If you are a business owner but not a resident of Canada and want to grow your business and open a location in Canada, there are two main ways for existing foreign corporations to register to operate in Canada:
1. Open A Branch Office
To open a branch office a foreign corporation must apply as an extra-provincial or foreign corporation in each province in which the business intends to operate.
2. Incorporate a Subsidiary
A subsidiary is a Canadian corporation whose shares are held by a foreign parent company. A subsidiary can be incorporated federally or provincially. Compared to a branch office, incorporating a subsidiary gives the parent company limited liability from the actions of the subsidiary.
Are You A Foreign Business That Wants to Open A Business in Canada?
You do not need to be a Canadian citizen or resident to open a business or branch in Canada, says Cross Border and International Tax Expert James Belesiotis:
A non-resident does not have to be a resident to operate a business or branch in Canada however, the business might be subject to a higher tax. Privately held corporations enjoy a federal tax rate of 9% assuming it's a Canadian Controlled corporation (for income up to $ 500,000). A non-resident who does not become a resident of Canada (which may or may not involve specific conditions in their specific tax treaty) will experience an increase to the federal tax rate by 29% points or 38% - this computes to an additional federal tax liability of $ 145,000 before provincial tax is imposed.
Should a non-resident corporation deploy an employee to render services even for a single day in Canada triggers a resulting payroll withholding obligation as noted in Tax Regulation 102.
Non-residents performing non-employment in Canada is subject to Tax Regulation 105 and typically misunderstood. A non-resident corporation engaged by another non-resident to perform services in Canada is subject to a 15% withholding requirement.
B2B Immigration Legal Guidance
The guidance of an experienced Canadian immigration lawyer can be very helpful if you are planning to incorporate a company in Canada as a non-resident. For example, different provinces have different residency requirements to open a business - and different tax rates:
- Ontario requires that 25% of directors must be Canadian in order to incorporate.
- In British Columbia
- If 51% of the shareholders of a Canadian corporation are non-residents of Canada you will lose the small business tax deduction, and your corporate tax rate will increase to 26.5% instead of 15%.
- In Ontario, profits distributed from a Canadian corporation to non-resident shareholders are subject to a withholding tax that can range from 5% to as high as 25%.
Learn about the benefits of using an immigration lawyer with the links provided below:
Have an immigration lawyer on your side:
Call Ackah Law BEFORE you cross the border: 587-602-0179.