Doing International Business In British Columbia: The Competitive Advantage Presentation to Economic Development Association of BC Bruce Flexman, President, IFC BC June 7, 2010
DEMYSTIFYING BRITISH COLUMBIA S INTERNATIONAL FINANCIAL CENTRE CORPORATE TAXES: BRITISH COLUMBIA IS A LOW-TAX REGION THE IBA PROGRAM: BRITISH COLUMBIA S TAX INCENTIVE BRITISH COLUMBIA S COMPETITIVE ADVANTAGES
CORPORATE TAXES IN CANADA Canada Federal Tax Rate 2010 18.0% 2011 16.5% 2012 15.0% Canada Provincial B.C. Tax Rate 2010 10.5% 2011 10.0% 2012 10.0% // 3
COMPARING CANADIAN CORPORATE TAX RATES Corporate Tax Rate-2010 BC 28.5 BC with IBA Program 18.0 Alberta 28.0 Saskatchewan 30.0 Manitoba 30.0 Ontario 31.0 Quebec 29.9 Nova Scotia 34.0 PEI 34.0 New Brunswick 29.5 Newfoundland 32.0 Source: KPMG Income Tax Rates for General Corporation 2009-2010 (Current to March 31, 2010) // 4
COMPARING INTERNATIONAL CORPORATE TAX RATES Corporate Tax Rate-2010 Canada BC 28.5 Canada - BC w/ IBA Program 18.0 Hong Kong 16.5 Singapore 17.0 Taiwan 17.0 Korea 24.5 China 25.0 Netherlands 25.5 United Kingdom 28.0 Australia 30.0 Germany (range) 30.0 33.0 US 39.5 Japan 41.2 India 42.2 Deloitte International Tax and Business Guides, 2010 // 5
VANCOUVER RANKS AS ONE OF THE LOWEST FOR TAXES TOTAL TAX COMPARISON, SERVICES Total Tax Index 2010 Canada Prince George 58.3 Vancouver 58.4 Vancouver / Prince George with IBA Program 42.8 Montreal 60.6 Toronto 68.4 U.S. San Diego 102.3 Portland 102.6 Seattle 106.8 San Francisco 105.8 Mexico Mexico City 62.4 U.K. London 87.1 Netherlands Amsterdam 91.9 Japan Tokyo 121.6 Germany Frankfurt 130.9 KPMG Competitive Alternatives 2010, Special Report: Focus on Tax // 6
TODAY S PRESENTATION CORPORATE TAXES: BRITISH COLUMBIA IS A LOW-TAX REGION THE IBA PROGRAM: BRITISH COLUMBIA S TAX INCENTIVE BRITISH COLUMBIA S COMPETITIVE ADVANTAGES // 7
BRITISH COLUMBIA S TAX INCENTIVE PROGRAM The International Business Activity (IBA) program is a unique tax incentive to promote British Columbia as a location for investment. B.C. refunds a registered company s provincial tax (10.5% as of January 1, 2010) paid on income from qualifying international activities. In most cases, non-arm s length as well as arm s length transactions qualify. A company can do business from any location in the Province not only Greater Vancouver. // 8
WHAT ACTIVITIES ARE ELIGIBLE? In general, qualifying activities are financially based and one part of the transaction is with a non-resident. Digital media publishing and distribution (new in 2010) Certification and trading of carbon credits (new in 2010) Clean technology (new in 2010) Arm s length loans and deposits Trade finance; factoring Dealing in securities Dealing in foreign exchange Financial advice and research Leasing Administrative support Management and administration of investment funds (new in 2010) Managing foreign exchange investments Short-term securities trading by a corporation Film distribution Patents: life science and green-related Equipment and data back-up Insurance, including captives Export and import financing // 9
BRITISH COLUMBIA S 2010 BUDGET International Business Activity Act (IBAA) Expanded Digital media publishing and distribution Certification and trading of carbon credits Clean technology Investment fund management activities // 10
FINANCIAL AND CORPORATE TREASURY Leasing property to non-residents by way of a direct financing lease Short-term securities trading by a nonfinancial corporation Managing investments for non-resident persons. Managing financial portfolios. Providing financial advice. Factoring and collecting trade accounts receivable. // 11
WEALTH MANAGEMENT Management and administrative services of investment funds (new in 2010) Managing investments for a non-resident for a fee or commission. Providing financial advice to non-residents. Managing, for a fee or commission, foreign exchange activities. Preparing financial research for the use of a non-resident. // 12
ADMINISTRATIVE SUPPORT SERVICES Administrative support services directly related to a financial activity of a non-resident financial business. Back-up office services, equipment, and premises to continue the business operations of a non-resident in case their primary business becomes temporarily unusable. // 13
INTELLECTUAL PROPERTY: LIFE SCIENCE & GREEN-RELATED PATENTS Patent activity is eligible for a refund of up to 75% of provincial income tax to a maximum of $8 million. Qualifying activities include: Selling, assigning, or licensing an allowed patent; Selling a good or service where revenue is based on an invention for which an allowed patent is owned Eligibility is defined according to the IPC class and includes patents for: Power using wind, tidal, and solar Wastewater treatment and fuel cells Life sciences patents: drugs and pharmaceuticals, biological treatments of water and sewage, medical devices. // 14
IB SPECIALISTS A company in the IB program can register an employee as an IB Specialist. Refund is 100% in Years 1 and 2; 75% in Year 3; 50% in Year 4; and 25% in Year 5. Maximum marginal tax rate (Years 1 and 2) drops from 43.7% to 29.0%. Compensation minimum of $100,000. Must be transferred from outside of Canada, work 70% in qualifying business and have an employment agreement in place prior to arriving in Canada. Allowed for all activities except patent activities // 15
EXECUTIVE SPECIALISTS An Executive Specialist can receive a refund on personal income taxes Refund is 100% for Years 1 and 2; 75% for Year 3; 50% for Year 4; and 25% for Year 5 Maximum marginal tax rate (Years 1 and 2) drops from 43.7% to 29.0%. Must be transferred from outside of Canada to provide a specific expertise and have an employment agreement in place prior to arriving in Canada. Compensation minimum of $250,000. Not allowed for patent activities // 16
QUALIFYING CRITERIA Qualifying activities Canadian incorporated (foreign bank branches in 2011) Office in BC Register with the BC Government Join IFC BC // 17
TODAY S PRESENTATION CORPORATE TAXES: BRITISH COLUMBIA IS A LOW-TAX REGION THE IBA PROGRAM: BRITISH COLUMBIA S TAX INCENTIVE BRITISH COLUMBIA S COMPETITIVE ADVANTAGES // 18
BRITISH COLUMBIA RANKS FIRST IN QUALITY OF LIFE Vancouver fourth worldwide and first in North America. (Mercer HR Consulting, 2010) Vancouver ranked the most livable city in the world seventh year in a row. (Economist, 2009) British Columbia ranks first in Canada in environmental quality (BC Progress Board, 2009) // 19
BRITISH COLUMBIA IS A PACIFIC GATEWAY British Columbia is a strategic gateway to the Pacific Rim and North America. Sailing time from British Columbia ports is 2-3 days shorter than U.S. ports. Vancouver International Airport has non-stops flights to major cities in Asia. Many Asian associations: Asia-Pacific Foundation Hong Kong Canada Business Association Canada Japan Chamber of Commerce ASEAN-Canada Business Council Established Asian communities Special B.C. immigration programs Publicly funded health care and education Stable financial regulation Comparatively strong fiscal situation NAFTA Agreement // 20
SELECTED INTERNATIONAL FINANCIAL CENTRE MEMBERS HSBC Bank (Canada) Bank of Montreal Bank of Nova Scotia Toronto-Dominion Bank Royal Bank of Canada Canadian Imperial Bank of Canada UBS Bank (Canada) JP Morgan Asset Management Cay Solutions (Kelowna) Custom House (Victoria) Kuehne & Nagel Services Ltd. Macquarie Metals & Energy Capital Orbis Client Services (Canada) Limited Raymond James Ltd. Teck Resources International Forest Products West Fraser International Vancouver City Savings Credit Union Tolko Finance (Vernon) Windsor Building Supplies // 21
QUESTIONS AND ANSWERS Bruce Flexman, President, IFC BC T: 604.683.6627 E: bflexman@ifcbc.com International Financial Centre British Columbia Suite 1170 Park Place 666 Burrard Street Vancouver, B.C. Canada V6C 2X8 www.ifcbc.com // 22