International trade: Figuring out the right approach for Canada

By Lancashire Business View

21 Jun 2017

In association with

A UK company may establish a business presence in Canada through either a branch or a subsidiary company. For many reasons, including taxation, most foreign companies in Canada choose to set up a subsidiary rather than a branch operation.

By Helen Cowley, tax partner at Cassons.

A subsidiary is a separate legal entity that is controlled by a parent company, typically through share ownership. Any profits of a Canadian subsidiary that are repatriated to the UK parent company will be paid as a dividend.

Assuming the Canadian subsidiary is tax resident in Canada it will be liable to Canadian taxes on its worldwide income. A non-resident company operating through a Canadian branch will only be liable to Canadian taxes on business profits generated by that branch.

Canadian corporate income tax (CIT) is collected separately by both the federal government and the provincial or territorial governments. The basic federal rate of CIT is currently 38 per cent but a provincial abatement of 10 per cent and a general rate reduction of 13 per cent can bring the federal tax rate down to 15 per cent in some cases.

In addition to federal CIT, provinces and territories impose their own taxes on income generated from business activities in those jurisdictions. The provincial abatement to federal tax will not be available for foreign income but neither should that income be liable to provincial and territorial taxes.

Provincial and territorial tax rates can vary between 2.5 per cent and 16 per cent depending on the type of entity, its trading activity and the level of business income generated. This may be an influencing factor on where in Canada you decide to do business but of course commercial considerations are likely to be the deciding factor.

The Canadian subsidiary may pay some or all of its after-tax profits to its UK parent company, in which case a withholding tax will be payable. The standard rate of Canadian withholding tax on dividends is 25 per cent but in the case of a UK subsidiary company this should be reduced through the Canadian / UK double tax treaty to 5 per cent.

If you would like to establish a presence in Canada without setting up a subsidiary company then you can instead register a branch of your existing UK company, although there will be withholding tax implications of a non-Canadian resident generating branch profits in Canada.

Whatever structure is chosen, you will also need to consider how the Canadian taxes interact with UK taxes and the treaty reliefs available to eliminate double taxation.

The Canadian corporate tax regime can be complicated and the choice between a branch and a subsidiary will depend on many factors including tax and regulatory matters. If you are considering carrying on a business in Canada then it is imperative that you take specialist advice from Canadian advisers before deciding on the appropriate structure.

Latest news

1

Three weekly domestic waste collection considered in plans Waste recycling Blackpool

Three weekly domestic waste collection considered in plans

01 Jul 2025

2

Graham Engineering confirms sale to a2e Industries Graham Engineering

Graham Engineering confirms sale to a2e Industries

01 Jul 2025

3

Training 2000 celebrates 'Good' rating by Ofsted Training 2000

Training 2000 celebrates 'Good' rating by Ofsted

01 Jul 2025

4

Fox Group acquires J Fisher and Sons Colin Fisher, Paul Fox CEO and Gary Fisher.

Fox Group acquires J Fisher and Sons

01 Jul 2025

5

Beever and Struthers strengthen leadership team with new partners Dean Curtis and Joe Diston

Beever and Struthers strengthen leadership team with new partners

01 Jul 2025

Background image for hub sign up block

LBV Hub

Leverage Lancashire Business View platforms

Post your news
Post your events
Post your offers
Build your network
Improve your SEO
Gain coverage in the magazine
Sign-up
Events
LBV123 July/August Launch Event
Lancashire Business View magazine launch
Networking
16 Jul 2025

LBV123 July/August Launch Event

Burnley

08:30 - 10:30

Lancashire Built Environment Conference 2025
BEC 315 X 315 Px
Networking
25 Sep 2025

Lancashire Built Environment Conference 2025

Blackpool Football Club, Blackpool, FY1 6HX

08:30 - 13:00

CMI Level 5 Management and Leadership Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Management and Leadership Course

Preston Campus, Preston , PR1 2HE

09:00 - 17:00

CMI Level 5 Project Management Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Project Management Course

Preston Campus, Preston, PR1 2HE

08:00 - 17:00

The Marketing Metrics that Matter – July 4
LBV Hub Seminars
04 Jul 2025 - 04 Jul 2025

The Marketing Metrics that Matter – July 4

Door4 Office, Burnley Wharf, Burnley, BB11 1JG

08:30 - 11:00

Tri-Site Survey Equipment Showcase
unnamed (2).jpg.jpg
LBV Hub Seminars
09 Jul 2025 - 09 Jul 2025

Tri-Site Survey Equipment Showcase

Crow Wood Hotel, Burnley, BB12 0RT

09:30 - 16:00

Choose Chorley for Business - Talent Reimagined Business Breakfast
talentreimaginedbb.png.png
LBV Hub Seminars
10 Jul 2025 - 10 Jul 2025

Choose Chorley for Business - Talent Reimagined Business Breakfast

Strawberry Fields Digital Hub, Chorley, PR71PS

08:00 - 10:30

Blackburn Cathedral hosts Champagne and Diamonds Event with Ainsworth Jewellers
Champagne-Jewellery 10 07 25_page-0001.jpg.jpg
LBV Hub Awards
10 Jul 2025 - 10 Jul 2025

Blackburn Cathedral hosts Champagne and Diamonds Event with Ainsworth Jewellers

Blackburn Cathedral, Blackburn, BB1 5AA

18:00 - 20:30

Shaping Preston's future by remembering its past
1750160034867.png.png
LBV Hub Networking
16 Jul 2025 - 16 Jul 2025

Shaping Preston's future by remembering its past

Society1, Coworking Space, Preston, PR1 3LT

18:00 - 20:30

Chamber Summer BBQ
LBV Hub Social
17 Jul 2025 - 17 Jul 2025

Chamber Summer BBQ

The Borough, Dalton Square, Lancaster, LA1 1PP

17:30 - 20:00

Preston Tech Connection: Web3 is Dead. Or is It?
July Longer Banner.jpg.jpg
LBV Hub Networking
29 Jul 2025 - 29 Jul 2025

Preston Tech Connection: Web3 is Dead. Or is It?

Society1, Coworking Space, Preston, PR1 3LT

18:00 - 19:30

Preston Freelancer Meet-Up: July
Longer July Banner.jpg.jpg
LBV Hub Networking
31 Jul 2025 - 31 Jul 2025

Preston Freelancer Meet-Up: July

Society1, Coworking Space, Preston, PR1 3LT

10:00 - 11:30

Advertise with us

Reaching 50,000 members, our print, digital and event platforms offer a fantastic way to raise your business profile and help you grow.

Find out more LBV122 Online Graphic
Subscribe now

Weekly news bulletin