Being one of the biggest countries in the world (second only to Russia), Canada occupies nearly a half of the North American continent. Canada is a member of:
- the G7;
- the United Nations;
- the Organization for Economic Cooperation and Development;
- the World Trade Organization;
The advantages of opening a business in Canada's include:
- investor-friendly legislation;
- favorable geographical location;
- easy procedure for company registration;
- little red tape;
- no currency controls;
- access to markets in North and South America;
- no mandatory financial audits; no need to file tax returns; no inspections;
- one of the 3 most attractive countries for investment;
- possibility of obtaining a residence permit in Canada.
Those looking to register a company in Canada can do it in one of its several low-tax regions. Canada has a two-tier concept of taxation (federal + provincial). The general income tax rate depends on the place of registration of a company in Canada (Canadian provinces have various tax rates, ranging from 25% to 29%).
There are several business organization forms in Canada.
Limited Partnership (LP) - one of the most popular forms, its structure being similar to a Scottish LP. Its main advantages include:
- a resident of any state can become a partner;
- tax returns and audits are not required;
- companies in which founders are citizens of other countries (and which do not operate in Canada) are exempt from taxes;
- setting up an LP in Canada requires having one 1 general/limited partner.
LLP - requires having the main partner (receives the lion share of profits and manages a company) and several other partners (their income depends on the initial investments; have no right to manage the enterprise; exempted from liability). Its main features include:
- submitting annual reports is required;
- residency plays an important role in paying taxes;
- having regular and registered partners is a must.
Corporation - establishing a corporation requires meeting the following criteria:
- 25% of directors must have a Canadian citizenship;
- tax reports must be submitted to the relevant authorities (not later than six months after the end of a respective tax period);
- holding regular meetings (can be held anywhere in the world);
- paying a corporate income tax of 27%;
- paying a provincial tax of 4% (New Brunswick) if a corporation's turnover is up to 500,000 Canadian USD;
- having a registered office.
Establishing an extra-provincial corporation (EPC) in Canada is perfect for reducing a tax burden. Providing it does not conduct its business in Canada, such an organization is exempt from an income tax. Its main features are:
- registration is required;
- directors/employees/shareholders are not required to have a Candian citizenship;
- no income tax is paid if an EPC’s profits are earned outside of Canada;
- possibility to open an office and an account with a Canadian bank(s);
- shareholders bear limited liability.
Each of the nine provinces of Canada has its own rules for establishing Canadian companies.
If a company’s name does not include the words “société par actions” or “compagnie”, the “sa”, “ltée” or “inc” abbreviations must be added to it. The most commonly used legal ending in Canada is the INC. Alternatively, an organization may be assigned a number (for example, “123456 Quebec Inc”).
Canada has signed agreements on the exchange of information with 20 countries (and is now negotiating another 8). However, information about holders of bank accounts and registered companies in Canada is not publicly available. .
Considering starting a business in Canada? Need advice on registering a company in Canada? Why not get in touch with YB Case?