Doing Business in British Columbia/Canada

Transcription

1 Doing Business in British Columbia/Canada Frank Schober Thora Sigurdson Ally Bharmal Introduction Robin Dhir Strategic Advisor, Fasken Martineau 1

2 Our Advantage Business-Friendly Legal Environment Low Tax Rates, Competitive Tax Incentives Integrated North American Transportation, Telecommunications & Infrastructure Modern Corporate Laws & Regulations Flexible / Accessible Immigration Laws Universal Health Care Educated multi-cultural, multi-lingual population People like to come here to live/work! Incorporation of Companies Federal system of government (similar to U.S.) Corporations can be incorporated federally or provincially extra-provincial registration No minimum capitalization requirements Director residency requirements 25% Canadian for federal company none for BC company 2

3 Alternative Business Structures Carrying on business in Canada without a branch office or other permanent establishment Canadian branch office Canadian subsidiary corporation Foreign partnership or trust Unlimited Liability Corporations Flow-through entity for U.S. purposes similar to LLC Branch Office or Canadian Subsidiary Branch Office Losses of a branch deductible by foreign corporation Foreign corporation s assets exposed to Canadian liabilities Canadian Subsidiary Liability limited to investment in subsidiary Separate, identifiable Canadian presence Subsidiary most common Transactions between branch or subsidiary and foreign corporation subject to transfer pricing rules 3

4 Canadian Employees Foreign corporation or Canadian subsidiary Set up accounts with CRA Withholdings for income tax, CP, EI, provincial healthcare premiums Employees taxable in Canada on income Exception in Canada < 183 days and salary paid outside Canada Immigration Matters: Staffing Your Canadian Business Canadians first immigration policy but some options for bringing in key staff and specially-skilled workers Start-Up Visa Program New (April 1, 2013) Permanent Resident stream for key employee(s) Investors know best need for confirmed support from designated investor Angel Investor Group Capital Investment Business Incubator (new: October 26, 2013) Focus: innovative, novel enterprises that will do well in Canada 4

5 Immigration Matters: Staffing Your Canadian Business Temporary Work Permit options: Intra-Company Transferees for executives, senior managers and specialized knowledge workers Processing time: currently 5 to 7 months at Canadian Consulates in India Temporary for this class: maximum 5 years for specialized knowledge workers; 7 years for senior managers and executives LMO-based Work Permits Processing time: 4 to 5 months for the LMO plus 5 to 7 months for the work permit Temporary for this class: hard cap of 4 years unless exempt Immigration should be part of your planning process Employment in BC Good, educated work force Regulated environment Employment Standards Human Rights Privacy Workers Compensation Common law/judge-made law 5

6 Employment in BC Two points that catch some by surprise No employment at will Termination of employment by employer only for cause or on notice (or pay in lieu of notice) Unless limited by enforceable contract, reasonable notice at common law is about one month per year of service (and more for short service) Contracts can limit termination obligations, but must comply with Employment Standards minimums (approximately one week per year of service to maximum of eight weeks) Human rights legislation prohibits discrimination in employment on various grounds, including disability (physical and mental) Accommodation process Canada is Now a Low-Tax Country Corporate Income Tax Rate Year 6

7 Canada is Now a Low-Tax Country 26% Corporate Income Tax 13.5% Corporate Tax Rate for Canadian-controlled private corporations 15% Withholding Tax on dividends paid to Parentco in India Capital returned tax-free before need to pay dividends Taxes We DON T Have Capital taxes Gross receipts taxes Estate or gift taxes Stamp taxes Additional Tax Advantages for Canadian Residents Additional tax advantages for Canadian-controlled private corporations (50% Canadian-owned) 13.5% tax on $500,000 annual active business income Refundable tax credits for qualifying R&D expenses For Canadian shareholders $800,000 Lifetime Capital Gains Exemption Shares can qualify for RRSPs, TFSAs, etc. Advantageous tax rules for ESOPs 7

8 Other Taxes Goods and Services Tax/Harmonized Sales Tax 5% Value-Added Tax Businesses generally entitled to full refund for GST/HST paid Some provinces have combined PST with GST to form 12-15% HST No tax on exports Provincial Sales Tax 7% B.C. Sales Tax Exemption for production machinery and equipment Exemption for goods for resale R&D Tax Credits Tax credits for qualifying SR&ED expenditures CCPCs 35% federal refundable tax credit on $3M of SR&ED expenses annually Non-CCPCs 20% federal non-refundable tax credit Provincial tax credit as well 8

9 SR&ED WHAT QUALIFIES Scientific research and experimental development means systematic investigation or search that is carried out in a field of science or technology by means of experiment or analysis and that is: (a) basic research, namely, work undertaken for the advancement of scientific knowledge without a specific practical application in view, (b) applied research, namely, work undertaken for the advancement of scientific knowledge with a specific practical application in view, or (c) experimental development, namely, work undertaken for the purpose of achieving technological advancement for the purpose of creating new, or improving existing, materials, devices, products or processes, including incremental improvements thereto, SR&ED WHAT DOES NOT QUALIFY Scientific research and experimental development does not include work with respect to (a) market research or sales promotion, (b) quality control or routine testing of materials, devices, products or processes, (c) research in the social sciences or the humanities, (d) prospecting, exploring or drilling for, or producing, minerals, petroleum or natural gas, (e) the commercial production of a new or improved material, device or product or the commercial use of a new or improved process, (f) style changes, or (g) routine data collection; 9

10 STRUCTURES TO TAKE ADVANTAGE OF SR&ED TAX CREDITS 1. Incorporate a subsidiary 2. Joint venture with Canadian company (50/50 ownership of new entity) 3. Work for hire ( costs plus basis) STRUCTURES TO TAKE ADVANTAGE OF SR&ED TAX CREDITS 1. Incorporate a subsidiary 2. Joint venture with Canadian company (50/50 ownership of new entity) 3. Work for hire ( costs plus basis) 10

11 TECHNOLOGY / INTELLECTUAL PROPERTY Patent Protection New no one else has invented and made public Useful useful purpose and is capable of operation Not obvious to a person of ordinary skill in the area to which the invention relates Patent in force for 20 years from the date of application Can be sold / licensed TECHNOLOGY / INTELLECTUAL PROPERTY Trade-mark Protection Word, symbol, sound or shape used to distinguish a person s goods or services May be acquired through use of mark in connection with goods/services, or by registration - Registration ensures protection across Canada, so get your marks registered in Canada - Granted for indefinitely renewable periods of 15 years - Can be sold/licensed but be careful! 11

12 TECHNOLOGY / INTELLECTUAL PROPERTY Copyright Protection Sole right to reproduce, publish and perform literary, dramatic, artistic and musical works Only form of expression protected, not the idea - Subsists in any work subject to copyright the moment it is created - Registration not necessary, but can be helpful. Mark materials as copyright - Lasts for life of author plus 50 years - Can be sold/licensed TECHNOLOGY / INTELLECTUAL PROPERTY Industrial Designs Protects the aesthetic features of a useful article (but not entirely functional features) 5 years, plus one 5 year renewal Integrated Circuit Topographies Plant Breeders Rights Domain Names (.ca) 12

13 TECHNOLOGY / INTELLECTUAL PROPERTY RELATED CONSIDERATIONS Non-Disclosure Agreements Standard Practice Protect your intellectual property and trade secrets Ownership of Work Product Employee vs Independent Contractor Ensure you have agreements in place to attain ownership 13