Canada is an extremely developed country where many entrepreneurs dream of registering their business. It is a reliable and sound decision with numerous advantages. The country is not considered an offshore jurisdiction per se. However, the authorities offer tax relief to those who meet certain conditions. The “agency scheme” minimizes payments to a three-digit figure.
Canada is on the OECD white list. It is not subject to European restrictions or requirements to disclose beneficiary lists. More about this and other aspects are discussed below in the article.
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The advantages of registering in Canada’s offshore zone particularly include:
Canada is not listed as an offshore zone, including in the Ukrainian list (Government Resolution of 2011). The country is also not subject to the transfer pricing regulations (Government Resolution of 2017). A Canadian LTD (analogous to our LLC) does not act as an organizational and legal form for non-residents who are not required to pay profit tax (Government Resolution of 2017).
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However, it is not all rosy in reality. By registering a company in an offshore zone, you will:
The fact is that Canada does not recognize apostille. It cooperates with Ukraine based on:
Therefore, we do not recommend considering Canada as a “tax haven”. If you simply want to minimize tax payments, it is an ideal option among the existing ones. However, moving your business into the “shadow” is not feasible: it is too costly, cumbersome, and, above all, illegal.
The country’s tax legislation provides for a residency-based system. This means that a company registered in Canada must make payments on any profit earned worldwide. A foreign company that is registered in the country and controlled from its territory is considered a resident.
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On one hand, there is no economic benefit for entrepreneurs. However, the country has the concept of a Canadian Nominee Company. These are agents working under an agreement with an offshore principal. They may be registered in Panama, the BVI, or the Seychelles. Thus, legally, a Canadian company will operate independently, but by proxy of an offshore entity for a specified fee (on an outsourcing basis).
The agent’s remuneration can vary: a percentage of the profit, Cost Plus, etc. In the first case, everything is clear, and no further explanation is needed. In the second case, it is slightly more complex. Cost Plus translates to “Costs/Profit”. The company covers all of the agent’s costs and additionally pays a fixed amount.
In fact, Cost Plus is better. It immediately reduces the volume of reporting and calculates taxes. The amount payable will be only a few thousand Canadian dollars at most.
Canada’s legislation provides for a two-tier tax system. There is a federal tax and a provincial tax. The payments from profits vary in different parts of the country. Therefore, the final tax calculation depends on the location where the company will be registered. However, the figure cannot exceed 29% of the total profit.
When you decide to establish a company in Canada, you will need to file a tax return annually. This must be done within 6 months after the end of the financial year. If the Tax Return is submitted late, you will incur a penalty of 5% of the total amount and 1% for each month of delay.
For non-residents of Canada who decide to open a business in the country, it is recommended to obtain a Legal Opinion. This legal opinion confirms the legality of the tax scheme used. By doing this, you protect yourself from untimely tax audits. It is best to obtain the document only from a reputable legal firm.
We have already discussed the jurisdiction a bit. Now about what the company registering in Canada should be like. Pay attention to the nuances of drafting the charter. It should include the names and passport details of:
Each of the above individuals must be a natural person. There are no requirements regarding their residency in the legislation. One person can hold all the positions.
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When registering a company in a specific province, be sure to rent or purchase a property. It will serve as your legal address. It is not mandatory to open an account at a Canadian bank, but it is advisable to do so. This decision significantly increases both the opportunities for doing business and the trust of tax or other government authorities.
Registration takes a maximum of 3 weeks. The term is counted from the moment when a complete set of documents is submitted. But if you do not want to deal with all the intricacies of Canadian tax law and spend time gathering documents, we offer to buy ready-made offshore companies. INVESTMAKLER company will be happy to assist you with this. We will help you transfer an already registered and functioning company in Canada to your name. Contact us today! Leave a request on the website, and our managers will call you back in a couple of minutes.