There are two types of corporations used for business transactions in Canada: those incorporated under federal law and those under provincial laws of 10 provinces 3 territories.
There are number of differences in internal governance, rights of minority shareholders, recourses etc. between the Federal and provincial corporate statutes but usually the federal statute is preferred option.
| General | ||
|---|---|---|
| Type of Company | Federal | Provincial |
| Average timeframe to constitute a new company – if the name search is required | 2 days | 2 days |
| Migration of domicile possible | Yes | Yes |
| Corporate Requirements | ||
| Standard authorised capital | $ 1.00 | $ 1.00 |
| Bearer Shares allowed? | No | No |
| Minimum number of shareholders | One | One |
| Minimum number of directors | One | One |
| Corporate directors allowed? | No | No |
| Local directors required? | Yes | No |
| Local meeting required? | No | No |
| Company secretary required? | No | No |
| Taxation | ||
| Corporate tax rate | 19.5% (15% by 2012) | 10-16% |
| Ordinary tax rate | Worldwide income | |
| Withholding tax on dividends | 25% - treaty deductions available | |
| Withholding tax on interest paid | No, if at arms length otherwise 25% | |
| Double taxation treaties | 88 | |
| Withholding tax on royalties | 25% - treaty deductions available | 25% - treaty deductions available |
| Incentives | Yes, up 35% for R & D 16% for Canadian labour expense | Similar incentives on provincial level |
| VAT (GST) | 5 % | 0-10% |
| Disclosure and Reporting Requirements | ||
| Disclosure of beneficial owner | No | No |
| Government register of directors | Yes | Yes |
| Government register of shareholders | Yes | Yes |
| Annual Tax Returns | Yes | Yes |
| Incorporation and 1st year Fees | Annual Maintenance | ||||
|---|---|---|---|---|---|
| Type of company | Fed | Prov | Fed | Prov | |
| Incorporation fees | 2,500 $ | 2,000 $ | |||
| Domicile fee | 1,000 $ | 1,000 $ | Domicile fee | 1,000 $ | 1,000 $ |
| Annual Administr.* | 2,000 $ | 2,000 $ | Annual Administr.* | 2,000 $ | 2,000 $ |
| Annual Tax Returns* | 1,000 $ | 1,000 $ | Annual Tax Returns* | 1,000 $ | 1,000 $ |
| Director`s fee* | 3,000 $ | 3,000 $** | Director`s fee* | 3,000 $ | 3,000 $** |
| Total | 9,500 $ | 9,000 $ | Total | 7,000 $ | 7,000 $ |
* Estimated Fee for a holding company with limited transactions – the fees are entirely time based
** Some provinces (e.g. Quebec) do not require resident director
Taxation
Canadian residents are taxed on their worldwide income. Non residents are taxed on their Canadian source income or gains on the disposition of a Canadian property. A non resident will be deemed to become resident if he or she spends more than 183 days in Canada in a calendar year.
Federal tax rates: 0-29%
Provincial tax rates: 10-24%
Capital gains: 50% of capital gains to be included in person’s income (the same as for the company)
No inheritance taxes but the deceased is deemed to have disposed of all property immediately before the death at the fair market value and the difference between acquisition value and adjustments and the fair market value is included in computation of the deceased income for the year of his death. No net worth or wealth tax. Real estate taxes are levied by the municipal authorities and are calculated on the evaluation of the real property (usually quite high).
