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Business in Canada


Canada is one of the richest countries in the world with high per capita income. In addition to being a member of the Organization for Economic Cooperation and Development (OECD) and the G8 (G8), NATO, WTO, Francophonie, OAS, APEC and UNO, it is rightly one of the ten largest trading countries in the world. Your business will be offered good taxation conditions, and the reputation of the country will not allow anyone to doubt the legality of the business. After signing the North American Free Trade Agreement (NAFTA), a trilateral trading block has been established between Canada, Mexico and the United States of America to remove the barriers in trade and investments between these countries. This, in turn, gives not only a good logistics network, over 451 million consumers, but also time zones adapted for trading on American quotes.

Owning a business in Canada can be a good way to obtain a residence permit. Therefore it is not surprising that such a service as a company registration in Canada is gaining popularity currently.

Legal system of Canada

The common law system (exception for the province of Quebec) prevails in Canada. The Canadian provinces have their own legislation, including corporate legislation, except for the branches subject to the federation. Canada did not participate in the Hague Convention, which repeals the requirement of legalization of foreign official documents of 05.10.1961. Therefore, there is no concept of "apostille" on official documents in the country, and the documents intended for the use abroad are legalized in the consulate.

Advantages of Canada

Canada is a stable jurisdiction with a very good reputation.
Mandatory paid-up capital is only 1 Canadian dollar.
In Canada, there are no requirements for the submission of reports on doing business outside the country.
УIn Ontario, general meetings of shareholders are not required.

Companies in Canada

There are 4 organizational and legal forms of business in Canada:

Limited partnership (LP)
Limited Liability Partnership (LLP)
Extra-provincial corporation (EPC)
Corporation
The most common form is limited partnership (LP). You can do business anywhere in Canada. However, you will have to pay for the license in the province where the activity will be carried out, and 25% of the directors must be the residents of Canada (they must have a valid Permanent Resident of Canada card). One more feature is the highest protection of the name throughout the country. The Canadian citizenship for the directors is not necessary, but a local registered agent is required in such provinces as British Columbia, New Brunswick, Nova Scotia, Prince Edward Island and Quebec. Doing business is allowed within the province in which the company is registered.
LP - Limited Partnership

The Canadian legislation makes it possible to use the companies with a zero tax rate - LP (Limited Partnership). LPs are not legal entities, but they have their features: they can open bank accounts, enter into transactions with counterparties within the framework of the activities carried out, etc. The Canadian LPs with foreign founders which do not conduct commercial activities and do not receive income on the territory of the country are exempt from paying taxes.
LP company in Canada is not a separate subject of taxation, and its partners pay their taxes on profits at the place of their residence according to their interests in LP (provided that this is stipulated by the legislation of a particular country). A company in Canada can conduct business with English and Scottish partnerships, as well as with the US companies, in a tax-free regime (similar to offshore companies). Naturally, provided that the partners of the LP company are non-residents of Canada and the company has no domestic activities. In some provinces of Canada, for example, in the province of Alberta, the register of companies is closed, which allows to preserve the owner's privacy.
Features of Canadian partnerships LP:
1. The name of the company must end with a word, phrase or abbreviation, which indicates the limited liability of the company. 2. The minimum authorized capital is 1000 CAD, but there are no specific requirements for its payment. 3. The founders may be minimum of 2 partners, physical or legal entities, there are no requirements for their residence. 4. One of the partners, the resident of any country, should be appointed as the General Partner. He bears unlimited liability for LP obligations and manages the partnership. LP does not have a director, the general partner manages. 5. Corporate general partners are allowed. If the corporation is registered outside of Canada, it is necessary to register it as an extra-provincial corporation (EPC) in advance for its appointment as the general partner. 6. A limited partner, a resident of any country, is responsible for obligations of LP by its contribution to the partnership, but he does not participate in the management of the company. He can be any physical or legal entity. In the event that not Canadian corporation is appointed as a limited partner, there is no need to register it as an extra-provincial corporation in Ontario. 7. A physical person can be a general partner and limited partner at the same time. Thus, one physical person is sufficient to register LP. 8. Partner relations are governed by a partnership agreement, which is drawn up according to their needs and wishes. 9. LP companies must have a local secretary. 10. LP companies are not required to file an annual financial report if they do not conduct business in Canada.
In the form confirming the registration of LP, the address of the registration office must be indicated. The copies of all partner resolutions and a copy of the Partnership Agreement should be kept in it. The official correspondence from the Government of Ontario is also received at the address of the registration office. 12. Limited Partnership is not subject to taxation. Therefore, LP should not file a tax return and pay income tax. All profits received by the Limited Partnership are distributed among the partners. Partners which are not residents of Canada do not have tax liabilities in it. If the partner is a resident of Canada, he is obliged to include his part of the profit received as a result of LP activities in his personal tax return and pay income tax. Canadian partnerships are an ideal choice for business, which involves the purchase of goods in the EU countries and their export to other countries (including Ukraine). On using the company with this purpose, the registered seller in any EU country is not always sure whether the operation is an export from the EU (and thus exempt from VAT procedures) or not. When using a Canadian company, the exports from the EU are obvious. The partnerships in Canada are also suitable for IT developers, whose main buyers are located in Canada, the US and the EU. In addition, partnerships will help to conduct online business (website development, marketing, auctions, online stores, etc.).
Limited Liability Partnership (LLP)

Founders. Кількість: мінімум – 2. Quantity: minimum - 2. Status: physical or legal entities. Residence: they can be residents of any country. Information about the founders: it is stored in the register of the enterprises of the relevant province. Nominee shareholders: allowed. Director. The LLP company law stipulates that the management of the company is carried out by partners that can also act as directors. Secretary. There are no requirements for the position of secretary. Authorized capital. The standard declared capital is 1.000 CAD. Minimum paid-up capital - no requirements.
Company name. It should end with the words "Limited Liability Partnership" or the abbreviation LLP. It is not allowed to register the names containing the words "Bank", "Insurance", "Trust", etc .; In addition, the name that, in the register's opinion, is "too general" (that is, it has no individuality) will not be registered. Information about the real owner of the company It is provided only to the registration agent and it is confidential. Reporting. There are no requirements for the submission of financial statements, but this does not relieve the company of this type from its drawing-up and storage.
Extra-Provincial Corporation (EPC)

The director, employees and founders of the EPC can have any citizenship, there are no clear requirements for it. A license is required for doing business in a certain province. Extra-provincial corporation operates as a branch, so the main company that will register the EPC in Canada is needed. Any offshore company can be registered as EPC. There is no income tax received outside of Canada. EPC can open an account in the Canadian Bank and an office for managing business in the US and other countries. This organizational and legal form is especially popular in Europe for the sale of goods and services abroad.
Corporation

Such an organizational form as corporation is most often used in tax planning. The Canadian corporation has the following structure:
Shareholders. The minimum quantity is one; it may be a physical and legal entity, a resident of any country. Usually, a physical resident person of a tax-free jurisdiction is a shareholder. Director. The minimum quantity is one; it must be a physical person over 19 years old, he may be a resident of any country. Usually, a physical person-resident of a tax-free jurisdiction is used as a director. Officials. A president, a treasurer and a secretary must be necessarily appointed in the corporation. Usually, the directors of the corporation are appointed to their positions.
Annual shareholders’ meetings are mandatory and they may take place outside of Canada. But the registration office of the corporation must be necessarily on the territory of the country. Bearer shares are not allowed in Canada. The name must contain a distinguishing element (for example, 007Bond), an activity description element (for example, the Detective Agency) and an element indicating the legal form of the enterprise (ending) - 007Bond Detective Agency Inc.
Taxation in Canada
Companies in Canada pay federal, provincial and municipal taxes. The local government sets the tax rates in each province independently. In addition, there is a special tax of 5% on goods and services, but a wide range of food, health care products and services, as well as education, are exempt from it. The total income tax rate is 25%. Companies are required to pay taxes on all their profits regardless of the source of its origin.
The tax is levied on the profits received less expenses associated with the operation of the company. The partnerships that do not operate in Canada are exempt from taxes on its territory. It should be also noted that Canadian companies-residents pay income tax regardless of the place of business, whether it is Canada or any other jurisdiction. Non-resident companies pay income tax only on profits received as a result of doing business directly in Canada.
Reporting and Audit
Taxes are calculated on the basis of a tax return and must be paid within 2 months from the end of the fiscal year.
Taxes are calculated on the basis of a tax return and must be paid within 2 months from the end of the fiscal year.
If the company did not conduct business during the financial year, a zero report is submitted to the tax office.
Exchange control in Canada
Absent
International tax agreements of Canada
To date, Canada has concluded about 90 bilateral agreements on avoidance of double taxation with the following countries:
Australia Austria Azerbaijan Algeria Argentina Armenia Bangladesh
Barbados Belgium Bulgaria Brazil United Kingdom Hungary Venezuela
Vietnam Gabon Guyana Germany Hong Kong Greece Denmark
Dominican Republic Egypt Zambia Zimbabwe Israel India Indonesia
Jordan Ireland Iceland Spain Italy Kazakhstan Cameroon
Kenya Cyprus Kyrgyzstan China (PRC) Colombia Korea Kuwait
Latvia Lithuania Luxembourg Malaysia Malta Morocco Mexico
Moldova Mongolia Nigeria Netherlands New Zealand Norway United Arab Emirates
Oman Pakistan Papua New Guinea Peru Poland Portugal The Republic of Côte d'Ivoire
Russia Romania Senegal Serbia Singapore The Slovak Republic Slovenia
United States Thailand Taiwan Tanzania Trinidad and Tobago Tunisia Turkey
Uzbekistan Ukraine Philippines Finland France Croatia Czech Republic
Chile Switzerland Sweden Sri Lanka Ecuador Estonia South Africa
Jamaica Japan
In addition, Canada has signed 24 agreements on the exchange of tax information with a number of offshore jurisdictions. The state is a participant to the Convention on Mutual Administrative Assistance in Tax Matters (as amended by the Protocol of 2010) and it will participate in the automatic exchange of information on financial accounts (within BEPS) from September 2018.

Канада, замок
Tax expenditures on the income of physical persons of Canada bring benefit for more than 50 percent of persons which gain income, according to the new report of the Canadian center of political alternatives (CCPA).

Using data of 2011, it was established that 59 of 64 tax expenses, provide more benefit to 50 percent of the persons gaining income. It shows that in 2011 39 percent of profitable tax expenses provided to more than 10 percent of persons which gain income, and less affluent taxpayers saw only 16 percent of the benefits.
The report states that there are only five taxes: a tax on working income, a guaranteed income without tax, social security without taxation, reimbursement of medical costs and disability tax credit - they can be described as "relatively progressive" with maximum benefit CAD1,110 ($ 840 USA).
The Canadian government is currently carrying out a comprehensive review of federal tax expenditures. The goal is to ensure that the tax costs are fair, effective and have financial responsibility.
The Canadian center of political alternatives has recommended that the annual tax expenditure report from Finance Canada, included the distribution of tax expenses through the income spectrum and those tax expenses were included as a cost in the financial statements of the federal government. Therefore, the federal government must be aimed at annual savings in tax expenditures to five percent.

Author: Olena Kutova

senior lawyer of the Finance Business Service company

Canada

The tendency of the federal and local governments in Canada to raise taxes for companies, means that the country is losing its competitive advantage, according to a new report, School of Public Policy at the University of Calgary.

The school Report of 2015 about Tax Competitiveness created by Filip Bezel and Jack Mintz explained that the effective rate of the corporate tax of Canada on new investments raised from 17.5 percent of 2012 to 20 percent of 2015. In the report speaks that this increase, first of all, at higher provincial rates of the corporate income tax, reversals of British Columbia the governments of the previous goods and services of tax reforms, and reducing tax benefits at the federal and regional levels. The reforms brought in the federal budget of 2016 will see effective increase in a rate to 20.1 percent.

The school showed that now Canada takes the sixth place on the extreme height of an effective rate of a tax (METR) in the G7 and the highest 13th place in the G20 and OECD group of the countries.

Among the provinces of Canada the report noted that Newfoundland and Labrador increased the rates of the corporate income tax to deal with their deficits while New Brunswick increased the corporate tax from 10 percent to 14 percent in 2014-16. The increase in corporate tax Alberta in 2015, increased its effective tax rate from 2.3 percent to 19.3 percent higher than Ontario and Quebec.

"Elections Donald Trump and Republican Congress, promising for reduction of tax rates of the corporate income tax, and also recent confirmation by May of the prime minister, for lowering of the British rate of the corporate income tax to 17 percent, pressure tactics will be reduced not to increase the corporate income taxes for the following several years", declared at political school.

The report recommends that the government should use the proceeds, which are received from the review of tax expenditures, to reduce the rate of corporate income tax.

Also, report offered: "For example, federal level could be reduced from 15 to 13 percent, having reduced accelerated depreciation and other tax preferences at the federal level without influence on the income of the state basis. Provinces could accept the unique rate of the corporate income tax on all companies which will also be financially neutral. And it would simplify structure of the business tax, and also would make it more effective and neutral".

Author: Sergey Panov

managing partner Finance Business Service

Canada

President of the European Council Donald Tusk warned that comprehensive economic and trade agreement (CETA) with Canada may be the last with the EU if the government "is not able to convince people that the trade agreements on their behalf."

Pinned hopes that CETA will be formally signed on Thursday 27 October. However, despite approval by 27 of the 28 EU Member States, the Belgian region of Wallonia refused to give their support. The Federal Government of Belgium gave their support to end on 24 October. Andre Antoine, Walloon parliament speaker, said that it is impossible to adhere to this "ultimatum."

It was to be a meeting last week after the European Council, where Tusk said "all member states, except one, approved the deal."

Commenting on the event, Tusk said: "Firstly, our citizens are increasingly concerned at the expense of trade agreements, leading the negotiations to their advantage, and I'm afraid that we can not continue negotiations for free trade agreements (FTA), if we do not will prove in practice that we are very serious about the protection of European consumers, workers and businesses."

"We have made some progress in this direction. Leaders have committed to urgently reach agreement on the modernization of EU trade defense instruments. We instructed our trade ministers to break the deadlock."

Speaking before the meeting, Tusk said: "If we can not convince people that trade agreements on their behalf if we can not convince them that our representatives are negotiating to protect the interests of the people, we have not is likely to build public support for free trade. it means, I'm afraid that CETA could be our last agreement on free trade."

Author: Sergey Panov

managing partner Finance Business Service

МПС Canada

Minister of Revenue of Canada, Diane Lebouthillier, assists the government, which is aimed at improving the interaction between the tax authority with SME.

Diana Lebouthillier participated in a roundtable discussion with owners of small and medium-sized businesses in New Brunswick, where it drew attention to its mandate to modernize the Tax Office Canada (CRA). The Government's consultation is to gather information about how the CRA can make their programs and services more streamlined and focused on taxpayers.

Diana Lebouthillier said: "Our government has made a commitment to make real changes. As for the Minister of National Revenue, one of my main priorities is to ensure that the Internal Revenue Canada became even more customer-oriented organization, so that Canadians and Canadian business owners feel more protected, respected and valued."

Budgeted CAD 185.8 million (USD 141.98 million) for the period 2016-2021, and CAD 14.6 million currently.

Author: Olena Kutova

senior lawyer of the Finance Business Service company

Canada closes a loophole in the property tax
Canadian Finance Minister Bill Morneau has announced that it will close loopholes surrounding the exemption from capital gains tax (CGT) on the sale of a principal residence.

Canadian Finance Minister Bill Morneau has announced that it will close loopholes surrounding the exemption from capital gains tax (CGT) on the sale of a principal residence.

According to the Department of Finance, the government "is committed to tax fairness, as well as to the fact that the tax exemption on capital gains from the sale of a principal residence will only be available in appropriate cases."

Last month, the Canada Revenue Agency (CRA) announced that it will investigate the case when the real estate speculators manipulated loopholes in the ownership rules permit to evade taxes.

According to the amendments, a person who was not resident in Canada, in the same year acquired a residence permit will not qualify for tax exemption in the current year.

Trust will be required in each current year, after 2016, it will apply - a spousal or common-law trust, a trust qualifying disability or trust in favor of a minor child, whose parents have died. The beneficiary of a trust, or a family member who gets a residence during the year, will be required to reside in Canada and be a member of the human family, which creates trust.

For tax years ending after October 2, 2016, the CRA will require taxpayers to report the disposal of property.

Author: Sergey Panov

managing partner Finance Business Service

Canada: Tax Administration

Canadian IRS released its first study on the extent of the tax gap. In broad terms, the tax gap is the difference between the tax that would be paid if all obligations are fully met in all cases, and the tax actually paid and collected.

"I am pleased to present to you the first study proceeds Agency of Canada estimated the tax gap. It is important to use this tool to make sure that Canadians are confident in the fairness of the tax system. It is equally important that we continue to look for innovative ways for Canadians to understand and comply Canada's tax system, "said Minister of Canadian national income, Diana Lebauthiler.

This is the first study to have a glance to show how Canada will speak on the assessment of the tax break, after it was promised to do so in April 2016 as part of international efforts to combat tax evasion.

Along with the report, Canada has published estimates GST / HST gaps suggest that the tax break for this tax is 6.2% in 2014, the whole pursuant to the previous years.

Having released two reports, the Canadian tax authority reported that new estimates of the tax gap include Canada and 24 other OECD countries, which are evaluated at least one aspect of their tax loopholes.

"KRR will continue to explore ways to better understand the tax gap and see how it can be applied to the Canadian context. Over the next two to three years, KRR publish a number of documents on various aspects of the tax gap, the tax authority said.

KRR also hold consultations with stakeholders, including the Canadian Tax Foundation, over the next year to provide experts, scientists, and other stakeholders that contribute to the investigation estimates the tax gap in Canada."

Author: Olena Kutova

senior lawyer of the Finance Business Service company

Parliament of Canada

On the level of precipitation about free trade agreement between Canada and EU the government of Canada claimed about envoy infliction who will speed this talks.

The government claimed that the infliction on envoy has a high preoritet for signing free trade agreement. In this year, it will be Pierre Pettigrew who will release this deal during one year.

Pettigrew will meet with stakeholders in the provinces and territories of Canada, as well as with senior business and government leaders of the EU member states.

Pettigrew said: "The agreement between Canada and the European Union sets a new world standard for commercial transactions and positions Canada as an innovative country and the new international norms of free agreement will create economic opportunities, and I am eager to help advance the deal."

In July, the European Commission formally proposed the signature and conclusion of free agreement. The Commission should receive the support of the Council of Europe and the European Parliament. Once this process is completed, the agreement will be provisionally applied. The Commission hopes that an agreement will be signed during the next Canada-EU summit to be held in October.

Author: Sergey Panov

managing partner Finance Business Service

European commission propose officially declaim and concluded Free Trade Agreement between EU and Canada. Commission need to get support from the European Council and European Parliament. After finishing this process this agreement can be provisionally applied.

EU-Canada

European commission propose officially declaim and concluded Free Trade Agreement between EU and Canada.

Commission need to get support from the European Council and European Parliament. After finishing this process this agreement can be provisionally applied. The commission hope that agreement between EU and Canada will signed during next summit between them in October.

Commission President Jean-Claude Juncker said: "FAT between EU and Canada is the best and progressive agreements and I want that it go into force as soon as possible. It provide new opportunities for European companies while promoting our standard as benefit for people. It's time to begin. At stake is the credibility of the European trade policy."

EU Trade Commissioner Cecilia Malmström said: "I hope that now the deal with Canada will be signed and concluded quickly, to the benefit of consumers, workers, and entrepreneurs – this is an agreement that Europe needs.

The Comprehensive Economic and Trade Agreement (CETA) will eliminate or reduce a range of tariffs. Upon implementation, Canada will scrap duties worth EUR400m (USD442.4m) for goods originating in the EU. At the end of transitional periods for duty elimination, this figure will rise to EUR590m a year.

Commission decided propose that The Comprehensive Economic and Trade Agreement will be mixed agreement that does not bring the damage from the legal point of view.

Author: Sergey Panov

managing partner Finance Business Service

Canadian benefits

The Organisation for Economic Cooperation and Development (OECD) said that government of Canada need to include Preferential Tax of small business in planned review of tax expenditures.

This recommendation was make in the last economical overview OECD of Canada and added that this capital taxable income is not sufficiently focused.

"The main aim of this agreement to save small business in a big amount for investing and its make this program more effective.

OECD said that depend of analysis result according to decision of federal budget in 2016 to defer a series of scheduled increases to the SBD and it will be seen as moving in a right direction. It added that the Government should also "review its targeted measures and adapt them as necessary to ensure that they correct clear market failures efficiently."

The 2016 Budget deferred any further reductions in the small business income tax rate and committed the Government to undertaking a review of the tax system within the coming year, with a view to eliminating poorly targeted and inefficient tax measures.

Author: Sergey Panov

managing partner Finance Business Service