The Business Owner Moving Money Between Countries
By Bryant Andrus
Profile: The Business Owner Moving Money Between Countries
TL;DR
- A new 1% US excise tax on cash-funded remittance transfers takes effect January 1, 2026; bank-account wires and card-funded transfers are exempt.
- Dividends to a Canadian parent, intercompany settlements and personal wires from US bank accounts are not subject to the new tax, so their timing can follow ordinary tax planning.
- Year-end also brings Canadian capital loss harvesting, 21-year trust planning and estate freezes that lock in current valuations.
If you run a business that moves money across the Canada-US border — dividend distributions from a US subsidiary to a Canadian parent, intercompany loan repayments, management fees, or personal wire transfers — January 1, 2026 brings a new US remittance tax that has been widely misunderstood. For most business and bank-to-bank transfers it doesn’t apply — but year-end still has real deadlines.
The One Big Beautiful Bill Act, signed into law on July 4, 2025, includes a 1% excise tax on cash-funded remittance transfers sent from the United States to recipients outside the country. The tax applies to the sender, is collected by the transfer provider, and takes effect January 1, 2026. Transfers made on or before December 31, 2025 are not subject to it, and transfers funded from bank accounts or US-issued cards are exempt altogether.
What the 1% Remittance Tax Covers
The IRS has issued only interim guidance (Notice 2025-55), but the statute is clear on scope: the tax applies to transfers funded with cash, money orders, cashier’s checks or similar physical instruments, and transfers from US financial-institution accounts or US-issued debit and credit cards are exempt. For a Canadian-owned US corporation making a dividend distribution to its Canadian parent, for an individual wiring US-dollar savings from a US bank account to a Canadian account, and for intercompany settlements between US and Canadian entities, the tax generally does not apply, because these transfers are made from accounts at financial institutions.
The practical advice is simple: fund cross-border transfers from a US bank account or US-issued card rather than with cash or money orders, and time them for ordinary tax reasons rather than the remittance tax. For the small set of transfers the tax does reach, the fix is simply choosing an exempt funding method.
The Year-End Canadian Checklist
Beyond the remittance tax, December 30 is the last trading day to realize Canadian capital losses for 2025, since trades now settle T+1. Losses realized before year-end can offset capital gains at the 50% inclusion rate — and can be carried back three years to offset gains from prior years when the inclusion rate was also 50%. For personal trusts approaching their 21st anniversary, planning must be completed before the anniversary date, when the trust is deemed to dispose of its capital property at fair market value. And for business owners considering an estate freeze, executing before year-end locks in the 2025 valuation for the preferred shares — potentially a lower valuation for businesses whose earnings have been hurt by tariffs.
Ready to Talk?
Cross-border planning is time-sensitive and highly fact-specific. If any of the topics in this issue apply to your situation, we would welcome the conversation. State Bird Corp specializes in US–Canada cross-border tax, estate, and immigration planning for families and businesses on both sides of the border. Our team works with clients across the US and Canada — wherever your cross-border life takes you.
Sources
- https://rsmus.com/insights/tax-alerts/2025/irs-grants-limited-relief-from-penalties.html
- https://www.cbh.com/insights/articles/excise-tax-on-remittance-transfers-irc-section-4475-explained/
- https://rsmcanada.com/our-insights/tax-alerts/dont-miss-your-trusts-21st-anniversary.html
- https://privatewealth-insights.bmo.com/en/insights/wealth-planning-and-strategy/2025-year-end-tax-planning-tips
- https://global.morningstar.com/en-ca/markets/canadas-stock-market-hit-historic-highs-2025
- https://www.irs.gov/businesses/small-businesses-self-employed/whats-new-estate-and-gift-tax
- https://www.pm.gc.ca/en/news/news-releases/2025/03/21/prime-minister-mark-carney-cancels-proposed-capital-gains-tax-increase
Sincerely,
The State Bird Corp Team
State Bird Corp
P: (602) 641-5996 · E: Info@statebirdcorp.com · W: statebirdcorp.com
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State Bird Corp is a management and financial consulting firm. State Bird Corp is not an accounting, legal or investment advisory firm. Cross-border planning is highly fact-specific. The strategies and topics described are general in nature, and readers should consult qualified specialists before taking any action. Any recommendation, inferences, or other guidance contained herein is meant for educational or general purposes and should not be relayed upon as specific advice for any person or business. Consult your legal, tax, and investment advisor for specific recommendation to your situation.