Significant changes are happening in the immigration sector, particularly in the business aspect. In the past, businesses were required to have at least 25 percent of company directors that were Canadian residents as per the Ontario’s Business Corporations. Even if the number of directors was less than four, one of them would need to be a resident.
What’s the Big News?
By scrapping this requirement, business owners can now establish a business in one of the most populated areas in Canada, Ontario. While this may seem like a significant change, many Canadian provinces don’t have this clause. British Columbia hasn’t had a residency requirement for more than twenty years. Ontario will no longer require any resident Canadians on the Board of Directors when registering a business. This policy was placed into effect last July 5th, 2021.
How to Start a Business in Ontario as a Non-Resident
Assuming you are a non-resident and want to expand your own business, here are two primary ways you can operate in Canada:
1. Establish a Branch Office
A foreign corporation must register as an extra-provincial or foreign corporation in each province where it wishes to operate to create a branch office.
2. Establish a Subsidiary
A subsidiary is a Canadian firm whose stock is owned by a foreign parent business. A subsidiary can be formed on a federal or provincial level. In contrast to a branch office, establishing a subsidiary limits the parent company’s accountability for the subsidiary’s activities.
What are the Requirements?
Whether a foreign citizen chooses to stay in their home country or come to Canada, the criteria for establishing a business remain the same. They are as follows:
- When creating a corporation in any province in Canada, a local address is necessary.
- Preparing the paperwork and choosing a specialist agent to file them with the Trade Register, reserving a business name number depending on the foreign investor’s preferences.
- Getting a Canadian tax registration number and registering for VAT in Canada, and obtaining the appropriate permits and approvals from Canadian authorities for performing services or selling products are also required.
Opening a corporation in Canada as a non-resident offers numerous benefits, one of which is the affordable business start-up expenses; nevertheless, it is crucial to note that only certain types of structures can be used in some provinces.
Limitations of Operating a Business as a Non-Resident
The state allows a non-resident to run a business or branch in Canada, although their corporation may be subject to a higher tax rate. Privately owned businesses run by Canadian residents benefit from a federal tax rate of 9% (on income up to $500,000). Suppose a non-resident does not become a Canadian resident (which may or may not be subject to specific limits under their tax treaty). In that case, their federal tax rate will increase by 29 percentage points or 38 percent. This results in an additional federal tax burden of $ 145,000 before any provincial taxes are applied.
According to Tax Regulation 102, a payroll withholding duty requirement is triggered anytime a non-resident business sends an employee to provide services in Canada for even a single day.
Non-residents who work in Canada are subject to Tax Regulation 105. A non-resident corporation hired to undertake services in Canada by another non-resident is subject to a 15% withholding obligation.
Due to the complexity of business registration, we strongly advise seeking expert assistance. A corporate lawyer can assist you in establishing the structure of your firm. A competent accountant may also help you with registering the firm, among other things.
By working with a reliable Canada immigration expert, you can make the proper adjustments and preparations even before you travel to Canada. If you’re looking for professional help from a trusted firm, please contact us at firstname.lastname@example.org or call 1-888-404-8472