Canadian Distributors and Selling Agents
A foreign business which is resident in a country with which Canada has a tax treaty can have an independent sales representative organization in Canada by way of distribution arrangements, or can enter into sales contracts to supply goods or services to Canadians, without being liable to Canadian income tax on its profits from such sales. Care must be taken to ensure that the foreign entity does not maintain a permanent establishment in Canada. In addition, its Canadian broker or agent must be independent of the foreign business organization, and not devote all or almost all of its efforts to representing the foreign business. A foreign business will be liable for Canadian income tax if it has a dependent agent or broker in Canada, with authority to negotiate and conclude contracts in its name.
In addition, certain bilateral tax treaties provide that a foreign business can store its products in Canada for purposes of display or delivery, or to maintain an office in Canada solely for the purpose of purchasing Canadian goods, or for collecting information without becoming liable for Canadian income tax.
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