Cross Border Pro

New Canadian Government

It's official:  Canada has a new government.  The Conservative party, lead by Stephen Harper, has won a minority government in the January 23 federal election.  It will be interesting to see what changes take place in the near future.  The conservatives definately lean more towards business interests and cross border business could see benefits from this government.  Canada doesn't have to be in bed with the U.S., but it does have to have a good working relationship. A recent proposal put out by the Conservatives was to introduce a capital gains deferal similar to the 1031 exchange in the States.  If an investment property is sold, the capital gains can be rolled over into a new investment and no capital gains tax paid at that time.  The capital gains tax is only paid when the property is sold and cash is taken out.  This could be a big benefit to cross border real estate transactions.  I recently participated in a real estate sale in the U.S. and was not able to participate in a 1031 exchange because there was no benefit.  Canada would have taxed the gain upon sale anyway.  If this capital gains tax strategy is implemented in Canada, it is hopefully aligned with similar requirements of the 1031 exchange in the States so that cross border real estate investors can defer gains on both sides of the taxing border.

New Border Requirements

The United States had previously announced the requirement for Canadians and returning U.S. citizens to have a passport upon entering or reentering the U.S. Many Canadian businesses and tourism boards were very concerned that this was going to reduce the number of casual trips to Canada.  It would likely reduce the number of planned trips also.  I was surprised to hear that only approximately 40% of Canadians have passports.  I haven't seen the statistics, but I would imagine the number of U.S. citizens with passports is even lower.  However, the U.S. recently announced that it was going to implement a new program called People Access Secure Service (PASS) that will cost nearly half as much as a passport and will be the size of a credit card.  Apparently this card can be read by radio signal also.  Canadian businesses and tourism officials seem to be relieved that the requirements are to be reduced slightly.  However, I cannot imagine how this system is that much better than a passport requirement.  People traveling over an international border are not going to say, $97 is way to much to pay for a passport, but I'll pay $50 bucks for a PASS card.  Besides, people understand passports. There is going to be confusion about what a PASS card is and what it does for you.  I can see some benefit to not having to carry a passport for frequent cross border travel, but that doesn't mean I won't have a passport.  Also, if crossing the U.S. / Canadian border frequently why not just get the NEXUS card?  This program only costs $50 and is a joint program for entering both Canada and the U.S. and also gets you access to the quicker NEXUS lanes at the border crossings. I think we are in a period of transition.  The U.S. wants tighter security at the borders, but thankfully it at least appears they recognize the impact to the economy of both Canada and the U.S. if the borders become to restrictive.

Crossborder Development Corporation

"The U.S. market offers a unique opportunity for growth for Canadian and foreign companies. But expanding into any foreign market has its complications and risks. That is why many of Canadas largest companies, and a number of international firms, have turned to Crossborder Development Corporation (CDC) for help. For over two decades, CDC has been helping companies successfully locate or expand in the U.S. CDCs complete package of services can make your venture into the U.S. marketplace a profitable one."

This is from a very interesting company located in Rouses Point, New York called Crossborder Development Corporation. Operated by Mark Barie and Mathew Boire, CDC offers immigration consulting and real estate brokerage services.  This packaged service offers Canadian companies what they need to cross the border and enter the U.S. market.   CDC is a licensed real estate broker providing traditional commercial real estate services including site selection, leasing, and sales.  In addition to real estate services, they can provide consulting on start-up financing and market research.  However, finding a location in the U.S. is of little use to a Canadian company if they are not able to secure proper immigration visas.  Recognizing this need, CDC packaged these services into one company.  What a dynamic and innovative approach to traditional real estate brokerage service.  CDC is able to provide immigration consulting, including obtaining work visas for company execs and employees, providing the ablility for a Canadian company to legally enter the U.S. market. Then Crossborder Development Corp is able to assist the Canadian company in finding a location to set-up and conduct their business in the U.S.

I believe many companies look to solution providers like CDC that are able to handle multiple issues.  A one-stop shopping approach.  I know when I was looking for crossborder accountants, I choose one who could prepare both my Canadian and U.S. tax returns.  This way, I am not having to juggle between two accountants and there is no confusion as to timing or missing items between the two returns.  This type of service has reduced my stress and helped to remove some of the concern of crossborder issues. Crossing the border is a significant and often complicated undertaking for a Canadian company.  Utililzing the services of a company like CDC can help in this process and possibly reduce some of the complications and risk.

Not A One-Way Street

Readers of this site might think that business and investment between Canada and the U.S. is a one-way street.  Although my focus has typically been on Canadian businesses and investors expanding into the United States, it should be noted that significant traffic is moving north of the border into Canada also. This is most visible in the "big box" retailers in the U.S. moving into Canada such as Walmart and BestBuy. Sears buyout of Eatons, a Canadian landmark, is another very visible northbound transaction. Starbucks, based is Seattle, is quickly spreading across Canada.  I am starting to feel like I did in the States with Starbucks on every corner, sometimes two on a corner.  Within one year of moving into our house there have been two Starbucks built near our house.  The newest is only about four blocks away.

In addition to these very visible transactions, there is significant movement in the technology and biotechnology sector. Leading Edge British Columbia is a non-profit organization dedicated to the promotion of British Columbia as a technology destination. Leading Edge B.C. has recently announced two U.S. tech companies moving into B.C. Urigen, Inc.pulled out of California in favour of B.C. in October. FSM Labs, a software company based in New Mexico, opened an international sales office in Vancouver also in October.

It is interesting to see economic development groups in the U.S. marketing to Canadian companies promoting the expansion of their business into the U.S.  And Canadian economic development groups, such as LeadingEdge B.C. marketing to U.S. based companies, promoting Canada as an attractive location for their tech business.  CrossBorder business and investment is truly a two-way street.