods transferred to states with low tax rates. This ensures that both companies get high-profit margins.  

2.    Transfer pricing helps in cost reduction by sending merchandise into countries that have high tariff rates at low transfer prices with an aim to lower the duty for the transaction.