If you are an international business coming to Canada from the US, UK or another country you’re in good company.
Many foreign enterprises are setting up shop in Canada to expand their market reach and employ skilled workers.
If you’re expanding to Canada, our team of specialists provide a turn-key, fully-customized solution to help ensure your success. We provide everything from advice on your company’s structure and whether to incorporate, to tax compliance (GST/HST), advisory, bookkeeping, and payroll services. We work with many international clients from the United States, the UK, Europe and Asia.
Who Should Read This
- International businesses planning to start a business with sales in Canada
- US and other international companies selling thru Amazon (FBA) or other online e-commerce platforms direct to retail customers in Canada
- Non-resident businesses sending employees to Canada
- International businesses looking to comply with Canadian tax regulations and avoid penalties for their activities in Canada
- Getting a Business Number to conduct business in Canada
- Should you incorporate or open a Canadian Branch?
- Canadian corporate tax return filing requirements
- Treaty-based T2 Corporate Tax Return
- Responsibilities for collecting and remitting sales taxes (GST/HST)
- Payroll taxes and compliance
- How we can help you in Canada
To conduct business in Canada you need a federal business number (BN). The business number is used for payroll, GST/HST, and income tax filings. We can assist foreign and Canadian corporations in obtaining a BN.
Should you incorporate your Canadian business or open a Canadian Branch?
The important thing to remember is that every company’s situation is different and it requires a thorough understanding of the facts before advice can be offered.
A Stern Cohen Tax Specialist can advise you on whether your foreign company should operate in Canada as a branch or if it should incorporate. Our tax specialists can recommend the ideal corporate structure for your needs in Canada (see below).
Many businesses choose to incorporate a Canadian subsidiary to limit the scope of a Canada Revenue Agency (CRA) audit to the books of their Canadian subsidiary and not their foreign corporation. It can also alleviate the requirement for your Canadian customers to withhold tax on payments to you for services rendered in Canada.
If it is determined that a Canadian corporation is optimal, we can refer you to a local lawyer. If you incorporate a Canadian entity, we’ll need the Articles of Incorporation before we can start our accounting services. Tax benefits (like lower tax rates) exist for business owners so speak with your advisor about the best option for you.
Corporate Income Tax
At the time this article was written, the Canadian corporate tax rate for a corporation operating a business in Ontario is 26.5%. A foreign corporation carrying on business in Canada is required to file an annual corporate income tax return. Failure to file a corporate tax return can lead to penalties up to $2,500.
For some foreign corporations, a refund of tax withheld by their Canadian customers in connection with services rendered in Canada may be available. This usually arises in a situation where the foreign corporation received a T4A-NR slip from their customer, their employees spent less than 183 days in Canada, and they are based in a country that Canada has an income tax treaty with.
Sales Tax (GST/HST)
Businesses selling goods and services in Canada are required to charge and collect Goods and Services Tax (GST) and/or Harmonized Sales Tax (HST) from customers. GST/HST is similar to Value Added Tax (VAT) used in Europe.
Some goods and services are exempt from sales tax in Canada. It is best to consult with a professional, like a Stern Cohen tax specialist, to determine if your goods and services are exempt from GST/HST.
Sales tax rates vary depending on the Canadian province where you conduct your business activities. It can range from 5% in Alberta to 15% in Nova Scotia. Some provinces have their own provincial sales tax (PST) that can be on top of the 5% rate of GST.
Sales tax returns (GST/HST returns) need to be filed and taxes remitted to the CRA on a monthly, quarterly or annual business depending on the revenue and sales activities of your Canadian business.
Stern Cohen can assist with all your subsidiary’s tax compliance requirements.
Payroll Taxes and Compliance
Whether your business is sending employees to Canada or hiring employees in Canada, payroll tax needs to be remitted to the Canada Revenue Agency (CRA). In some cases, payroll tax can be waived for foreign employees if the foreign corporations meet certain requirements.
In addition, the corporation will also need to file a T4 information return at the end of each calendar year to report the payroll made in Canada. Stern Cohen can assist with payroll and reporting compliance.
Most Ontario businesses with employees (including family members and sub-contractors) must register with the WSIB (Workplace Safety & Insurance Board) within 10 calendar days of hiring their first employee. Find out if you need to register on this link.
Finally, if your Canadian operations has a payroll of more than $490,000 (CAD) in Ontario, we can assist with registration and filing of another payroll tax called EHT (Employer Health Tax).
We Can Help Your Business Succeed In Canada
Contact us for all the expertise you need including:
- Guidance on the best structure for your business in Canada
- Proactive advice and services for compliance with CRA on corporate, sales, and payroll tax
- Set up of your business account with the Canadian Revenue Agency (CRA)
- Correct setup and integration of your Amazon or Shopify business and QuickBooks Online
- Support for sales on Shopify and Amazon and registration across Canada
- Bookkeeping, monthly reporting, cash flow and accounting services by our FIT team
- Monthly financial analysis and reporting
- Year-end corporate financial statements
- Referrals to lawyers to help you incorporate and register a Canadian corporation
- Referrals to local Canadian bankers to help you establish a Canadian bank account
- Set up and provide payroll services (or we can connect you with a payroll provider)
For more information about how a partnership with Stern Cohen will work for you, we invite you to contact us today.
Disclaimer: While this information is meant to be helpful, it is not meant to be advice for your unique situation. If you would like assistance with your tax and filing requirements for doing business in Canada, please contact us.