Canada Revenue Agency Reporting Requirements A Canco which controls a Forco will have an obligation to submit certain special returns to the Canada Revenue Agency annually. Failure to file such returns on a timely basis will expose Canco to significant penalties. Form T1134 Any Canadian resident, whether a corporation or individual, with respect… Continue Reading
Category Archives: Offshore corporations
CANADIAN OFFSHORE CORPORATE TAX PLANNING FOR DUMMIES-PART 9
Techniques for Minimizing Tax on the Sale of Forco Shares In many cases, Forco will not be saleable by Canco as a stand-alone entity. Its value is strictly tied in to functions it forms for Canco’s corporate group. However, there may be cases where Forco has value, and is saleable, on its own. This might… Continue Reading
CANADIAN OFFSHORE CORPORATE TAX PLANNING FOR DUMMIES-PART 8
The Upstream Loan Rules A Canco that will be using one or more Forcos as part of its offshore tax planning, should be aware of the upstream loan rules. Before the introduction of these rules, there were no Canadian tax consequences if Canco received a loan from Forco, even if that loan remained outstanding indefinitely.… Continue Reading
CANADIAN OFFSHORE CORPORATE TAX PLANNING FOR DUMMIES-PART 7
Optimal Ownership Structures So far, I have discussed the use of Forco within the context of a relatively simple structure where it would be a wholly-owned subsidiary of Canco. In many situations, that simple structure will be appropriate, but in others situations, there may be a better alternative. Two common variations are discussed… Continue Reading
CANADIAN OFFSHORE CORPORATE TAX PLANNING FOR DUMMIES-PART 6
Using an Offshore Subsidiary to Finance Other Foreign Affiliates In situations where substantial amounts of capital are needed to finance the active business operations of Canco’s foreign affiliates (“Forcos”), Canadian tax laws provide an incentive for Canco to form a financing affiliate (“Finco”) in an appropriate jurisdiction, which will permit little or no income tax… Continue Reading
CANADIAN OFFSHORE CORPORATE TAX PLANNING FOR DUMMIES-PART 5
Using an Offshore Subsidiary to Hold IP In many corporate groups, particularly in the internet age, the real wealth lies in the IP-patents, trademarks, computer software. Often, it is quite tempting to look for ways to move such IP offshore, both for tax and other reasons. Stories of IP-based companies such as Google and Apple… Continue Reading
CANADIAN OFFSHORE CORPORATE TAX PLANNING FOR DUMMIES-PART 4
Transfer Pricing Issues As is the case with most major counties, Canada has rules in its tax laws aimed at preventing income from being shifted to other jurisdictions by unreasonable transfer pricing [1]. To date, most of the activity of the CRA and reported tax cases has focused more on inbound transfer pricing issues… Continue Reading
CANADIAN OFFSHORE CORPORATE TAX PLANNING FOR DUMMIES-PART 3
Active Business Income vs. FAPI The tax benefits of setting-up an offshore structure and establishing Forco will only be present with respect to income earned by Forco that is considered to be income from an active business. If the income is classified as “foreign accrual property income” (“FAPI”), there will generally be no… Continue Reading
CANADIAN OFFSHORE CORPORATE TAX PLANNING FOR DUMMIES-PART 2
Carrying On Business in Canada The mere fact that Forco is not resident in Canada will not, in and of itself, ensure that Forco’s income is not subject to Canadian tax. Care must also be taken that none of Forco’s income is derived from carrying on business in Canada. To the extent that it is,… Continue Reading
CANADIAN OFFSHORE CORPORATE TAX PLANNING FOR DUMMIES-PART 1
Introduction In my blog that was posted on November 12, 2015, Canadian Corporations Can Repatriate Profits of Offshore Subsidiaries Tax-free, I explained that Canadian-based corporations, unlike their U.S. counterparts, can usually repatriate the earnings of offshore subsidiaries, free of Canadian tax. This is usually true even if those earnings have borne little or no… Continue Reading