Generally, a subsidiary is a subordinate corporation within a larger business organization controlled by a body corporate. Generally, the body corporate (more commonly referred to as the “parent corporation”, “parent” or “holding corporation”) holds some or all of the shares in a subsidiary, which allows the parent to exert direct or indirect control (de jure control) over the subsidiary. De jure control means the parent holds sufficient shares to elect a majority of the directors onto the subsidiary’s board.
Things to do When Forming a Canadian subsidiary
Determine the jurisdiction of formation
The subsidiary will be governed by the laws of the jurisdiction in which it is formed and the following factors should be considered when making this threshold decision:
Director residency requirements
For corporations formed in Ontario, Alberta, Manitoba, Saskatchewan, Newfoundland, and Labrador or under the federal laws of Canada, at least 25% of the directors must be resident Canadians
Where the subsidiary will carry on business in Canada
If the subsidiary has been formed under the federal laws of Canada, the subsidiary will need to register in each Canadian jurisdiction where business will be conducted
If the subsidiary has been formed under the laws of a specific Canadian province or territory, the subsidiary will need to register in each Canadian jurisdiction where business will be conducted, other than its jurisdiction of formation
Articles of incorporation
You will need to file articles of incorporation to legally form a corporation, as well as have corporate by-laws
Registering a Subsidiary in Canada (Brand new company)
Most non-resident investors prefer to incorporate a subsidiary chiefly because a subsidiary allows for a division of liability between the Canadian operation and the foreign operation. A subsidiary is simply a Canadian corporation whose controlling or sole shareholder is another corporation.
An incorporated subsidiary of a foreign corporation is entitled to many of the same rights as a Canadian-owned corporation, such as limited liability.
Foreign corporations have the option of incorporating a subsidiary at a federal level or a provincial level.
Tax Implications of registering your foreign company in Canada as a Subsidiary
Income resulting from worldwide operations is taxable in Canada.
Losses are not generally deductible by the parent. Losses may be carried back 3 years and carried forward 7 years against income earned in Canada by the Canadian subsidiary.
Withholding tax is normally payable annually on any after-tax profit distributed as dividends to non-Canadian shareholders.
Foreign jurisdictions may give credit for withholding tax on interest and dividend payments. Some countries may also provide extra relief for the underlying foreign taxes paid on income earned in Canada.
Withholding tax is payable on deemed dividends resulting from the discontinuance of the company.
In provinces where the subsidiary does business other than the province of incorporation, incorporation fees must be paid and licensing fees generally must be paid.
The deductibility of interest on debts owed to non-Canadian residents may be limited.
The depreciation of fixed assets is calculated at Canadian rates in order to determine Canadian taxable income.
Register Today Your Foreign Company in Canada as a Subsidiary (Brand New Company)
Company formations offer fast & easy Canada company registration for foreign companies wishing to operate an do business in Canada. The total fees for the registration of a subsidiary in Canada are $2200 CAD.
Information and documents needed:
The information and documents required to register a new company in Canada as a subsidiary are:
- Proposed Company name
- Proposed Business activity in Canada
- Company Address in Canada (If any)
- Jurisdiction of Incorporation
- Names and addresses of the directors of the corporation
Subsidiary registration Fees
The total fees for the registration of a subsidiary in Canada are $2200 CAD
What our Canada Company Registration Service Includes:
- Provincial name search report or NUANS Report request
- Preparation of the incorporation application
- Provincial Registered agent service for 1 year
- Filing of your incorporation application
- Government fees