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.
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.
The important thing to remember is that every client 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.
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.
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.
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).
Contact us for all the expertise you need including:
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.
Stern Cohen FIT is your virtual accounting department and CFO on an industry-leading, cloud accounting platform.
Get the right FIT but pay significantly less than hiring in-house.. with better results and a whole lot less stress.Learn More...