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A Canadian Investor's Guide to Florida Investments

Superior Client Service

Are you a Canadian investor in Florida businesses? If you have a stake in any limited liability partnership businesses (otherwise known as L.L.Ps), then you could be seeing your annual tax burden rise rather dramatically.

On May 26, 2016, the Canadian Revenue Agency (CRA), made their latest announcement in the world of Partnership tax treatment for Canadian investment in the US. The announcement established that for the purpose of income tax law, L.L.P. and L.L.L.P businesses organized under the laws in the states of Florida and Delaware would longer be treated as “true partnerships.” Instead, these entities are now taxable as corporations rather than flow through partnerships. The announcement did not say anything about similar businesses in other states, but implied they would be treated the same.

The law essentially brings these two types of partnerships to the same tax grounds as other limited-liability entities, such as LLCs, which have been taxed as corporations for many years.

Prior to this ruling, the CRA was doing their due diligence in order to deal with the abundance of newly formed Florida and Delaware LLP’s. During the process of figuring out the best tax approach, CRA officials discovered they were allowing their citizens to receive the preferential flow through tax treatment for their US investments held in a US LLP.

Instead, Canadian owners of U.S. L.L.P. and L.L.L.P. businesses will not be subject to double income tax. First, from the United States government, who will continue to treat these entities as “pass-through” entities, and only subject them to income taxes, but then again by the Canadian government who tax these businesses as corporations. Previously, Canadian citizens could credit the tax they paid to the U.S. towards their Canadian burden, but this is no longer the case.

The opposite can also be true: U.S. businesses that also have operations or investments in Canada could be taxed at a higher rate as well.

These changes have caused significant changes and necessary adjustment for our client’s at Powell, Jackman, Stevens & Ricciardi, PA. Our Fort Myers business advocates can assist with providing all of the information necessary to ensure your US based investment is fully secured and you are receiving all of the benefits permitted by law.

To learn more about how to hold your Florida based investments, contact our firm today.

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