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Foreign Tax Credit PlanningOnce you have collapsed your RRSPs/RRIFs/LIRAs, paid the appropriate withholding tax and moved your investments and cash to the US , the question then becomes "Now what?" By properly structuring your investment portfolio in the US to produce "foreign passive income," you can begin recouping some of the passive withholding tax you left in Canada on your US income tax return! We have seen folks that implemented proper foreign tax credit planning strategies withdraw a $1,000,000 RRSP, leave C$250,000 in withholding in Canada and recoup ALL of it back on their US tax return before the foreign tax credits expired. This means they withdrew their entire RRSP tax-free from Canada . This is obviously NOT the norm but is used as an example to show you the power of proper foreign tax credit planning strategies. Considering your situation, wouldn't you rather pay 10 or 12% withholding on your RRSP rather than 25%? We can analyze your situation and if applicable, show you how. Click to see an example here The ideal investment to consume your passive foreign tax credits would produce a lot of foreign income annually and not have any foreign taxes withheld. If you use mutual funds, you want the mutual fund manager to elect to "pass-through" the passive foreign income by making the necessary elections under the US tax code. Don't forget that foreign tax credits have a defined "life" before they expire so it is important to implement your foreign tax credit planning strategies as soon as possible or in a balanced fashion to maximize your benefit (see income tax planning for more details) We have experts that scour the investment world for the best investments that will use up your foreign tax credits before they expire. |
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