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Can a Canadian company get a US EIN?

Asked by: John B. - 1 December, 2010
https://d25eic0jctudgb.cloudfront.net/images/site/avatars/default.png-f1597c1da25f30f8c1a941405e8391c8 Hi, I am Canadian citizen who owns a Canadian company that sells auto parts to US customers, using a US PayPal account that transfers the money to a Canadian PayPal account (in order to save on some international fees). So all the profit is realized in Canada, and the company pays taxes in Canada.

Basically because of new regulations from January 1 my company is required to have an EIN, in order to maintain its US PayPal account.

Can my Canadian company get a US EIN? Should I instead open a local US company? Please help!
Answered by: Alex Zehn - 7 December, 2010
https://d25eic0jctudgb.cloudfront.net/images/site/avatars/28.jpg-7d9906f3bebbbdfc924d6dc4cf7bc094 John,

There are couple of solutions to your situation:

1. One is to get an EIN for your Canadian company. However, you should understand that by doing so you will be required to report your US income to the IRS annually like any other company doing business in the US.

Since today technically your transactions are taking place in Canada, after getting an EIN and reporting it to PayPal your transactions will take place in the US. That would create a situation where your income might be taxed both in the US and Canada - and I would recommend to consult a Canadian accountant, specializing in international taxation law, if you choose that route.

2. Second option is to open a US company (such as Wyoming LLC, lets call it "XYZ, LLC") and use that as the entity that does the actual business in the US. The new company will be both owned by the Canadian company, and will be buying the parts from it as a "customer", in order to resell them to US customers for zero profit.

This way your Canadian company will still need to report its US income, coming from the ownership of the "XYZ, LLC", which is always zero. On the other hand, since "XYZ, LLC" is buying from your Canadian company in Canada, your Canadian company will only report income in Canada. This scenario requires slightly more filing, which includes getting the EIN for your Canadian company and registering an LLC in the US, but that would be the only disadvantage.

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