Generally, 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.
Additional posts from the blog
On April 7, 2014, the Minister of the Environment issued a Notice with respect to hydrofluorocarbons (the “Notice”), pursuant to the Canadian Environmental Protection Act, 1999. The Notice imposes reporting requirements on those who imported, exported, or manufactured certain hydrofluorocarbons (“HFCs”) from 2008 and 2012. A non-exhaustive list of HFCs subject to these reporting requirements can be found in Schedule 1 of the Notice.
In an interesting decision, the Human Rights Tribunal of Ontario has ruled that an employer is not liable for discriminatory and harassing texts sent by a rogue employee to another of its workers.
On April 8, 2014, Canada’s government introduced Bill S-4, the Digital Privacy Act, in the Senate. Bill S-4 is the federal government’s latest attempt to reform the federal Personal Information Protection and Electronic Documents Act (“PIPEDA”). It would be a mistake to say that it is largely recycled from the government’s last attempt to reform PIPEDA in 2011 through Bill C-12, which died on the order paper. Here’s what’s different, what’s been dropped, and what seems to be largely the same. Caveat: This is a first read!