Specialized Tax Solutions for non-resident corporate entities operating in Canada
A non-resident corporation who carries on business in Canada must register for a GST/HST program account when it provides taxable supplies (goods or services) in Canada for over $30,000 a year (the registration threshold). Non-resident corporations can voluntarily register for a GST/HST program account even if they don’t meet the threshold.
“Carrying on business” for GST/HST purposes involves actively engaging in commercial activities in Canada. It’s a complex legal concept, and various factors are considered, such as the extent and nature of the activities, frequency, and scale. Consult the CRA or a tax professional for specific guidance.
A non-resident corporation must register for a payroll account number with the CRA if it has Canadian employees or withholds Canadian income tax from payments to non-resident employees. The registration is necessary to remit income tax deductions and other payroll-related obligations.
Yes, a foreign company can operate a business in Canada. They can do so by establishing a subsidiary, branch, or through other legal structures. The specific requirements and tax implications depend on the chosen structure.
Yes, a non-resident corporation doing business in Canada is generally required to file a Canadian corporate income tax return, such as a T2 return, to report its Canadian-source income and calculate tax liability.
Yes, a US corporation doing business in Canada is subject to Canadian tax laws and generally required to file a Canadian corporate income tax return if it earns income from Canadian sources. However, per the Canada-US tax convention, a US corporation only needs to pay Canadian tax on profits allocable to a “permanent establishment” in Canada.
income tax purposes?
A US corporation is considered to have a permanent establishment in Canada if it has a fixed place of business in Canada, such as an office, branch, or factory. Additionally, if it has employees or agents in Canada with the authority to conclude contracts on its behalf, it can trigger the concept of a permanent establishment.
The choice between a branch and a subsidiary depends on various factors, including tax implications, liability, and regulatory requirements. Consult with a tax advisor to determine the most suitable structure for your specific business needs.
When hiring and paying non-resident employees in Canada, payers should consider obligations such as withholding and remitting income tax, providing T4 slips, and complying with immigration and employment regulations. Regulation 102 contains certain exemptions for tax withholding from payments to non-resident employees. Consult the CRA and a tax professional for detailed guidance.
When making payments to non-resident contractors for services performed in Canada, payers may have withholding tax obligations (typically 15% of the payments). The specific requirements vary depending on the nature of the services and the tax treaty between Canada and the contractor’s home country. Regulation 105 contains certain exemptions for tax withholding from payments to non-resident contractors.
Thin capitalization rules limit the amount of interest expense a corporation can deduct for tax purposes when it’s excessively indebted to non-residents. These rules aim to prevent profit shifting through excessive interest deductions.
Upstream loan rules are designed to prevent Canadian corporations from taking on excessive debt from foreign affiliates that might not be repaid. There are specific tax implications and restrictions associated with upstream loans. Typically, an income inclusion must be realized by the Canadian corporation for the loan received from foreign affiliates if not repaid within a specified timeframe.
Yes, Canadian corporations are generally required to withhold and remit withholding tax on dividends paid to non-resident shareholders. The withholding tax rate is typically 25% but can be reduced depending on tax treaties between Canada and the shareholder’s home country.
Canadian corporations engaging in intercompany service agreements should follow the arm’s length principle and use transfer pricing methods in accordance with Canadian tax regulations. Methods like the Comparable Uncontrolled Price (CUP) method, Cost Plus method, and Resale Price method are common approaches to ensure transactions are priced at fair market value.
