GoFuckYourself.com - Adult Webmaster Forum - View Single Post - Got a question for all Canadian paysite owners! Read!

x582 · 01-02-2003, 07:38 PM

I posted that earlier in another thread
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Scenario :

Wild Sex Inc. (Canco) is a Canadian company incorporated in Canada. Canco owns 5 paysites which generate a total of $100,000 per month.

In order to continue to do business with Paycom, Canco has to incorporate in the USA to follow the new Visa guidelines. Canco creates Hot Chick Inc. (Usaco) in Nevada.

Because the sites has to be in the USA, Canco has to sell at FMV (Fair Market Value) the site to Usaco. The price of the sites are determined by FMV with complex calculations. Let's say for the purpose of this examples that the price is $500,000.

Usaco buys the sites and contract Paycom to process the credit cards of the 5 sites.

At the end of the fiscal year of Usaco, the EBIT (earning before income tax and interest) is $800,000. Then, Usaco has to pay income tax of about (let's say) 35%.

EBIT = $800,000
IRS Income Tax = $280,000

NET INCOME = $520,000

Canco would like to receive 25% of the net income.

So Usaco pays $130,000 in Dividends to Canco.

Because Usaco pays dividends to a foreing entity, Usaco has to pay a witholding (on the behalf of Canco) of %25 of the dividends paid.

So Usaco pays $32,500 to the IRS (Witholding Tax)

Canco has to pay income tax of about (let's say) %35 on $130,000 of dividends he received from Usaco.

So Canco pays $45,550 to the CCRA (Canada Custom Revenue Agency).

Because Canco paid a tax to the IRS on the dividends and there is a DTT (Double Tax Treaty) with the USA, Canco can claim back the $32,500 paid to the IRS..

01-02-2003, 07:38 PM
x582 Confirmed User Join Date: Mar 2002 Location: heh? Posts: 609	I posted that earlier in another thread ------- Scenario : Wild Sex Inc. (Canco) is a Canadian company incorporated in Canada. Canco owns 5 paysites which generate a total of $100,000 per month. In order to continue to do business with Paycom, Canco has to incorporate in the USA to follow the new Visa guidelines. Canco creates Hot Chick Inc. (Usaco) in Nevada. Because the sites has to be in the USA, Canco has to sell at FMV (Fair Market Value) the site to Usaco. The price of the sites are determined by FMV with complex calculations. Let's say for the purpose of this examples that the price is $500,000. Usaco buys the sites and contract Paycom to process the credit cards of the 5 sites. At the end of the fiscal year of Usaco, the EBIT (earning before income tax and interest) is $800,000. Then, Usaco has to pay income tax of about (let's say) 35%. EBIT = $800,000 IRS Income Tax = $280,000 NET INCOME = $520,000 Canco would like to receive 25% of the net income. So Usaco pays $130,000 in Dividends to Canco. Because Usaco pays dividends to a foreing entity, Usaco has to pay a witholding (on the behalf of Canco) of %25 of the dividends paid. So Usaco pays $32,500 to the IRS (Witholding Tax) Canco has to pay income tax of about (let's say) %35 on $130,000 of dividends he received from Usaco. So Canco pays $45,550 to the CCRA (Canada Custom Revenue Agency). Because Canco paid a tax to the IRS on the dividends and there is a DTT (Double Tax Treaty) with the USA, Canco can claim back the $32,500 paid to the IRS..