Are you selling things to Canada, or seriously considering whether or not you are going to market goods or services there?
Have you considered increasing the amount of goods or services that you are marketing in Canada?
Do your workers sometimes cross over the border into Canada to sell goods and services there?
If you, or your boss, answer yes to any of those questions then you need to make sure you have a sound knowledge of income taxes and other types of taxes in Canada.
Canada has drastically cut corporate taxes
Many U.S.businesses had already been increasing the level of goods and services they were attempting to sell in Canada. Then the Canadian government have markedly reduced the rates of corporate taxes to make the country an even more attractive place to invest in.
Tax law and carrying on a business in Canada
In Canada the interpretation of what constitutes carrying on a business is a really broad one. It covers the usual activities of buying, selling, making, and providing services within the country. Yet it also covers the marketing and taking of orders via an agent, or a servant of the business based in Canada whether or not that business is physically based in the country itself.
How to qualify for the benefits of the Canadian Income Tax Treaty
People that are not resident in Canada are still liable to pay income tax on any profits they have made by trading in the country. Those businesses that only operate in Canada on a cross border often claim exemption through the provisions of the treaty.
The best structures for operating businesses in Canada
What is exactly the best structure for operating in Canada depends on the type of business that each company carries out. Basically the profile of each company and the owners of these companies will influence the structure for each one.
You need to find the best way to pay in Canada if your business is going to have a presence in the country.
Open a branch in Canada is one way of ensuring your business is paying the correct rate of tax. Further more for U.S. companies any tax they pay in Canada is creditable towards their U.S. tax returns. This means if you pay tax on profits in Canada you do not have to then pay tax on the same profits in the U.S. Also any loses made in Canada can be offset against tax allowances in the U.S. That can help soften the blow of loses as part of set up costs.
Businesses should also consider the benefits of setting up as a limited liability company in Canada as well. There are no differences in tax rates yet it could Increase legal protection.
Offering services in Canada
Businesses can offer and provide services without having to be there. A good example of this would be providing computer software programs remotely from a different country. The profits from these services Are liable for taxes.
Businesses that sell goods and services are also liable for paying the Goods and Services Tax. This GST is collected by the federal government and the majority of the provinces add a surcharge on top of it. So the level of taxes will depend on, which provinces are traded with.