Realtor cross-border tax: US referral fees, FIRPTA literacy, and dual licences

A US referral fee is usually a Canada-only tax event

When a Phoenix or Fort Lauderdale brokerage pays you for referring a buyer, that fee is income from a service you performed in Ontario — which makes it foreign-source from the IRS's point of view and simply business income on your Canadian return. The US payer still needs paperwork proving you are not a US person: Form W-8BEN if the fee is paid to you personally, W-8BEN-E if it is paid to your PREC. Sign the W-9 they send by default and you have told the IRS you are a US taxpayer.

If the brokerage withholds 30% anyway — it happens when the form arrives late — you will receive a 1042-S the following spring, and getting the money back means filing a US return. Far easier to get the form in before the first payment. On the Canadian side, the fee converts to CAD at the exchange rate when it is earned, and a referral service supplied to a non-resident brokerage is generally zero-rated for GST/HST: you charge 0% yet still claim input tax credits, unlike the 13% HST on your Ontario commissions.

FIRPTA literacy wins listings — as long as you stay in your lane

Your snowbird and investor clients will eventually sell a US property, and the agent who can explain what happens next earns the referral. Under FIRPTA, the buyer must generally withhold 15% of the gross sale price — not the gain — when the seller is a non-resident of the US. A Form 8288-B withholding certificate, filed before closing, can cut the withholding down to the actual tax on the gain, and reduced rates exist for lower-priced homes the buyer will occupy. Sellers also need a US tax ID (ITIN) and a 1040-NR to settle the real bill and claim any refund.

You should flag these mechanics, not run them — that is tax advice, and it is our job. Agents who work with us hand their clients a clean process: we handle the 8288-B timing, the ITIN application, and the Canadian return where the same gain is reported with a foreign tax credit so it is never taxed twice.

Dual-licensed agents: when commissions become US-source

Hold a Florida or Arizona licence and actually show property there, and the analysis flips: commissions from services performed inside the US are US-source income. The Canada–US treaty still protects you — business profits are taxable in the US only if you have a permanent establishment there — but claiming that protection is an active step, typically a 1040-NR with a Form 8833 treaty disclosure rather than silence. States write their own rules and are not bound by the treaty: Florida has no personal income tax, Arizona does.

Two practical cautions. Track your US days — a pattern of long US stints affects both the treaty position and your personal residency picture. And confirm who the payee can be: many US brokerages will only pay the licensed individual, so commission you hoped to route through your Ontario PREC may have to land personally.

Where the PREC fits in a cross-border practice

The PREC remains the right home for your Canadian commission flow — small business rate on retained earnings, salary-dividend flexibility — and we cover the setup on our realtor incorporation page. Cross-border, it adds bookkeeping duties rather than magic: USD fees need consistent FX conversion, a US bank account kept for convenience counts toward the $100,000 T1135 reporting threshold along with any US rental or investment assets, and the W-8BEN-E on file with each US payer needs renewing — the form lapses at the end of the third calendar year after you sign it.

What the PREC does not do is shelter US-source commissions from US rules, and holding US real estate inside it creates problems we would rather help you avoid. Before you take the dual-licence leap or a referral partnership gets serious, a one-hour planning call sets the structure while it is still cheap to change.

Source: IRS — FIRPTA withholding.