Kris Rossignoli, Senior Private Wealth Manager at Cardinal Point Wealth Management, was recently featured in The Globe and Mail article, “Flee Canada? Companies considering a U.S. move quickly learn it’s costly and complicated – and can even backfire.” In the article, Rossignoli offers expert commentary on the financial, tax, and immigration challenges Canadian companies face when considering relocating operations to the U.S.
Drawing from his extensive experience in cross-border wealth and tax planning, Rossignoli highlights key obstacles, such as Canada’s departure tax—typically 25% of net assets—as a major deal-breaker for many businesses. He also underscores the complexity of physically moving operations and obtaining U.S. immigration visas, warning that the steep financial and logistical costs often outweigh the perceived benefits of redomiciling.
His insights support the growing view among cross-border financial professionals that most Canadian companies are better off staying put—unless they have substantial operations in the U.S.
To learn more and read the full article below:
Flee Canada? Companies considering a U.S. move quickly learn it’s costly and complicated – and can even backfire
Only two months into United States President Donald Trump’s second term, whispers that Canadian companies will keep fleeing to the U.S. are rampant, and there are fears that it will cause economic ruin.
Corporate giants such as Brookfield Asset Management Ltd.
The reality: For many companies, redomiciling in the U.S. simply isn’t worth it, according to financial and legal advisers on both sides of the border. Once chief executives dig into the details, they quickly learn the benefits often aren’t all that compelling, and the process of relocating can be both gruelling and expensive.
To start, any perceived U.S. tax benefits usually aren’t that great – and can even be punitive. Canadian companies must also pay a departure tax worth roughly 25 per cent of their net assets on their way out.
As for Mr. Trump’s promise that U.S.-based companies won’t face tariffs, it’s misguided. The White House has repeatedly ignored the prospect of retaliatory tariffs, and a newly-American company that keeps selling to Canadian clients could end up facing stiff levies from their former home country.
There’s also the risk of political backlash, something Quebec-based trucking giant TFI International Inc. faced hours after announcing it would move to the U.S. The anger was so acute that chief executive officer Alain Bédard backtracked within four days and chose to stay put.
Of course, there can be benefits to redomiciling. For publicly listed companies, it offers the chance to get included in a U.S. stock market index, such as the S&P 500. That can attract more investor and analyst attention, helping to boost a company’s share price.
But nothing’s guaranteed. There’s already fierce competition among American companies to get into these indices, and there is also speculation that the rules for inclusion will change in the near future. S&P Global, which manages a number of major indices, might soon allow Canadian and other foreign-based companies to be included in a U.S. index despite being domiciled outside of the U.S.
“If this is the path followed, then there is no need for Canadian companies to even muse about switching to U.S. incorporation as these companies will get the benefit of U.S. index inclusion without the costly and difficult process of reincorporating south of the border,” wrote Peter Haynes, a managing director at TD Securities who specializes in index rules, in an e-mail to The Globe and Mail.
On the tax front, CEOs often assume their companies will pay lower rates in the U.S., especially with Mr. Trump bragging about the tax cuts he put in place during his first term. Yet in a number of U.S. states, the corporate tax rate is quite similar to what a Canadian company currently pays once all levels of government are factored in.
There are also scores of less obvious tax differences between the two countries. For miners, certain exploration tax credits offered in Canada may not exist in the U.S., and for health care or technology companies, the same can be true for research and development tax credits.
While there certainly are instances where a Canadian company will pay lower taxes in the U.S., the corporations that benefit have to consider their geographic mix. For the most part, revenue gets taxed in the country where it is earned. So if a newly-American company still generates half of its sales in Canada, half of its business will be taxed at Canadian rates.
“People can redomicile to their heart’s content,” said Lachlan Wolfers, the national leader of KPMG Law in Canada, but corporate taxes are mostly paid wherever a company has a permanent establishment, such as an office, factory or mine. (There are some exceptions, such as technology companies that claim they sell into Canada from the U.S., which is why Canada enforced its digital sales tax.)
Tax is a “relevant and important factor,” Mr. Wolfers said, but ultimately, “these decisions should not be tax-driven.”
Redomiciling can also be a logistical nightmare – and an expensive one.
Few business owners factor Canada’s departure tax into their calculations, and it can be sizable. In a recent case, Carol Sadler, a partner specializing in cross-border taxation at Achen Henderson in Calgary, said the departure tax would wipe out all of her clients’ cash and receivables, and then they’d have to move their equipment to the U.S. and would likely need financing to restart operations there.
The departure tax “is one of the typical deal breakers we see,” said Kris Rossignoli, a cross-border tax and financial planner with Cardinal Point Wealth in New York, who works with Canadian clients.
And even when it’s manageable, in order to physically move to the U.S long term, business owners need an immigration visa: “That’s not something you can just get overnight,” Mr. Rossignoli said.
For some, the benefits can still outweigh the costs, such as when a Canadian company has significant manufacturing and sales in the U.S. But such clients also have to look a few years out.
“I think the number of people who will do this in the short-term is really small because we just don’t know how long the tariffs are gonna last,” said Max Reed, a cross-border tax lawyer and principal of Polaris Tax Counsel in Vancouver. (U.S. Treasury Secretary Scott Bessent recently said the reciprocal tariff rate that the U.S. plans to charge each of its trading partners will be announced on April 2.)
The same is true for publicly listed corporations who might redomicile for index purposes. In early March, S&P proposed changes to its rules for inclusion in the S&P/TSX Composite Index, permitting U.S. domiciled companies “with significant ties to Canada” to remain listed here.
Responding to questions from The Globe, S&P did not say much about its reasoning and also did not discuss the likelihood of future changes to other indices.
But Mr. Haynes, the TD analyst, thinks the same thing could happen in the U.S. over the next two years. Country-specific indices, he wrote, “are a bit of a relic.”
Often, he added, “these domestic indices bear limited resemblance to a local economy – think about Shell or BP which are part of the FTSE 100 but have only a small percentage of revenue generated in the United Kingdom.”