Business Operations in Canada provides U.S. and other foreign businesses with the  information they need to understand the commercial and tax law associated with conducting business in Canada. Written by Patrick Marley and Richard Tremblay, both of Osler, Hoskin & Harcourt LLP, this Portfolio begins with an overview of the regulations and processes governing business operations in Canada.  It identifies the investment controls, trade and commerce regulations, and immigration, and it examines the legislation and law governing the various types of business organizations.

Business Operations in Canada covers t he rules of income taxation with particular emphasis on problems likely to be encountered by foreign businesses. This Portfolio bases its discussion of individual and corporate income taxes on the federal Income Tax Act and directs its discussion of income taxes toward a basic explanation of the Canadian tax system, special rules applicable to corporations, and the taxation of nonresidents. Other sections deal with tax avoidance, the computation of income, and administration of the income tax legislation.

Among the non-tax matters covered in this Portfolio are the formation and operation of business entities, anti-trust or combines law, NAFTA, and legislation dealing with the review of foreign investment in Canada, which may be of particular interest to foreign businessmen.

Readers will find the forms commonly used in connection with the Income Tax Act and the text of the Canada-United States tax treaty among this Portfolio’s worksheets.

Business Operations in Canada allows you to benefit from:

• A perspective that addresses the concerns of foreign investors/enterprises and their advisors looking to invest/do business or already invested/doing business in the country
• Identification of those features of the country’s system that are likely to prove most problematic to outside investors
• Emphasis on those aspects of the tax system that impact transactions and structures with a cross-border dimension
• Information and insight to enable users to anticipate the pitfalls and opportunities likely to arise in making an initial investment, carrying on operations and devising potential exit strategies
• Invaluable practice documents including tables, charts and lists
• Time-saving citations to relevant sections of tax laws, regulations, court cases, and more

This Portfolio is part of the Foreign Income Portfolios Library, a comprehensive series containing more than 100 Portfolios, which covers critical transactions and issues in international taxation. This highly-regarded resource library offers commentary on a wide range of foreign income topics including: Foreign Tax Credit, Business Operations in Italy, Business Operations in Puerto Rico, Branch ProfitsTax, Source of Income Rules, Subpart F (Controlled Foreign Corporations), Foreign Partnerships and Partners, Transfer Pricing, and more.

 

Detailed Analysis

I. Canada and the Canadian Legal System

A. Introduction

B. The Country, Its Government, and Legal System

II. Operating a Business in Canada

A. Investment Controls

1. General

2. Reviewable Transactions

3. Notification

4. Competition (Antitrust)

5. Proposed Amendments

B. Trade and Commerce Regulation

1. Import-Export

a. General

b. Import Regulations

c. Export Regulations

d. Government Programs

2. North American Free Trade Agreement

C. Immigration

1. General

2. Temporary Entry

3. Permanent Residents

III. Establishing a Business

A. Types of Business Organizations

1. General

2. Sole Proprietorships

3. Partnerships, Joint Ventures and Licensing/Franchising

4. Corporations

5. Unlimited Liability Companies

B. Financing

1. Securities Legislation

2. Personal Property Security

C. Employment Legislation

1. Minimum Standards Legislation

2. Workers' Compensation

3. Human Rights Legislation

4. Labor Law

5. Employment Equity and Pay Equity

6. Unemployment, Pension, and Health Premiums

D. Environmental Legislation

1. Environmental Assessment of Impacts of Proposed Projects

2. Environmental Control of the Operation of Established Facilities

E. Consumer Protection Legislation

F. Government Disclosure

G. Language Legislation

IV. General Private and Commercial Law

A. Real Property

B. Intellectual Property

1. Patents

2. Copyright

3. Trademarks

4. Industrial Designs

5. Semi-Conductor Chips

6. Trade Secrets / Confidential Information

C. Bankruptcy Law

1. Creditor Reorganization

2. Liquidation

D. Conflicts of Laws

V. Regulated Sectors

Introductory Material

A. Financial Services

B. Communications

1. Broadcasting

2. Telecommunications

C. Energy and Natural Resources

VI. Principal Taxes

Introductory Material

A. Income Tax

B. Estate, Succession Duty, and Gift Tax

C. Commodity Taxes

1. Federal Customs Duty

2. Anti-Dumping Duty

3. Goods and Services Tax

4. Federal Excise Tax and Excise Duty

5. Provincial Retail Sales and Commodities Taxes

D. Corporate Capital Taxes

E. Payroll Taxes

1. Canada and Quebec Pension Plans

2. Employment Insurance

3. Provincial Payroll and Health Fund Taxes

F. Land Transfer Taxes

1. Ontario Land Transfer Tax

2. Quebec Land Transfer Tax

3. British Columbia Property Purchase Tax

4. Manitoba Land Transfer Tax

5. New Brunswick Real Property Transfer Tax

6. Nova Scotia Deed Transfer Tax

7. Other Provinces and Territories

G. Municipal Taxes

H. Natural Resource Taxation

VII. Administration

Introductory Material

A. Returns

B. Records

C. Inspection of Records

D. Inquiries

E. Assessment

F. Payment

G. Penalties

H. Objection and Appeal

I. Advance Rulings

J. Fairness Rules

VIII. Income Taxation

A. Provincial Income Tax

B. The Canadian Tax Net

1. Taxation by Residence

a. Individual Residence

b. Corporate Residence

c. Residence of Trusts

2. Tax Base for Canadian Residents

3. Tax Base for Nonresidents of Canada

a. Business Income

b. Employment Income

c. Gains

d. Nonresident Withholding Tax

e. Part-time Residents

C. The Computation of Income

1. Employment and Similar Income

a. Benefits and Remuneration

(1) Benefits Generally

(2) Automobile Use

(3) Interest-free and Low-interest Loans

(4) Lump-Sum Payments

(5) Stock Options

b. Deductions in Computing Employment Income

c. Deferred and Special Compensation and Tax-free Savings Accounts

d. Termination of Employment

2. Income from Business or Property

a. Accounting for Profit

b. Taxation Year

c. Inventory

d. Statutory Inclusions

(1) Interest

(2) Imputed Interest

(3) Contingent Payments

(4) Restrictive Covenant Payments

e. Deductions in Computing Income

(1) Interest and Related Charges

(2) Reserves

(3) Capital Cost Allowances

(4) Goodwill and Other Intangibles

(5) Scientific Research

f. Ceasing to Carry on Business

3. Capital Gains

a. What Is a Capital Gain?

b. Taxation of Capital Gains

c. Transitional Rules

d. Deemed Dispositions

e. Rollovers

f. Property Receiving Special Treatment

g. Capital Losses

D. Computation of Taxable Income

1. Personal and Similar Deductions

2. Employee Stock Options

3. Charitable Gifts

4. Part VI.1 Tax

5. Capital Gains Exemption

6. Losses

a. Noncapital Losses

b. Net Capital Losses

c. Farm Losses

d. Limited Partnership Losses

e. Acquisition of Control

f. Corporate Reorganizations

g. Nonresident Taxpayers

7. Intercorporate Dividends

E. Computation of Tax

1. Individuals

2. Trusts

3. Corporations

a. The Basic Rate

b. The Small Business Deduction

c. Manufacturing and Processing Deduction

d. General Corporate Rate Reduction

4. Tax Credits

a. Individual Personal Tax Credits

b. Investment Tax Credit

c. Political Contributions

d. Foreign Tax Credit

IX. Taxation of Partnerships, Trusts, Corporations

A. Partnerships

1. Allocation of Income or Loss

2. Cost of Partnership Interest

3. Transfers of Property Between Partner and Partnership

B. Trusts

1. General

2. Deemed Disposition

3. Distributions of Trust Property

4. Nonresidents

5. Specified Investment Flow Through Tax Rules

C. Corporations and Their Shareholders

1. Dividends and Distributions

a. Taxable Dividends

(1) Corporate Recipients Generally

(2) Term Preferred Shares

(3) Guaranteed Shares

(4) Collateralized Shares

(5) Taxable Preferred Shares

(6) Short-Term Preferred Shares

(7) Special Refundable Tax

(8) Individuals Receiving Taxable Dividends

b. Stock Dividends

c. Pre-1972 Surplus Accounts

d. Capital Dividends

e. Integration

f. Corporate Distributions Tax

g. Shareholder Benefits and Loans

2. Capital Alterations and Reorganization

a. Return or Alteration of Capital

b. Liquidation

c. Share-for-Share Exchange

d. Foreign Share-for-Foreign Share Exchange

e. Share Conversions and Reorganizations

f. Amalgamation

g. Transfer of Property for Shares

h. Anti-surplus Stripping

i. Foreign Spin-Offs

j. Divisive Reorganizations

3. Special Corporations

D. Tax-Exempt Persons

1. Charities

2. Pension Plans

3. Qualified Investments

4. Special Taxes

E. International Banking Centers

X. Taxation of Resource Income

Introductory Material

A. Capital Cost Allowance

B. Exploration and Development Expenses

1. Canadian Exploration Expense

2. Canadian Development Expense

3. Canadian Oil and Gas Property Expense

4. Recovery of Expenses

5. Foreign Resource Expenses

C. Disposition of Resource Properties

D. Flow-through Shares

E. Prospectors

F. Government Royalties

G. Resource Abatements and Deductions

H. Reorganizations

XI. Tax Avoidance, Tax Evasion and Income Imputation

A. Tax Evasion and Tax Avoidance

B. Substance, Form, Business Purpose and Statutory Interpretation

C. The General Anti-Avoidance Rule

1. Section 245

2. GAAR Cases

3. Information Circular 88-2

4. The GAAR Committee

D. Other Statutory Anti-avoidance Provisions

1. The Fair Market Value Rule

2. Capital Gains and Losses

a. Deemed Proceeds or Capital Gain

b. Superficial Losses

c. Stop Loss

d. Attribution

3. Expenses

4. Benefits and Income Imputation

5. Transfer Pricing

a. 1997 and Prior Years

b. 1998 and Subsequent Taxation Years

(1) Penalty Provisions

(2) Documentation Requirements

(3) Information Circular IC 87-2

(4) Advanced Pricing Arrangements

E. Foreign Income

1. Foreign Accrual Property Income

a. Nonresident Corporations

b. Nonresident Trusts

c. Offshore Investment Funds, Foreign Investment Entities

2. Foreign Tax Credit

a. Business Income

b. Nonbusiness Income

c. Credits Against Foreign Affiliate Income

(1) Foreign Accrual Property Income

(2) Dividends

(3) Interest Related to Investments in Foreign Affiliates

F. Nonresident Withholding Tax

1. Rate

2. Charge

3. Types of Payments

a. Management or Administration Fee or Charge

b. Interest

c. Estate or Trust Income

d. Rents, Royalties, and Similar Payments

e. Dividends

f. Other Payments

4. Deemed Residence

5. Provincial Tax

XII. Tax Treaties

Introductory Material

A. Treaty Process in Canada

B. Provincial Taxation

C. Treaty Interpretation

D. Business Income

E. Investment Income

F. Canada-United States Tax Treaty

1. Withholding Taxes

2. Business Profits

3. Personal Services

4. Gains

5. Administration

6. Treaty Planning

7. Treatment of Fiscally Transparent Entities

8. Hybrid Entities-Treaty Benefit Denial Rules

Working Papers

Table of Worksheets

Other Resources

Worksheet 1 Form 1 - Articles of Incorporation

Worksheet 2 Form 3 - Notice of Registered Office

Worksheet 3 Form 6 - Notice of Directors

Worksheet 4 Form 23 - Request for Name Search

Worksheet 5 Form 4 - Articles of Amendment

Worksheet 6 Form 9 - Articles of Amalgamation

Worksheet 7 Form 11 - Articles of Continuance

Worksheet 8 Form 17 - Articles of Dissolution

Worksheet 9 Form 22 - Annual Return

Worksheet 10 Schedule II - Ownership

Worksheet 11 Schedule IV - Transfer of Technology

Worksheet 12 Tax Reference Table

Worksheet 13 Form T1 - General Income Tax and Benefit Return - Common (Except Newfoundland and Labrador, Quebec, Ontario, Yukon, Northwest Territories and Non-Residents)

Worksheet 14 Form T1 - General Income Tax and Benefit Return - Newfoundland and Labrador Only

Worksheet 15 Form T1 - General Income Tax and Benefit Return - Quebec Only

Worksheet 16 Form T1 - General Income Tax and Benefit Return - Ontario Only

Worksheet 17 Form T1 - General Income Tax and Benefit Return for Non-Residents and Deemed Residents of Canada

Worksheet 18 Form T2 Short - Return for Eligible Corporations

Worksheet 19 Form T2 - Corporation Income Tax Return

Worksheet 20 Form T3 - Trust Income Tax and Information Return

Worksheet 21 Form T400A Objection - Income Tax Act

Worksheet 22 Form T2023 - Election in Respect of Loans from Non-Residents

Worksheet 23 Form T2057 - Election on Disposition of Property by a Taxpayer to a Taxable Canadian Corporation

Worksheet 24 Form T2058 - Election on Disposition of Property by a Partnership to a Taxable Canadian Corporation

Worksheet 25 Form T2061A - Election by an Emigrant to Report Deemed Dispositions of Property and Any Resulting Capital Gain or Loss

Worksheet 26 Form T2062 - Request by a Non-Resident of Canada for a Certificate of Compliance Related to the Disposition of Taxable Canadian Property

Worksheet 27 Form NR4 - Statement of Amounts Paid or Credited to Non-Residents of Canada

Worksheet 28 Form T4A-NR Summary - Return of Amounts Paid or Credited to Non-Residents of Canada

Worksheet 29 Form NR6 - Undertaking to File an Income Tax Return by a Non-Resident Receiving Rent from Real Property or Receiving a Timber Royalty

Worksheet 30 Form NR7-R - Application for Refund of Nonresident Part XIII Tax Withheld

Worksheet 31 Form NR73 - Determination of Residency Status (Leaving Canada)

Worksheet 32 Form NR74 - Determination of Residency Status (Entering Canada)

Worksheet 33 Form RC1 - Request for a Business Number

Worksheet 34 1980 Canada-United States Income and Capital Tax Treaty (In force)

Worksheet 35 1995 Protocol to 1980 Canada-United States Income and Capital Tax Treaty, as Amended by 1983 and 1984 Protocols (In force)

Worksheet 36 1997 Protocol to 1980 Canada-United States Income and Capital Tax Treaty, as Amended by 1983, 1984 and 1995 Protocols (In force)

Worksheet 36A 2007 Protocol to 1980 Canada-United States Income and Capital Tax Treaty as Amended by 1983, 1984, 1995 and 1997 Protocols (In force)

Worksheet 37 IRS Notice 96-31 Clarifying Application of U.S.-Canada Income Tax Treaty Issued May 10, 1996

Worksheet 38 Publication 597, Information on the United States-Canada Income Tax Treaty (Excerpt)

Worksheet 39 List of Comprehensive Double Taxation Agreements and Related Protocols Signed by Canada as of January 1, 2008

Worksheet 40 Form T1134–A - Information Return Relating to Foreign Affiliates That Are Not Controlled Foreign Affiliates

Worksheet 41 Form T1134–B - Information Return Relating to Controlled Foreign Affiliates

Worksheet 42 Form T1141 - Information Return in Respect of Transfers or Loans to a Non-Resident Trust

Worksheet 43 Form T1142 - Information Return in Respect of Distributions From and Indebtedness to a Non-Resident Trust

Bibliography

OFFICIAL

Listings

Cases:

UNOFFICIAL

Bankruptcy Law:

Business Entities:

Communications:

Competition Legislation:

Conflicts of Laws:

Consumer Protection:

Employment Law:

Energy Law:

Environmental Law:

Foreign Investment:

General:

Government Incentives:

Immigration:

Intellectual Property:

Licensing and Franchising:

Personal Property Security:

Securities Regulation:

Trade: