Date de publication : 06-10-1907
The following information are for the sole purpose of providing a general overview of the local taxation of the Corporate tax aspects of the country. In any case, the information provided below cannot be considered as comprehensive or deemed to constitute specific legal advice.
Yes we tax in Canada
New tax reform: No specific information
New tax treaties:
- Tax treaty between Canada and Pakistan is under revision.
- Tax treaty between Canada and Germany is under revision
- Tax treaty between Canada and Switzerland is under revision.
- Exchange of letters related to tax treaty between Canada and United Kingdom enters into force.
Local tax advisors
No specific information on the local tax advisors.
The domestic definition of Permanent Establishment follows the wording of article 5 of the OECD Model:
- Dependent agent who habitually concludes contracts in the name of a non-resident company (except if the activity is limited to purchase of goods);
- Fixed place of business, building site, construction, assembly or installation and any related supervisory activity.
Resident companies are taxed on their worldwide income (« worldwide principle »).
Entities are considered to be resident for tax purposes in Canada if their place of incorporation is in Canada, or if their place of management & control is in Canada.
Note: the definitions of permanent establishment and place of residence are subject to the relevant provisions of any applicable double tax treaty, if any.
Corporate Income Tax
The general CIT tax rate is 28% (Federal rate).
Note: the provincial rate is up to 16%.
Non-deductible expenses includes the following:
- Interest in excess of the thin-capitalization threshold
- CIT and similar taxes
Carry forward: Yes (20 years for ordinary losses and indefinitely for capital losses). Some restrictions may apply.
Carry back: Yes, 3 years. Some restrictions may apply.
Companies should submit the tax return annually within 6 months from the end of the taxation year.
Annual tax returns are established by the company on a self-assessment system.
Companies shall pay monthly advance payments.
Whithholding Taxes (payment to foreign companies)
The local tax rates in Canada are the following, subject to the provisions of an applicable double tax treaty, if any.
There is 25 WHT on the profits paid from a branch to its foreign head office.
The general rate of WHT on dividends is 25% of the gross amount.
The general rate of WHT on interest is 25%.
Note: there is no WHT if the interest rate complies with the market practice.
The general rate of WHT on Royalties is 25%.
The general rate of WHT on management fees is 25%.
The general rate of WHT on technical services is 25%.
Generally, capital gains are 50% taxed under the regular CIT as general income.
Standard GST tax rate is 5%
Zero-rated supplies include, subject to certain conditions:
- exports of goods and services;
Exempt supplies include, subject to certain conditions:
- Certain financial services ;
- Training and education ;
Note: exempt transactions differ from zero-rated transactions in that the input GST associated with exempt transactions is not deductible.
In case where for a tax period, Input GST exceeds Output GST, certain non-resident companies (which are not required to register and incur Canada-GST in the course of their business activities in Canada) may apply for a refund.
No other specific information of GST in Canada.
The general statute of limitation is 10 years.
There is no foreign exchange control in Canada. Income and capital could be freely repatriated.
There are thin capitalization rules in Canada. The interest derived from loans between related parties may not be deductible in case where interest exceeds some ratios.
[Furthermore, the interest rate shall comply with the market practice.]
Do not hesitate to share your experience in Canada with us in the comments below. Any comments are welcome !