Support for Foreign Business in Canada

Attention: US, UK, and International Business Owners

– A Resource for International Businesses Operating in Canada –

Welcome to Canada!

If you are an international business or organization planning to operate in Canada, you’re in good company.  Many foreign enterprises are coming to Canada to widen their customer base and to employ our skilled workers. Just ask Google.

If you’re expanding to Canada and don’t know where to start, Stern Cohen Accountants can help.

Start Here!

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, advisory, bookkeeping, and payroll services. We work with many international clients from the United States, the UK, Europe, Asia and beyond.

Who Should Read This Article

• Foreign companies 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

Topics Covered

This article includes accounting information for operating in Canada. It provides comprehensive, yet easy to read, information on the following topics:

1. Basic checklist for setting up your Canadian operations
2. Incorporation
3. Your Canadian corporate tax return filing requirements
4. Responsibilities for collecting and remitting goods and services taxes (GST) on Canadian sales
5. Payroll taxes and compliance
6. How we can help you

1. Basic Checklist for Setting Up Your Canadian Operations

Setting up a Canadian branch may seem daunting from afar, but our local team can guide you through it. Here are a few key milestones:

• Should you incorporate your Canadian business?
  A Stern Cohen Tax Specialist can help you select the ideal structure for your needs in Canada (see #2 below). 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.
• Banking
  We can provide you with a referral to a local bank to assist in establishing your Canadian banking needs. Stern Cohen cannot begin any bookkeeping/payroll services without bank account information.
• Sales Tax
  You’ll need to charge and collect Goods and Services Tax (GST) and/or Harmonized Sales Tax (HST) You may also be required to register for provincial sales tax (PST) in certain provinces. A Stern Cohen tax advisor can assist you in determining your sales tax requirements.
• Business Number
  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 corporations and Canadian corporation in obtaining a BN.

2. Incorporating a Canadian Corporation

We can evaluate whether it is beneficial for you to incorporate a Canadian subsidiary. 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.

3. Corporate Income Tax

At the time this article was written in 2020, 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.

4. 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.

5. 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 that have 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).

6. How Stern Cohen Accountants Can Help

Our specialist teams look forward to helping you 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)
• Bookkeeping, monthly reporting, cash flow and accounting services by our FIT team
• Up to the minute monthly financial analysis via Zoom web conferencing or phone
• 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)
• COVID-19 relief from the Canadian government. Yes, we have helped our clients determine eligibility and apply for the COVID-19 government relief programs. Many have received Canadian government relief.

One More Thing If You’re Late to the Party: Voluntary Disclosure

If you have not fulfilled your obligations while doing business in Canada, consider the CRA’s Voluntary Disclosure Program (VDP). Depending on the situation, penalties can be waived or reduced. Your Stern Cohen tax specialist can help determine if the VPD program is suitable for your situation.

For more information about how a partnership with Stern Cohen will work for you, we invite you to call or contact us today.

Disclaimer: While the information in this article 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.