U.S. vs Canada tax filing obligations for E-2 visa holders

Running a U.S. business on an E-2 treaty investor visa creates tax obligations that many investors do not fully understand. Some E-2 visa holders file only U.S. taxes. Others file only in Canada. Both approaches can lead to costly mistakes.

The truth is simple: many E-2 visa holders must file taxes in both the United States and Canada. Knowing where and how to file helps you avoid double taxation, penalties, and problems with future E-2 visa renewals.

Tax Residency Comes Before Visa Status

Your tax residency determines where you must file taxes not your visa.

U.S. Tax Residency for E-2 Visa Holders

You may become a U.S. tax resident if you meet the Substantial Presence Test, based on the number of days you spend in the U.S.

If you are a U.S. tax resident, you must report:

• U.S. business income
• Canadian income
• Foreign investments
• Worldwide income

This applies even if the income is earned outside the U.S.

Canadian Tax Residency for E-2 Visa Holders

Canada looks at residential ties, such as:

• A home in Canada
• A spouse or family in Canada
• Financial and social connections

Many E-2 visa holders remain Canadian tax residents, even while living or working in the U.S.

U.S. Tax Filing Obligations

E-2 visa holders with U.S. income or U.S. tax residency may need to file:

• Form 1040 or 1040-NR
• U.S. business tax returns (LLC, corporation, or partnership)
• Payroll tax filings if the business has employees

Many E-2 investors must also file foreign asset reports, such as:

• FBAR (FinCEN Form 114)
• FATCA Form 8938

Missing these forms can result in serious penalties.

Canadian Tax Filing Obligations

If you are still a Canadian tax resident, you must:

• File a Canadian personal tax return
• Report worldwide income, including U.S. income
• Claim foreign tax credits for U.S. taxes paid

Canada does not ignore U.S. income — it requires reporting, even when tax was already paid in the U.S.

Avoiding Double Taxation with the Tax Treaty

The Canada–U.S. tax treaty helps prevent the same income from being taxed twice. However, it does not eliminate E-2 visa tax filing requirements.

The treaty helps by:

• Determining tax residency
• Allowing foreign tax credits
• Reducing withholding taxes
• Coordinating business income reporting

Incorrect use of the treaty is a common issue for E-2 visa holders and can increase audit risk.

Why Business Structure Matters

Your U.S. business structure affects:

• How much tax you pay
• Where income is reported
• Treaty benefits
• E-2 visa renewal support

LLCs, corporations, and partnerships are taxed differently in the U.S. and Canada. Poor planning often results in higher taxes and reporting problems.

Why Tax Compliance Supports E-2 Visa Renewals

During E-2 renewals, immigration officers review:

• Business income
• Owner compensation
• Payroll compliance
• Tax return consistency

Accurate and timely tax filings support your business credibility and long-term visa approval.

Confused about U.S. and Canada tax filing rules for your E-2 visa?

Many E-2 visa holders make mistakes simply because their cross-border tax situation was never reviewed properly.

At e2visa.ca, we help E-2 investors:

• Understand U.S. vs Canada tax residency
• Avoid double taxation
• Stay compliant in both countries
• Support E-2 visa renewals with clean tax filings

Schedule an E-2 tax consultation today with CPA for E-2 Visa and get clear answers before filing mistakes become costly.

Frequently Asked Questions (FAQs)