Tax Residency for Business Entities in British Columbia

A corporation will generally be considered resident in Canada for tax purposes if either it was incorporated in or continued into Canada or its central management is situated in Canada. An applicable tax treaty will also be considered when determining residency.

Tax Rates for Business Entities

Income Tax.

A corporation resident in Canada must pay federal and provincial income tax on its worldwide income (income includes 50 percent of capital gains). The federal income tax rate for 2012 is 15 percent. The British Columbia provincial income tax rate for 2012 is 10 percent, resulting in a combined federal-provincial tax rate of 25 percent.

Excise Tax.

The excise tax is currently levied in the form of a single federally administered Harmonized Sales Tax (HST) in British Columbia at a rate of 12 percent. HST registrants that are exclusively engaged in commercial activities are generally entitled to recover HST payable on input cost. It is anticipated that in 2013 excise tax in British Columbia will be in the form of a federally administered Good and Services Tax (GST) at a rate of 5 percent and a provincially administered Provincial Sales Tax (PST), which rate is expected to be 7 percent

Non-Tax Resident Business Entities

A non-resident corporation is liable to pay tax on taxable income from carrying on business (including trading) in Canada and from the disposition of taxable Canadian property (subject to any applicable tax treaty).

Taxation of Payments to Foreign Shareholders

Dividends paid to foreign shareholders. These are generally subject to 25 percent non-resident withholding tax. Applicable tax treaties generally reduce this rate to between 5 percent and 15 percent.

Dividends received from foreign companies. An individual or corporation resident in Canada must include in their taxable income dividends received from a foreign corporation. In certain circumstances, a corporation resident in Canada can deduct dividends received from and paid out of a foreign affiliate’s active business income.

Interest paid to foreign corporate shareholders. Interest paid to arms-length parties that are not “participating debt interest” is not subject to withholding tax. A 25 percent withholding tax applies to any payment to non-arm’s-length parties or on any “participating debt interest”. Applicable tax treaties generally reduce this rate to between 0 percent and 15 percent.

IP royalties paid to foreign corporate shareholders. IP royalties are generally subject to non-resident withholding tax at the rate of 25 percent (subject to any reduction under an applicable Canadian tax treaty).

British Columbia Online Incorporation Service for Only $99 Plus Government Fees. Incorporate Now

Business Corporations are incorporated in British Columbia, according to the provisions of the British Columbia Business Corporation Act with the British Columbia Corporations Division. Company Formations Canada provides fast and easy British Columbia Incorporation Service and provides all the documents your new British Columbia corporation will need to stay up-to-date and in compliance with the British Columbia Business Corporation Act.

Our British Columbia Incorporation service includes

Receipt and review of your incorporation information.
If you choose to incorporate a named company, we conduct a Provincial or NUANS prescreen search of your proposed corporate name and advice you if there are any difficulties with your name.
Preparation and filing of Article of Incorporation.
Personalized ByLaws
Personalized Company Minute Book
Organizational Resolutions
Register of Directors
The resignation of Director Form
Appointment of Corporate Officers
The resignation of Officer Form
Subscription of Shares
Share Certificate
Register of Shareholders
Consent and waiver for allotment of shares
Directors’ resolutions approving the allotment of shares
Consent and waiver for transfer of shares.
Shares Transfer Form
Directors’ Resolutions Approving Transfer of Shares
Notice of Organizational Meeting of Incorporators and Directors
Waiver of Notice of Meeting of Incorporators and Directors
Minutes of Organizational Meeting of Board of Directors
Waiver of Notice First Meeting of Shareholders
Minutes First Meeting of Shareholders
Notice to Directors of Regular Board Meeting
Minutes Shareholders Annual Meeting
Minutes Regular Board Meeting
Provincial-specific startup checklist

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