We have a vendor requesting payment in Canadian dollars. (The invoice is for membership renewals for our Canadian employees.) The check is to be mailed to an Illinois address. What reporting information should we request?

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We do not have a sufficient understanding of the details in this situation to provide a definitive answer; however, here are some considerations.

Our understanding of the situation: A U.S. vendor (association) located in Illinois is billing your firm (located in Ontario) for memberships, and the payment amount will be $150. (The currency of the exchange is not material with regard to information reporting requirements.) Do we correctly understand payment will be made by your Canadian office? Or will it be made by your U.S. office?

We are unclear on the relationship between your Canadian office and your U.S. office. The nature of that relationship might affect reporting requirements here.

If payment is made by the Ontario office, then it seems that Canadian reporting requirements might rule, though we are not clear on that point if the Ontario office is merely an office in Canada; if it is a subsidiary of your U.S. office, then it might be that U.S. tax regulations rule.

In a Canadian information reporting scenario, where a Canadian company pays for services, a payment of "fees or other amounts for services" is reportable IF it meets the reporting threshold of $500 or more in the reporting year. If the Canadian company pays a non-resident for services IN Canada, they report it on T4A-NR. That’s not exactly the situation here.  We spoke with a CRA staff person (Adele, ID#501463PRA).  I asked Adele if a Canadian company paid a U.S. company a fee of $150 for membership services and the U.S. company is in the U.S., would T4A reporting apply.  She thought not, based on the $500 threshold.  I also inquired whether such payment to a "foreign" vendor, if over the $500 threshold, would be reportable on the T4A, or if there was another form for reporting payments to foreign vendors (as with the 1042-S in the U.S.); she said that the requirements around the T4A are not well defined, though there is an effort to provide greater definition. [Note that T4A, T1204 (govt. services), and T5018 (construction) are more recent developments than the U.S.’s 1099 series.]  

There may be further consideration: if the Ontario office is just an office of the U.S. company, then does the IRS have a claim?  If the payment is considered as being from a U.S. company, then it is below the $600 reporting threshold.  What if it is a subsidiary?  We were not able to run down this line of reasoning today.

We hope this may be helpful. If you can provide more detail on the nature of the relationship of the Ontario office and the U.S. company, we might be able to get closer to an answer, though keep in mind there is some lack of clarity around Canadian reporting.

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